LAW LIBRARY OF LOS ANGELES COUNTY THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW the Froperty he [TY LAW LIBRARY 'here thanj^^^ Law Library, please r|gl^ or notify Librarian. -^f^f^ v Books beJo^m^ toc^is Libraryj^^ nev^' sold, exchanged or given away. CHICAGO STAR BINDERY li4 S. Spring St, L A. T«l. Mutual 4434 LAW LI ^ I LOS ANGEL A TREATISE Law of Mortgages Real Property: BY DARIUS H. PINGREY, OP THE Illinois Bar. Author of a Treatise on Chattel Mortgages; etc IN TWO VOLUMES. Volume I. PHILADELPHIA: T. & J. W, JOHNSON & CO., 1893. Entered according to Act of Congress, in the year 1S93, by DARIUS H. PINGREY, In the Office of the Librarian of Congress, at Washington, D. C. T IS93 PREFACE. The design of this work is to present the law of real estate mortgages as it is, supported by the leading and the latest decisions of the courts ; therefore, the author has refrained from unnecessarily obtruding his own theory. The bench and the bar want the law as it is, and use text-books as the pole-star to guide them to the source — the reports. Every treatise derives its authority from the cases cited. However, it is not granted, as assumed by some of the leading American and Englisli authors, that the cases make the law in the same sense as the statute does. The law is the general rule on which the case is decided ; or, as Thomasius says, the decisions are the principia cognos- cendi, but not the principia essendi of the law. While the author acknowledges that precedents carry more weight than argument, yet he has not neglected to discuss the fundamental principles that form the basis of the law of real estate mortgages. The decisions of the new courts have been given due promi- nence. The fifteen thousand cases cited have been carefully studied without regard to the syllabi, and the author has attempted to present the principles as deduced by the courts. The author believes- that the system of classification and grouping of subjects will make the law readily accessible to the practitioner. This new plan of treatment, new labor, and new materials were found essential to meet the growing- demands of the age. Trusting that this work will be found of value, it is sub- mitted to the examination of a liberal and enlightened pro- fession. Darius H. Pingrey. Bloomington, III., March 15th, 1893. ^r^.^.a'ya TABLE OF CONTENTS. PAET I. THE NATURE AND REQUISITES OF THE CONTRACT. CHAPTER I. DEFINITION AND DEVELOPMENT. SECTIONS 1. History and Development, 1-8 2. The American Doctrine, 9 3. The States Adopting the Common-Law Rule, 10-27 4. The States Adopting the Equitable Rule, 28-54 5. The States Adopting a Modification of the Common-Law Rule, . 55-59 6. The State Whose Mortgage is a Species of a Pledge, 60 CHAPTER II. CONDITIONAL SALES, ASSIGNMENTS, AND CHATTEL MORTGAGES DISTINGUISHED. 1. Whether a Conditional Sale or Mortgage, 61-66 2. Construction and Illustration, 67-68 3. Assignment and Deed of Trust in the Nature of a Mortgage, . . . 69-75 4. A Chattel Mortgage Distinguished, 76-78 CHAPTER III. ABSOLUTE SALE DISTINGUISHED. 1. Absolute Conveyance with Defeasance, 79-85 2. Deed Intended as Security, 86-89 3. Agreement to Reconvej% 90-96 4. Sale with Right to Repurchase, 97-99 5. Purchasing at Judicial Sale, 100-101 6. The Rights of Parties Under Deeds of Trust, 102-103 7. Rights of Subsequent Purchasers for Value and without Notice, . 104-105 8. Assignments of Contracts to Purchaser, 106 V VI TABLE OF CONTENTS. CHAPTER IV. EVIDENCE TO ESTABLISH THE CHARACTER OF THE CONVEYANCE. SECTIONS 1. To Establish a Conditional Sale 107-109 2. To Prove an Absolute Deed a Mortgage, 110-125 CHAPTER V. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 1. Classification of the Legal Rules, 126-129 2. Statutory Provisions and Decisions, 130-137 3. Equity Arising from the Real Character of the Transaction, . . . 138-170 4. Doctrine of Fraud^ Accident, Mistake, or Some Vice in the Con- sideration, 171-175 5. A Trust Created between the Parties, 176-180 CHAPTER VI. REQUISITES AND VALIDITY. 1. Classification of Mortgages, 181-188 2. The Date of the Mortgage, 189-190 3. Description of the Parties, 191-194 4. Description and Identification of the Parties, 195-200 5. Clause of Defeasance and Recitals, 201-207 6. Execution, 208-220 7. Delivery of the Instrument, 221-226 CHAPTER VII. CORRECTION AND REFORMATION. 1. Filling Blanks After Execution, 227-257 2. Attestation 258-264 3. Reforming the Mortgage, 265-270 CHAPTER VIII. EQUITABLE MORTGAGES. 1. General Statement, 271 2. By the Deposit of Title Deeds, 272-277 3. Infonnal Mortgages, 278-''8S 4. Agreements to Make Conveyance of Land, when Intended as Se- curity for a Debt, 289-297 5. Assignments of Contracts of Purchase as Security, 298-304 6. By Act of the Legislature, 305-306 TABLE OF CONTENTS. Vll CHAPTER IX. vendor's lien. SECTIONS 1. Nature and Effect, 307-316 2. Reservation of Vendor's Lien, 317-327 3. Priorities, 328-335 4. Enforcement of the Lien, 336-347 CHAPTER X. THE PARTIES TO THE MORTGAGE. 1. Classification and Competency of Gi-antors, 348-375 2. Classification and Competency of Grantees, 376-382 CHAPTER XL MORTGAGABLE INTERESTS. 1. Present Interests or Interests In Esse, 383-394 2. Fixtures Subject to a Mortgage Lien, 395—109 3. Fixtures in Manufactories and Mills, 410-417 4. Rolling Stock of Railways, 418— tl9 5. Accessions to Mortgaged Realty, 420^22 6. Enforcement of Lien, 423-426 CHAPTER XII. AFTER-ACQUIRED PROPERTY. 1. Potential Interests, 427^28 2. Unplanted and Growing Crops, 429-452 3. In Equity, 453-455 4. Railroad Property, 456-462 CHAPTER XIII. THE DEBT SECURED. 1. Identification and Description of the Debt, • . . 463-482 2. Future Ad-»-ances, 483-495 3. Indemnified Mortgagee for Future Advances, 496-505 4. Mortgages for Support, .... ..■••......... 506-517 CHAPTER XIV. THE CONSIDERATION. 1. A Valid Consideration, 518-535 2. Want of Consideration, , 53f>-543 3. Illegal Consideration, 544-549 VUl TABLE OF CONTENTS. PAET II. RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. CHAPTER XV. INSURABLE INTERESTS. SECTIONS 1. The Mortgagor's Right to Insure for His Own Indemnity, .... 550-551 2. The Mortgagor's Right to Insure for the Mortgagee's Indemnity, . 552-557 3. Misrepresentation and Conceahnent of Mortgagor, 558-5(51 4. The Right of the Mortgagee to Insure for His Own Indemnity, . 562-5G4 5. Enforcement of Contract in Case of Loss, 5(35-578 6. Ahenatiou of Mortgaged Property, 579-588 PAET III. REGISTRATION OF THE INSTRUMENT. CHAPTER XVI. REGISTRATION. 1. Statutory Provisions, 589-641 2. Registration of Separate Defeasance, 642-647 3. Title Deeds 648 4. Equitable Mortgages are within the Rule, 649-653 5. Assignment of Mortgages, 654-662 CHAPTER XVII. THE LIEN. 1. The Parties, 663-674 2. Lien of Purchase-Money Mortgage, 675-685 3. Mechanics' Lien, 68()-695 4. After-Acquired Title, 696-70(5 5. Covenants of IVIortgagor, 707-708 6. Extinguishment of the Lien, 709-716 CHAPTER XVIII. CONSTRUCTION OP REGISTRATION LAWS. 1. The Record, • 717-734 2. Constructive Notice, 735-749 3. Actual Notice, 750-759 4. Implied Notice, 760-768 TABLE OF CONTENTS. IX PAET IT. CONTRACTS IN VIOLATION OF LAW. CHAPTER XIX. USURIOUS MORTGAGES. SECTIONS 1. Nature and Effect, 769-781 2. Defense, 782-787 3. Interest upon Interest, 788-794 4. Conflict of Laws, • • • 795-799 CHAPTER XX. FRAUDULENT MORTGAGES. 1. Fraud Generally, 800-805 2. Diu-ess as an Element of Fraud, 806-808 3. Preferences, 809-812 4. Who May Set Up Fraud, 813-819 5. Sunday Laws, 820-822 PAET Y. RIGHTS OF PARTIES BEFORE DEFAULT. CHAPTER XXI. THE RIGHTS OF THE MORTGAGOR. 1. Construction of Mortgagor's Covenants, 823-825 2. Relative Rights as to the Mortgagee, 826-841 3. Remedies Against Mortgagee, 842-845 4. Relative Rights as t,o Third Persons, 846-853 5. Improvements, 854-857 6. The Right of Eminent Domain, 858-862 7. Remedies Against Mortgagor for AVaste, 863-879 8. Rights to Emblements, 880-885 CHAPTER XXII. THE RIGHTS OF THE MORTGAGEE. 1. The Mortgagee's Interest, 886-896 2. Relative Rights as to INIortgagor, . . - 897-909 3. Remedies Against the Mortgagor, 910-914 4. Relative Rights as to Junior Mortgagee, 915-923 5. Relative Rights as to Purchasers and Creditors of Mortgagor, . . 924-931 6. Relative Rights as to Lessee of INIortgagor, 932-948 X TABLE OF CONTENTS. CHAPTER XXIIL ASSIGNMENT OF MORTGAGE AND DEBT. SECTIONS 1. Rule at Common Law, 949-955 2. Who May Make an Assignment, 956-96G 3. Priorities, 967-9G9 4. What Constitutes an Assignment, 970-977 5. Rule in Equity, 978-984 6. Validity in Equity and at Law, 985-997 7. Negotiable and Non-Negotiable Instruments, 998-1006 CHAPTER XXIV. TRANSFER OF THE MORTGAGED PROPERTY. 1. Purchase without Assuming Payment of Mortgage, 1007-1012 2. Assumption of Payment by Vendee, 1013-1018 3. Transfer of the Debt, 1019-1026 4. Right of Mortgagee to Bring Action Against Vendee, 1027-1040 5. Right of Mortgagor or Grantor to Enforce the Contract, .... 1041-1044 6. Defense of Purchaser, 1045-1052 CHAPTER XXV. MERGER. 1. At Law and in Equity, 1053-1054 2. When It Takes Effect, 1055-1074 3. Discharge and Release of Mortgage, 1075-1083 CHAPTER XXVI. SUBROGATION. 1. Rights of Purchaser and of Party Paying the Debt, 1084-1096 2. Rights of Mortgagee, 1097-1099 3. Rights of Junior Mortgagee, 1100-1106 4. Rights of Sureties and Guarantors, 1107-1119 CHAPTER XXVII. PAYMENT OP THE DEBT. 1. Constructive Payment, 1120-1139 2. Actual Payment, 1140-1154 3. Rights of Administrators and Executors, 1155-1161 4. Foreclosure is a Payment Pro Tanto, 1162-1168 TABLE OF CONTENTS. XI SECTIONS 5. Change in the Form of the Debt, 1169-1187 6. Presumption of Payment, 1188-1191 7. Evidence of Payment, 1195-1198 8. Application of Payments, 1199-1211 9. Eeissue and Eevivor of Mortgage, 1212-1218 CHAPTER XXVIII. DISCHARGE AND RELEASE. 1. Requisites of a Discharge, 1219-1232 2. Entry of Satisfaction on the Record, 1233-1234 3. Action to Enforce Release, 1235-1240 4. Cancellation of Release, 1241-1251 5. Statutory Provisions for Release of Mortgages, 1252-1302 6. Action to Recover Penalty, 1303-1312 PAET YI. RIGHTS OF PARTIES AFTER DEFAULT. CHAPTER XXIX. FORECLOSURE OF POWER-OF-SALE MORTGAGES AND TRUST DEEDS. 1. Foreclosure With No Redemption 1313-1318 2. Who May Exercise the Power of Sale, 1319-1335 3. Suspension of the Power, 1336-1344 4. Notice in General, 1345-1348 5. Construction of Notice, 1349-1358 6. Recitals in the Notice, •. 1359-1368 7. Method of Sale, • 1369-1372 8. Validity, 1373-1378 9. Payment, 1379-1382 10. Who May Purchase, 1383-1394 11. The Affidavit, 1395-1401 12. The Deed, 1402-1423 13. Enjoining the Exercise of the Power, 1424-1436 14. Setting Aside the Sale, 1437-1454 15. Costs and Expenses, 1455-1461 16. The Surplus, 1462-1470 17. Redemption, 1471-1474 CHAPTER XXX. POWER-OF-SALE MORTGAGES AND TRUST DEEDS STATUTORY PROVISIONS. 1. Statute of England, 1475-1477 2. Statutes of the Several States, . 1478-1527 Xll TABLE OF CONTENTS. CHAPTER XXXL THE RIGHT TO FORECLOSE. SECTIONS 1. Right to Foreclose, 1528-1537 2. Election of Mortgagee to Declare the Whole Debt Due, .... 1538-1545 3. Election of Remedies by Mortgagee, 1546-1552 4. Actions at Law, 1553-1563 5. Eflect of the Statute of Limitations, 1564-1575 CHAPTER XXXII. FORECLOSURE BY TAKING POSSESSION. 1. Statutory Provisions, • 1576-15^1 2. Construction of Statutory Provisions, 1592-1611 3. Waiver of Foreclosure, 1612-16^3 CHAPTER XXXIII. FORECLOSURE BY WRIT OF ENTRY. 1. Statutory Provisions, 1624-1627 2. Who May Bring the Action, 1628-1637 3. Against Whom Brought, 1638-1642 4. What Defense May Be Made, 1643-1657 5. The Conditional Judgment, 1658-1664 CHAPTER XXXIV. PARTIES TO AN EQUITABLE FORECLOSURE. 1. By Whom Brought, 1665-1692 2. Against Whom Brought, 1693-1722 3. Defect of Parties, 1723-1726 4. Intervention and Substitution of New Parties, 1727-1735 CHAPTER XXXV. FORECLOSURE IN EQUITY. 1. Jurisdiction, 1736-1745 2. Defenses, 1746-1772 3. Pleadings— The Bill, ...••• 1773-1780 4. Pleadings — Plea, Answer, and Cross-Bill, 1781-1782 5. Pleading and Practice, 1783-1790 TABLE OF CONTENTS. Xlll CHAPTER XXXVI. THE APPOINTMENT OF A RECEIVER. SECTIONS 1. Grounds for Appointment, 1791-1799 2. Equitable Rule, 1800-1801 3. Rights of Junior Mortgagee, 1802-1808 4. Status of the Receiver, 1809-1816 CHAPTER XXXVII. STRICT FORECLOSURE. 1. When Applied, • ... 1817-1820 2. States Using this Method, 1821-18-12 3. Pleading and Practice, • 1843-1850 4. Setting Aside Foreclosure, • 1851-1855 CHAPTER XXXVIII. THE DECREE. 1. Jurisdiction of Court of Equity, . . . . • 1856-1860 2. Form of the Decree, 1861-1866 3. Validity, 1867-1871 4. Who are Bound by the Decree, 1872-1881 5. The Amount Due, 1882-1893 6. Costs, 1894-1904 CHAPTER XXXIX. THE SALE. 1. Notice and Terms of Sale, 1905-1915 2. Sales in Parcels or En Masse, 1916-1919 3. Marshalling and Method of Sale, 1920-1935 4. Validity, 1936-1946 5. Confirmation of Sale, 1947-1951 6. Rights and Liability of Purchaser, . . . • 1952-1970 7. The Deed, 1971-1981 8. Setting Aside, 1982-1998 CHAPTER XL. APPLICATION OF PROCEEDS. 1. Disposition of the Proceeds, 1999-2002 2. Distribution of Surplus 2003-2019 3. ]VIarshalIing Distribution of Proceeds, 2020-2026 XIV TABLE OF CONTENTS. CHAPTER XLI. THE DEFICIENCY. SECTIONS 1. Judgment for Deficiency, 2027-2029 2. PersonalJudgment, 2030-2035 3. Enforcement of Personal Judgment, 2036-2054 CHAPTER XLII. STATUTORY FORECLOSURE AND REDEMPTION. 1. Statutory Provisions and Decisions, .... 2055-2103 CHAPTER XLHI. ACCOUNTING. 1. Mortgagee's Debits, 2104-2116 2. Mortgagee's Credits, 2117-2129 3. Periods of Bests, 2130-2136 CHAPTER XLIV. REDEMPTION. 1. Nature of the Remedy, 2137-2139 2. Right to Redeem, 2140-2150 3. Who May Redeem, 2151-2174 4. Terms of Redemption, 2175-2201 5. Contribution to Redeem, 2202-2208 6. Pleading and Practice, 2209-2227 CHAPTER XLV. REDEMPTION BARRED. 1. Definition and Nature of the Statute of Limitations 2228-2236 2. Running of the Statute, 2237-2245 3. New Promise or Acknowledgment, 2246-2251 PART I. THE ISTATUEE A:N'D EEQUISITES OF THE CONTRACT. CHAPTER I. definition and development. Article 1. History and Development. § 1. The Origin of Mortgages. I 6. A Mortgage at Common Law. § 2. Vivum Vadium. | 7. Mortgages as Viewed in Courts I 3. Mortuum Vadium, of Equity. ^ 4. Welsh Mortgages. § 8. The Adoption of the Principles I 5. The EngUsh Law of Mortgages. of Redemption. § 1. The Origin of Mortgages. — Mortgages were frequent in ancient times in Egypt, as indeed, they are at this day. In one paper is found an official copy of a mortgage for pubHca- tion or registration, dated in the thirteenth year of Trajan, A. D. 110, from a bank called the Broad Bank of Sarapion, which belonged to some Syrians and an Egyptian. It declares that they have entered on a continuous mortgage of land — ^that is, not merely for a short loan before harvest — of which one and a half acre belongs to Dioktetos and eight acres to Tutares. This reaffirms an old mortgage which had not been witnessed, and declares the whole debt to be equal to about sixty quarters of grain, worth, perhaps, one hundred or one hundred and fifty pounds. It was stipulated in grain because probably it would be paid in kind, so much to be deducted each year for the grain handed in and so much added to the remaining principal for interest. 1 2 NATURE AND REQUISITES OF THE CONTRACT. Pledges of land were made by the Anglo-Saxons in England, but the nature of the transfer and the rights of the parties are unknown.^ It is well established that liens upon the property of another prevailed at all times among all civilized nations. The jurisprudence of all civilized nations, both ancient and modern, contains a system of liens whereby the creditor can take a lien upon his debtor's property.^ However, some au- thorities claim that mortgages of land originated with the Jews,^ which assertion has long since been overthrown. An ancient recorded Egyptian marriage settlement says: " In case I should despise thee, in case I should take another wife than thee, I will give thee twenty argenteus, in shekels one hundred, twenty argenteus in all. The entire of the prop- erty which is mine and which I shall possess, is security of all the above words until I shall accomplish them according to their tenor." * It was held usury for Christians to lend money at interest. So if lands were enfeoffed to a creditor and the rents and profits received by him and not used in reducing the principal of the debt, it was punishable by forfeiture of his lands and chattels, if he died possessed of the pledge. This, says Glanville, is the origin of the term mortuum vadium, and not the ineaning sub- sequently attached to the definition by Littleton.^ In a state of nature, agreements of this kind must have been entirely useless, for in that state a creditor might have seized on any part of his debtor's goods and chattels without ceremony or contract.® It would seem that the primitive idea of giving mortgages ought to be referred more to the introduction of order and civilization among mankind than to the invention of any par- * Essays on An^lo-Saxon Land Law, p. 106. Essays in Anglo-Saxon Law, Appendix, Case No. 18, p. 342. ^ Hamilton's Hedaya, Book XLVIII, Pawns. ' Powell on Mortgages, 1. * Records of the Past, Vol. X, pp. 75-78 ; Comp. Just. Inst. 1. IV, tit. 6, Beet. 29. * Glan\nlle, Lib. 10, c. 6. «PuflF. Lib. 5,0.10, sect. 16. DEFINITION AND DEVELOPMENT. O ticular people. Hence, it is evident that different nations sub- jected this system of lending money to different regulations, and in England the Court of Chancery has given rise to the inseparable incidents of redemption and foreclosure. " But the general principle must have been common to all mankind, as a necessary effect of the establishment of society. The. prac- tice, then, of lending and borrowing at interest must have ex- isted from the earliest antiquity ; but its present prevalence, which is almost universal, may be attributed to the extension of commerce ; for commerce could not be carried on without credit, and credit could not be obtained without compensation." ^ The two distinct forms of mortgages which have been desig- nated by the terms vivum vadium and mortuum vadium appear to have been adopted from the customary law of Normandy.^ During the feudal tenures in England, it seems that there were no mortgages.^ The feudatory with the concurrence of his lord might have aliened, and consequently have mortgaged the feud.* " The tenant could not transfer his feud without his lord's consent, nor the lord his seigniory without his tenant's consent, although the tenants, men of the crown, it would seem, might grant subinfeudation (i. e., to hold themselves) without license. It was further held, the tenant could not subject his lands to his debts by execution of law, for, if he could, he might have effected that circuitously which he could not by direct means have accomplished. Nor, if the lands came to him by descent, could he aliene them without the consent of the next collateral heir."^ So when a pledgee of land, in feudal times, took possession, he did not take full feudal seisin, but only a qua^i seisin,*^ a ^ Mr. Coventry in Powell on Mortgages, p. 106. ^ Vinnius, Ingt. Lib. 3, tit. 15. 'Treatise on Eq. Lib. 3, c. 1, sect. 1. *Feud. Lib. 2, tit. 5, sect. 5. * Coote on ]\Iortgages, 5. There is a case reported of a feudal lord mort- gaging his provinces. 1 Hume's Hist, of England, 270 ; 4 Hume's Hist, of England, 30. «4 Bract. (Rolls Ed.) 74, sect. 4. 4 NATURE AND REQUISITES OF THE CONTRACT. seisin de vadio, which was a pledgee's seisin ; or a seisin dis- tinct from the general seisin, not exclusive of that of the pledgor, but consistent with and dependent upon it.^ The freehold was deemed to remain in the pledgor, and the pledgee was said to be seized through the owner of the fee ; ^ the pledgee was seized not in his own name but in the name of another.^ § 2. VivuM Vadium. — Vivum vadium denoted a pledge of land when the creditor took possession of the land lender the con- veyance to hold and enjoy until he paid himself out of the rents and profits, without any limit to the time for redemption. Upon payment of the debt the debtor received back his lands, and could recover them by suit if not voluntarily given to him by the creditor. In this case the land survives the debt. It consisted of a feoffment to the creditor and his heirs, until out of the rents and profits he had himself satisfied his debt.* The Norman judges recognized gages or pledges of land, either with or without transfer of possession. If the pledgee took possession, the transaction was a pawn ; if not, it was a hypothecation.^ Where one seized as a pledgee died in possession and his heir, being excluded, brought a writ of mort d^ancestor to get possession, he was provided not with the ordinary writ of mort d'ancestor, counting upon seisin generally, but with a special writ, alleging in his ancestor a seisin de vadio.^ In Glanville's time, a form of contract was used by which one might pledge his property on the terms that, upon default, the pledgee's interest should become absolute.^ If the pledge was pignus, and the pledgee was in possession on the day of 1 Glanv. Lib. XIII, cc. 2, 26-30 ; 4 Bract. (Rolls Ed.) 23&-240. ''Glanv. Lib. XIII, c. 11. " Qualemcunque seisinam, scilicet per ipsum tenentem vel per aliquem antecessorem ejus, veluti in vadio." ^4 Bract. (Rolls Ed.) 550. " De vadio . . . et sic in nomine alieno." * Coote on Mortgages, 4 ; 4 Kent's Com. 137. H Bract. (Rolls Ed.) 74, 236. 6 Glanv. Lib. XIII, cc. 26-30. ^Glanv. Lib. X,c.6. DEFINITION AND DEVELOPMENT. O default, his freehold began at once in possession ; if not, he had to resort to a real action to get possession/ § 3. MoRTUUM Vadium. — Mortuum vadium was an absolute fee, with the condition annexed making void the feoffment on paj^ment of a given sum, which the common law allowed, if reserved to the feoffer or his heirs. The feoffee took the whole estate, subject to be defeated, but which, on the non-fulfillment of a certain engagement, became his own by an indefeasible title. If the debtor did not discharge the debt, according to contract, theii the land was lost to him, and became dead to him forever.^ § 4. Welsh Mortgage. — The Welsh mortgage has now en- tirely gone out of use. These mortgages resemble the vivum vadium of Coke, or the mortuum vadium of Glanville. In them the rents and profits were substituted for the interest, and the land was to be held until the mortgagor refunded the princi- pal ; yet, if the value of the rents and profits was excessive, equity would, notwithstanding any agreement to the contrary, decree an account.^ The Welsh mortgage, without any mitigation of its severity in equity, was analogous to the contract termed antichresis in the Roman law.* Such mortgages were analogous to the mortgage of lands in the time of Glanville. This mortgage was harsh and unconscionable, but a lawful contract. Glan- ville calls it lawful but unjust : injusta et honesta.^ The French code '^ adopted the Roman antichresis, with this mitigation, that the rents and profits shall be applied to keep down the interest, and the surplus, if any, to liquidate the principal debt. So, under the civil code ^ of Louisiana, taken ' 1 Bract. (Rolls Ed.) 160. This system seems to be derived from the civil law.— 1 Bract. (Rolls Ed.) 146, 236, 8. 2 Co. Litt. 205, a ; 2 Black. Com. 157. ^ Fulthrope v. Foster, 1 Vern. 476. *Dig. 20, tit. 1, law 1, sect. 11. *Glanv. Lib. 10, c. 6, sect. 8. 8 Code avil, No. 2085. » Civil Code, art. 3143-3148. 6 NATURE AND REQUISITES OF THE CONTRACT. from the Code Napoleon, there are two kinds of pledges — the pawn on movables, and the antichresis given on real estate. Under the antichresis the creditor acquires the right to take the rents and profits of the land, to apply annually to the in- terest, and the surplus to the principal of the debt, and is obli- gated to keep the estate in repair and to pay the taxes. If the debtor makes default in payment of the debt the creditor may prosecute the debtor and obtain a decree for selling the land pledged. In a Welsh mortgage there is a perpetual power of redemp- tion, and the mortgagee cannot compel a redemption or fore- closure.^ An assignment of the rents of the mortgaged premises, until full payment of the mortgaged debt, to the mortgagee by the mortgagor, is in the nature of a Welsh mortgage.^ And a mortgage with a clause to the effect that the mortgagee shall take possession and apply the rents to the discharge of the in- debtedness is, in its nature, a Welsh mortgage. But the mort- gagee in a suit to foreclose is not entitled to a judgment with- out accounting for the rents.^ § 5. The English Law op Mortgages. — Chancellor Kent says that the English law of mortgages seems to have been borrowed, in a great degree, from the civil law ; that the Roman hypotheca corresponds very closely with the description of a mortgage at law in England. The land was retained by the debtor, and the creditor was entitled to his actio hypothecaria, to obtain possession of the pledge, when the debtor made de- fault. On the other hand, the debtor could regain possession after payment of the debt, if the creditor refused to restore the land, and the debtor might redeem at any time before a sale.* It is evident that the English law of mortgages was taken, in its most comprehensive sense, from the Roman law. In the Roman law, the mortgage could be held for future advances,^ ^ Longuet v. Scawen, 1 Ves. Sr. 402. * Angier v. Masterson, 6 Cal. 61. » Rankert v. Clow, 16 Tex. 9. *4 Kent's Com. 136. 5Code, 8, 27, 1. DEFINITION AND DEVELOPMENT. 7 and a covenant that the mortgage should be forfeited on de- fault was not binding, but void.^ The mortgagor was entitled to redeem, before his title became extinguished ; the pledge could not be sold without sufficient notice, or judicial decree.^ The general features of similitude between the Roman hypotheca and the English mortgage are striking.^ This testimony is valuable, but there is opposition to it. Mr. Butler is of the opinion that mortgages were intro- duced less upon the model of the Roman hypotheca than upon the common-law docrine of conditions.^ And it appears that Blackstone, following Littleton, expressly classes mortgages as estates on condition.^ The Norman judges improved the English system which existed long before the Conquest, by incorporating into it the elaborate foreign system of law with which they were conver- sant, by the study of Italian law-writers. So the Roman law was the spring-head of the English jurisprudence upon the subject of mortgages.'' The Anglo-Saxon word for pledge is etymologically the same as the Roman word, vadium. The Saxon law ran parallel with the civil.^ The ancient law of Attica indicated a pledge without posses- sion by a pillar or tablet set up on the land, inscribed with the creditor's name and the amount of the debt.^ § 6. A Mortgage at Common Law. — A mortgage at common law is a feoffment upon the condition that if the feoffer or his heirs pay the debt to the feoffee or his heirs, the feoffer shall re-enter and repossess his lands. The estate passes to the mortgagee subject to be defeated upon the performance of the 1 Code, 8, 35, 3. 2 Code, 8, 28, 4 ; Code, .34, 3, sect. 1. ^ 2 Surge's Com. on' Colonial and Foreign Laws, 164-246 ; 1 BrowTi's Views of the Civil Law, 200-210. * Co. Litt., Butler's Notes, 1, *2B1. Com. 152-162. ^Gilrnan v. 111. and Miss. Telegraph Co., 91 U. S. 603, 615. ■'2B1. Com. 342-3. *3 Grote's Hist, of Greece, part II, ch. XL 8 NATURE AND REQUISITES OF THE CONTRACT. condition. If default is made by the mortgagor, his estate be- comes forfeited, and the mortgagee holds the estate absolute.^ The transaction was governed by the rules which govern conditions.^ A common-law mortgage created an estate absolute in its form, but intended to secure the performance of some act, such as the payment of money by the grantor or some other per- son, and to become void if the act is performed according to the terms prescribed at the time of making the conveyance.^ Or a common-law mortgage may be defined to be a debt by specialty, secured by a pledge of land of which the legal own- ership is vested in the creditor, with a proviso that such con- veyance shall be void on payment of the obligation on a day specified.* It may be defined as an estate upon a condition defeasible by the performance of the condition according to its legal eff'ect.' It is not only a lien for a debt, but a transfer of the property itself as a security for the debt.® " The mortgagee takes the place of the mortgagor as owner of the land, and the mortgagor that of the mortgagee as owner of the money borrowed, the subsequent repayment of the money and reconveyance of the land being regulated by what is in fact nothing else than a subsidiary contract." '' The scheme of an absolute conveyance with a defeasance back had its origin at an early time. From the plain system of pledge of the Roman and the Saxon law, with a foreclosure procedure for the benefit of the debtor that he might redeem, the system of pledges went through successive stages of schemes by creditors to curtail the rights of the debtor. Courts of equity had protected the debtor. Then the creditor, to evade 'Litt., sect. 332 ; Story's Eq., sect. 1004. ^Litt., sect. 332 ; Wade's Case, 5 Coke, 114 ; Goodall's Case, 5 Coke, 96. ^ 1 Washb. Real Property, 475. *Coote on Mortg. 165. ^Erskine v. Townsend, 2 Mass. 493. « Conard v. Atlantic Ins. Co., 1 Pet. (U. S.) 386. ^Ames' Science of Jurisprudence, p. 269. DEFINITION AND DEVELOPMENT. 9 the equitable rule, took a deed absolute of the land, and con- currently with it the creditor gave to the debtor a bond, which came to be known as a bond of defeasance, stipulating that if the debtor returned a certain sum of money, paid at a certain time, the deed should then become null and void, or that the grantee would reconvey. It was the object by this procedure to make the transaction operate as a sale of land, with an option of buying back.^ But the courts of equity in England and in this country declare that such a transaction, if intended in fact for a mere security, is nothing but a mortgage. Still another device at the present time is used. The land is conveyed to the creditor or to some third person upon the trust that it is to be availed of by holding it to the creditor's use, or by selling it, in case of failure to pay the sum secured, and paying the debt from the proceeds. But as a scheme to avoid the law of mortgages, it is a failure, as the courts have decided that a deed, in form a trust deed, but given in fact as a security, does not convey a trust estate, but is a mortgage, and gives nothing but a mortgagee's estate.^ And some of the States have enacted a law that such trust deeds must be foreclosed in court and the mortgagor allowed the statutory period of re- demption;^ and such laws are passed to prevent abuse and oppression.* This struggle between the creditor and the courts has been alluded to by Glanville and Bracton in speaking of the fact that courts of law have been capable of equitable procedure. This equitable doctrine to shield the debtor in allowing him to redeem was undoubtedly exercised in very ancient times. The successive stages of devices by creditors to curtail the debtor's rights if he fail to comply with the condition of the contract, began in time immemorial. It has been a struggle between the courts of equity and creditors, with success on the part of these courts. 'Moyle, Imp. Just. Inst., 1 Vol., pp. 315, 316. 2 Alison, in re, 11 Ch. D. 284; Locking v. Parker, L. R., 8 Ch. 30; Teal v. Walker, 111 U. S. 242. n 111. Rev. Stat., ch. 95, sect. 17. * Ventres v. Cobb, 105 III. 33. 10 nature and requisites of the contract. § 7. Mortgages as Viewed in Courts op Equity — Redemp- tion. — The equitable doctrine of mortgages was derived from the civil law.^ The courts of equity seized upon the first op- portunity to mitigate the severity of a common-law mortgage. Judge Story says : " Courts of equity, acting upon general prin- ciples, could not fail to perceive the necessity of interposing, to prevent such manifest mischief and injustice, which were wholly irredeemable at law. They soon arrived at the just conclusion that mortgages ought to be treated, as the Roman law had treated them, as a mere security for the debt due to the mortgagee ; that the mortgagee held the estate, although for- feited at law, as a trust ; and that the mortgagor had what was significantly called an equity of redemption, which he might enforce against the mortgagee, as he could any other trust, if he applied within a reasonable time to redeem, and offered full payment of the debt and all equitable charges." ^ It is said that a strict foreclosure in the case of a mortgage was condemned by the Council of Lateran, A. D. 1178, during the reign of Henry II, but that Parliament, in 1391, refused to admit a redemption after forfeiture, and such estates continued irredeemable during the reign of Edward IV.^ But this doctrine of redemption became established in 1629, in the reign of Charles I.* It may be unnecessary particularly to cite the old cases upon this subject ; but it may be stated generally that one series of them commencing in Capper v. Dickinson,'"' followed the notion of conditional sales, and the other series that of a pledge in the way of security. Capper v. Dickinson went so far as to hold that if the property was not redeemable at the day it was forfeited ; and this decision, though as rigorous and as odious as the lex commissoria of Rome, which it resembled, was no more than the logical and legitimate result of the premise upon which it was based, ^ Story's Eq., sect. 1005. ^ Story's Eq., sect. 1013 and note. ^2 Washb. on Real Prop, 39. * Co. Litt., Butler's Note, 204, b. ; and see 1 Spence's Eq. 603 ; How v. Vig- ures, 1 Rep. in Ch. 32. *1 RoUe, 315. DEFINITION AND DEVELOPMENT. 11 namely, an absolute sale upon condition subsequent. This doctrine could never equitably be applied to cases of delivery of property in the way of security, nor to cases where the de- livery was expressly as collateral security and in no respect a sale. " No sooner, however, was this equitable principle established than the cupidity of creditors induced them to attempt its invasion, and it was a bold but necessary decision of equity that the debtor could not, even by the most solemn engage- ments entered into at the time of the loan, preclude himself from his right to redeem ; for in every other instance, probably, the rule of law, modus et conventio vicunt legem, is allowed to prevail. In truth it required all the firmness and wisdom of the eminent judges who successively presided in the courts of equity to prevent this equitable jurisdiction being nullified by the artifice of the parties." ^ So the narrow and precarious character of the mortgagor at law is changed under the liberal jurisdiction of courts of equity, whose influence has reached the courts of law, " and the case of mortgages is one of the most splendid instances in the history of our jurisprudence, of the triumph of equitable principles over technical rules, and of the homage which those principles have received by their adoption in the courts of law." 2 The original severity of the common law, treating the mort- gagor's interest as resting upon the exact performance of a condition, and holding the forfeiture or the breach of a condi- tion to be absolute, by non-payment or tender at the day, is entirely modified and relaxed. Equitable interposition is attributed to the courts of equity ; but this doctrine was probably adopted long before the estab- lishment of distinct chancery courts. In very early times the courts of law in England showed themselves capable of equit- able procedure. The foreclosure process allowing the mort- gagor to redeem, even after default and suit brought, was dis- ^ Coote on Mortg. 21. M Kent's Com. 158. 12 NATURE AND REQUISITES OP THE CONTRACT. tinctly equitable, aud represented a very ancient struggle be- tween courts and creditors.^ And this same procedure was adopted in Roman law to avoid the law of pledge, and thus relieve the pledgor, from the absolute loss of his property, by redemption.^ § 8. The Adoption of the Principles of Redemption. — This doctrine of redemption after forfeiture was laid down in the reign of Charles I, at first very cautiously. " The court conceived, as it was observed in chancery, that the said lease being but a security, and the money paid, though not at the day, the lease ought to be void in equity." ^ Sir Matthew Hale, when chief justice, showed that he had not accepted this doctrine of equity, for he complained very severely of the growth of equities of redemption, as having been too much favored. In 14 Rich. II, the Parliament, he said, would not admit of this equity of redemption. By the growth of equity the heart of the common law was eaten out. He complained that an equity of redemption was transferable from one to another, though at common law a feoffment or fine would have extinguished it ; and he declared he would not favor the equity of redemption beyond existing precedents.* The equity of redemption grew in favor with the courts of equity ; " once a mortgage always a mortgage " became a maxim.^ The object of this rule is to prevent oppression. Contracts made with the mortgagor, to lessen, embarrass, or restrain the right of redemption, are regarded with jealousy, and generally set aside as dangerous agreements, founded in WTong against the mortgagor.^ Hence the equity of redemption is considered to be the real and beneficial estate, tantamount to the fee at law ; and accordingly it is descendible by inheritance, devisable 1 3 Bl. Com. 40-52. ■■'Moyle, Imp. Just. Inst., 1 Vol., pp. 315, 316. 'Emanuel College v. Evans, 1 Rep. in Ch. 10. * Rosearrick v. Barton, 1 Cases in Ch. 217. * Newcomb v. Bonham, 1 Vern. 7. * Howard v. Harris, 1 Vern. 190. DEFINITION AND DEVELOPMENT. 13 by will, and alienable by deed, precisely as if it were an absolute estate of inheritance at law.^ Lord Eldon said that the doctrine of the court gave coun- tenance to the strong declaration of Lord Thurlow, that no agreement of the parties would alter the right of redemption.^ Lord Hardwicke felt himself bound to allow an assignee, who had bought the equity of redemption for a mere pittance, to redeem.^ Lord Mansfield did much to bring about the adoption of this equitable doctrine. " It is an aflront to com- mon sense to say the mortgagor is not the real owner." ■* And it seems that Lord Mansfield obviously considered a mortgage to be even at law a mere security for the debt, and not an actual conveyance.^ But this view of a common-law mortgage in a law court is clearly erroneous, as is seen by the decisions of the judges,*' who thought it a most important part of English procedure that the jurisdiction of the courts of law and equity should be kept perfectly distinct, as nothing con- tributes more to the administration of justice, though they act in a great degree by the same rules, yet they act in a diff'erent manner, and their modes of affording relief are different.^ Courts of equity, from a very early period, took a very dif- ferent view of the matter from that of the courts of common law. They looked upon the forfeiture of the estate at law because of non-payment on the very day fixed by the mort- gage, as in the nature of a penalty, and, as in other cases of penalties, gave relief, by allowing the mortgagor to redeem the land on equitable terms, at any time before the right to do so was barred by foreclosure. This right to redeem after the estate had become absolute in law in the mortgagee was called the " equity of redemption." Courts of equity held that the 1 Casbome v. Scarfe, 1 Atk. 603 ; 2 Jac. & Walk. 190, n. ^Seton V. Slade, 7 Ves. 273. =* Anon., 1 Atk. 313. *The King v. St. Michaels, 2 Doug. 630. 5 Martin v. Mowlin, 2 Burr. 978 ; Wren v. Buckley, 1 Doug. 292 ; Eaton v. Jaques, 2 Doug. 455. ® Powell on Mortg., Mr. Coventry's note, 266. ^ Shannon v. Bradstreet, 1 Sch. & Lef. 52. 14 NATURE AND REQUISITES OF THE CONTRACT. mortgage was a mere security for the payment of the debt, and that the mortgagor was the real beneficial owner of the land, subject to the lien of the mortgage; that the mortgagee had a lien on, but not an estate in, the land. These two systems were maintained without conflict between the law and equity courts. The equity courts did not attempt to control the law courts, or even to question the legal doctrine which they announced, and in case of redemption required the mortgagee to re-convey the real estate to the mortgagor, to make the latter's title available in a court of law. Article 2. The Araerican Doctrine. § 9.. In General. § 9. In General. — The harsh and rigorous doctrine of the common law that the legal ownership is vested in the mort- gagee has been greatly modified by most of the States of this Union. It is the American doctrine in equity that until fore- closure the mortgagor remains seized of the freehold and the mortgagee has, in effect, but a chattel interest, which goes to the executor, in case of death of the mortgagee, as personal assets, and though, technically speaking, the fee descends to the heir, yet he is but a trustee for the personal representative and need not be a party to a bill by the executor for a fore- closure. The mortgagee merely holds the legal title as security for a specific purpose, and neither in a court of law nor of equity is he permitted to use it, except for the purpose of mak- ing effectual the security, and to prevent any violation of his rights under the mortgage.^ As against third parties, the mortgagor is considered as having the legal estate, and may in every respect deal with the land as his own, subject only to the rights of the mortgagee.^ 1 Bartlett v. Borden, 13 Bush. (Ky.) 45 ; Harkrader v. Leiby, 4 Ohio St. 602. ^ Chamberlain v. Thompson, 10 Conn. 243 ; Schuylkill Co. v. Thoburn, 7 Scrg. & E. (Pa.) 411 ; Bradley v. Fuller, 23 Pick. (Mass.) 8 ; Terry v. Rosell, 32 Ark. 478. DEFINITION AND DEVELOPMENT. 15 In England there is no conflict between the courts of law and of equity. But in the United States there is a confusion and conflict in the decisions of the courts, resulting from a failure to keep in mind the distinction between courts of law and of equity. Many causes have contributed to destroy that certainty and uniformity which formerly prevailed. Chiefly among the causes may be mentioned the statutory lin\'s enacted in many of the States, and the failure of the courts and the authors to note these changes in their expositions of the law in the different States. Another source of confusion on this sub- ject is that many of the States have abolished the common-law forms of action by statute, and instead of them a single statu- tory form has been adopted in which legal and equitable rights are administered at the same time and by the same tribunal. Under these statutory enactments and change in procedure the equitable theory of a mortgage has, in many of the States, en- tirely superseded the legal one. The doctrine of some of the States is still similar to that of the common law, while other States have adopted the equitable rule, and still others have a modified view. In those States where the common-law rule prevails, a mort- gage possesses a dual character, being one thing in a court of law and another in a court of equity — a conveyance of land in the former and a security for a debt in the latter.^ But these two systems have been shorn of their incongrui- ties, and so adjusted that equitable and consistent rules prevail.^ In order to present the doctrine of the courts in the different States, sometimes modified by statutory provisions, it is imper- ative that the interpretation of the courts be given, and when regulated by statute the effect of such provision. It is nearly impracticable to group the States under appro- priate divisions, as the views expressed differ, though in a slight degree. A fair classification may be attempted. 1 Welsh V. Phillips, 54 Ala. 309. * Martindale on C!onv., sect. 407. 16 nature and requisites of the contract. Article 3. The States Adopting the Common-Law Rule. I 10. In General. I 19. New Hampshire. § 11. Alabama. ? 20. New Mexico. I 12. Arkansas. ? 21. North Carolina. i 13. Connecticut. \ 22. Ohio. i 14. District of Columbia. ? 23. Pennsylvania. I 15. Illinois. I 24. Rhode Island. § 16. Maine. I 25. Tennessee. i 17. Maryland. § 26. Virginia. i 18. Massachusetts. § 27. West Virginia* § 10. In General. — The States coming under this division have declared in favor of the common law, though the rule has been modified and is not as strict and harsh as it was in the time of Lord Mansfield, who endeavored to mitigate its severity. In fact, no State now enforces the strict common-law doctrine of real estate mortgages. By the common law, if the mortgagor paid the money at the time specified in the mortgage, the estate of the mortgagee, by reason of the performance of the condition therein, at once de- termined and was gone forever. But if the mortgagor failed to pay on the day named, the title of the mortgagee became absolute, and the mortgagor ceased to have any interest what- ever in the mortgaged premises. By the execution of the mortgage the entire legal estate passed to the mortgagee, and unless it was expressly provided that the mortgagor should retain possession till default in payment, the mortgagee might maintain ejectment as well before as after default. This rule has obtained, with certain limitations, in many of the States. The courts of law regard the title of the mortgagee in fee as in the nature of a lease or determinable fee. The term of its life is measured by that of the mortgaged debt. When the latter is paid or becomes banned by the statute of limitations, the mortgage title is extinguished by operation of law. An outline will now be given of the views held in the dif- ferent States. DEFINITION AND DEVELOPMENT. 17 § 11. Alabama. — In this State the mortgage transfers the legal title, defeasible on performance of the conditions, and the right of immediate possession, unless by the terms of the mort- gage possession is reserved in the mortgagor for an unexpired term, as between the parties. As to the mortgagee, the mort- gagor has only an equity ; but it is uniformly held in all late decisions of the courts of this State, and is now the settled rule, as to all persons except the mortgagee and those claiming in his right, that the mortgagor is the owner of the fee and has title under which he may maintain ejectment against strangers who have no connection with the title of the mortgagee.^ But a purchaser of the equity of redemption in mortgaged lands at execution sale against the mortgagor ^ acquires a title on which he may maintain ejectment against the mortgagor in possession. Neither can the mortgagor set up the outstand- ing legal title of the mortgagee to defeat the action.^ The courts hold that the effect of a mortgage is different from that of any other species of conveyance in some particu- lars. It is treated differently in the two leading jurisdictions, equity and common law. In the former, it is but a security for money — an incident to the debt it secures, the debt being the principal. In the latter, it is, as between the parties, a transfer of the legal title, leaving in the mortgagor only a right to redeem, called in the books an equity of redemption. The mortgagor in possession holds in subordination to the right and title of the mortgagee and his transferee ; and the latter may dispossess him at any time, by action at law, unless by the terms of the mortgage possession is reserved in the mort- gagor for a term not expired. A mortgagee in possession is, in a law forum, the legal owner, holding possession under a legal title. " His holding is adverse to tlie mortgagor, and, if acquiesced in for the period of limitations for actions at law, it bars the mortgagor of all relief, legal and equitable. As to all persons, however, who cannot connect themselves wdth the ^ Allen V. Kellam, 69 Ala. 442 ; Denby v. Mellgrew, 58 Ala. 147. "^ Code, sect. 2892. ^ Cotton V. Carlisle, 85 Ala. 175. VOL. I. — 2 18 NATURE AXD REQUISITES OF THE CONTRACT. title of the mortgagee, the mortgagor in possession is the owner of the legal title ; and under sucli title he can both maintain and defend an action of ejectment. And as to all rights and privileges, both civil and political, of which the ownership of a freehold is one of the conditions, the mortgagor is a free- holder, while the mortgagee, by the mere virtue of his mort- gage title, cannot claim to be such." ^ A mortgagee, if there is no stipulation or reservation in the mortgage to the contrary, has the immediate right of entry, and may eject the mortgagor or his tenants.^ After the law-day and default in the performance of the condition, the estate vests absolutely in the mortgagee — the fee is freed from the condition annexed to it. Nothing remains in the mortgagor but the equity of redemption, of which, as between mortgagor and mortgagee, courts of law do not take notice. Before default, all that remains in the mortgagor is the right to perform the condition, and thereby restore his original estate.^ A mortgagee in possession, before or after default in the payment of the mortgage debt, and before foreclosure, is a trus- tee of the rents and profits for the mortgagor, and is bound to apply them in extinguishment of the mortgage debt.^ The court says that, under the decisions in Alabama, mort- gages are regarded as possessing a dual character — a convey- ance of an estate in lands, and a security for a debt — bearing one character in a court of law and another in a court of equity.'' It is no defense to an action of ejectment brought by a mortgagor against any other person than the mortgagee that the legal title is in the mortgagee and the law-day of the mortgage has arrived. Because the mortgagor is the legal owner as against every stranger, and a defendant in ejectment is not permitted to set up an outstanding legal title in a mort- ^ Marks v. Robinson, 82 Ala. 69, opinion by Stone, C. J. 2 Duval v. McLoskey, 1 Ala. 737 ; Welsh v. Phillips, 54 Ala. 309 ; Toomer v. Randolph, 60 Ala. 356. 3 Paulling V. Barron, 32 Ala. 11 ; Barker v. Bell, 37 Ala. 358. * Davis V. Lassiter, 20 Ala. 561. * Welsh V. Phillips, 54 Ala. 309. DEFINITION AND DEVELOPMENT. 19 gagee with which he does not connect himself. The better and prevaiHng doctrine is that a mortgage is a mere security' as to tliird jDersons, and as to them tlie mortgagor has such a title as will support ejectment.^ §12. Arkansas. — In this State as between mortgagor and mortgagee, the legal estate is in the mortgagee ; but as to all others it is in the mortgagor, and may be conveyed by him subject to the mortgage.^ The legal title to mortgaged property passes, at law, to the mortgagee, subject to be defeated by the performance of the conditions of the mortgage ; and the legal right of possession follows the legal title unless it is expressly provided in the deed, or clearly appears to be the intention of the parties, that the mortgagor shall remain in possession until after default.^ 'And after forfeiture, the mortgagee is usually entitled to possession of the mortgaged premises, and must apply the rents and pro- fits to the mortgage debt, but he is not entitled to the rents and profits until he has taken possession, or the necessary steps to obtain possession.* A deed of trust executed for the purpose of securing a debt, and to be void upon payment of the debt, and containing a power of sale upon default, is, in legal effect, a mortgage. The grantor retains an equity of redemption, and a purchaser at execution sale of the equity of redemption succeeds to all the rights of the mortgagor, among which is the equitable right of redemption by paying the mortgage debt.^ In short, the legal estate in the property mortgaged passes to the mortgagee, subject to be defeated by performance of the conditions of the mortgage ; and the right of possession follows the legal title, unless controlled by stipulations in the deed, or the apparent intention of the parties." ' Scott V. Ware, 65 Ala. 174 ; Allen v. Kellam, 69 Ala. 442. 2 Terry v. Resell, 32 Ark. 478. 3 Kannady v. McCarron, 18 Ark. 166. ♦ Reynolds v. Canal and Banking Co., 30 Ark. 520. * Turner v. Watkins, 31 Ark. 429. 8 Whittington r. Flint, 43 Ark. 504 ; Fitzgerald v. Beebe, 7 Ark. 310. 20 NATURE AND REQUISITES OF THE CONTRACT. The mortgagee who himself occupies the mortgaged premises consisting of improved property, is not entitled to pay for permanent improvements made without the mortgagor's con- sent, and is chargeable with such rents only as the land would have yielded without the improvements/ § 13. Connecticut. — The title of the mortgagee is peculiar. It is a legal title, but can hardly be said, now, to be classed with any description of title known to the common law. Orig- inally, it was a conditional estate before forfeiture, and an absolute one afterward. But courts of equity have so modified its character, and courts of law have so far recognized these modifications, that this time the title can be no better dis- tinguished than by calling it a mortgage title, and nothing more.^ The payment of the mortgage money after forfeiture does not divest the mortgagee of his legal estate, but gives only a right to compel a reconveyance in chancery.^ Payment of the mortgage money constitutes the mortgagee a trustee for the mortgagor, who can compel the execution of the trust, by a reconveyance.* Judge Ellsworth says that it is too well settled to be debated, that as between the mortgagor and mortgagee, or the assignee of the mortgagee, payment of the mortgage debt, after the law- day, does not affect the legal title, in courts of law. As to the parties themselves, the real and public title remains, and pay- ment of the debt is no extinguishment or release of the mort- gagee's title.^ A mortgagee holds the legal title solely as a means of en- forcing payment of the mortgage debt. For all other purposes the mortgagor is regarded as the owner. When the debt is 1 Robertson v. Read, 52 Ark. 381. 2 Dudley v. Cadwell, 19 Conn. 218. ^ Phelps V. Sage, 2 Day, 151 ; Smith v. Vincent, 15 Conn. 1 ; Doton v. Rus- sell, 17 Conn. 140. *Gunn V. Scovil, 4 Day, 2.34. * Cross V. Robinson, 21 Conn. 378 ; Roath v. Smith, 5 Conn. 136 ; Porter v. Seeley, 13 Conn. 564. DEFINITION AND DEVELOPMENT. 21 satisfied, if the legal title is then vested in the mortgagee, he holds it in trust for the mortgagor. Inasmuch as the legal title is in him, he may defend, on that ground, an action of ejectment brought against him by the mortgagor.^ The mortgagee in possession, whether the possession has been acquired actually or by attornment of tenants, is bound to appl}^ the rents and profits in the discharge of the debt, and can be compelled to account for them.^ The legal title to the land mortgaged is not transferred by mere payment of the mortgage debt, by a party who claims an interest in the estate.^ And a mortgagee can maintain eject- ment without previous demand, or entry, or notice to ciuit, in order to maintain his rights,* and whatever doubts there may be as to the original correctness of this rule, it has become a settled rule of practice in Connecticut.^ • § 14. District of Columbia. — When real estate mortgages are given, they have a defeasance clause, and can only be enforced by foreclosure in a court of equity. But mortgages are seldom used. Deeds of trust take their place, under which the property is sold by the trustee, after default in payment of the debt secured. §15. Illinois. — In Illinois a mortgage is a conveyance of lands, by a debtor to his creditor as a pledge or security for the payment of money due, with the proviso that such conveyance shall be void on payment of the money and interest, on a cer- tain day ; and in the event that the money be not paid at the time appointed, the conveyance becomes absolute at law, and the mortgagor has only an equity of redemption — ^that is, a right in equity, on payment of principal, interest, and cost, within a reasonable time, to call for a reconveyance of the lands.'' ^Clinton v. Westbrook, 38 Conn. 9 ; Smith v. Vincent, 15 Conn. 1. ^ Chamberlain v. Railroad Co., 54 Conn. 472. 'Savings Bank r. McPartlan, 40 Conn. 90. * Rockwell V. Bradley, 2 Conn. 1. * Savings Bank v. McPartlan, 40 Conn. 90. ^ Hall V. Byrne, 1 Scam. 140. 22 NATURE AND REQUISITES OF THE CONTRACT, Before condition broken, the mortgagor is considered in equity the owner of the fee, having the jus in re as well as jus ad rem, and being so, is entitled to all the rights and remedies which the law gives to the owner.^ As between the parties the mortgage is regarded simply as a security for debt. But as between the mortgagee and a third person, in law, the former is regarded as the owner of the free- hold.2 In Illinois, as in England, the mortgagee of lands is held in law to be the owner in fee, and is entitled to all the rights and remedies which the law gives to such owner ; he may after condi- tion broken, even maintain ejectment against the mortgagor.^ The dual system respecting mortgages exists in this State, precisely as it did in England prior to its adoption in this country. The equitable theory of a mortgage has, in process of time, made in this State material encroachments upon the theory which is now recognized in courts of law.^ Thus, it is now settled that the mortgagor or his assignee is the legal owner of the mortgaged estate, as against all j^ersons except the mortgagee or his assigns.^ So in case of ejectment by the mortgagor, against a third party, the defendant cannot defeat the action by showing an outstanding title in the mortgagee.'' Courts of law in this State regard the title of a mortgagee in fee, in the nature of a lease or determinable fee. The terms of its existence is measured by that of the mortgage debt.'' § 16. Maine. — The common-law doctrine is held in this State. As between the parties to the mortgage the fee of the estate passes to the mortgagee at the execution of the instrument, and he may enter immediately, or have a writ of entry against the 1 Carroll v. Ballance, 26 111. 9. * Moore v. Titman, 44 111. 367. 3 Oldham v. Pfleger, 84 111. 102 ; Finlon v. Clark, 118 111. 32 ; Taylor v. Adams, 115 111. 574 ; Barrett v. Hinckley, 124 111. 32. * Barrett v. Hinckley, 124 111. 32. "Hall V. Lance, 25 111. 277 ; Emory v. Keighan, 88 111. 482. "HalU. Lance, 25 111. 277. ' Pollock V. Maison, 41 111. 516 ; Harris v. Mills, 28 111. 44 ; Gibson v. Eees, 50 111. 383. DEFINITION AND DEVELOPMENT. 23 mortgagor, unless there be a stipulation in writing that the mortgagor shall retain possession and receive the profits. As to third persons, the mortgagor is considered as still having the legal estate.' As the mortgagee has the right of immediate possession, unless it is otherwise agreed between them, he may- enter and harvest the croj)s growing upon the land which he planted before mortgaging, and an action of trespass cannot be maintained against him by the mortgagor for so doing.- The agreement that the mortgagor shall retain possession must be in writing ; but it need not be in any prescribed form of words.^ It may be deduced from language used in the con- dition of the mortgage.* The right of the mortgagee to recover possession of the mort- gaged premises, even before breach of the condition of the mortgage, when there is no agreement to the contrary, is af- firmed by statutory enactment.^ §17. Maryland. — Upon the execution of a mortgage the legal estate becomes immediately vested in the mortgagee, and the right of possession follows as a consequence, subject only to the occupancy of the mortgagor, which is only tacitly per- mitted until the will of the mortgagee is determined. As soon as an estate in mortgage is created, the mortgagee may enter into possession. This right of possession is always subject to any agreements which may be made in relation thereto, and so stipulations are made in the mortgage, giving the right of possession to the mortgagor until forfeiture ; but where the parties are entirely silent as to the possession, the right follows the legal estate, and vests in the mortgagee.® The mortgagee is entitled to this possession of the premises upon execution, delivery, and registration of the mortgage, un- less there is in the mortgage a covenant that the possession so 1 Blaney v. Bearce, 2 Me. 1.32. ^Gilman v. Wills, m Me. 273. 3 Norton v. Webb, 35 Me. 218. * Brown v. Leach, 35 Me. 39. ^Eev. Stat., ch. 90, sect. 2. See, also, Hadley v. Hadley, 80 Me. 459. ® Jamieson v. Bruce, 6 Gill & J. 72. 24 NATURE AND REQUISITES OP THE CONTRACT. remains in the mortgagor, which covenant is in effect a re- demise of the premises from tlie mortgagee to the mortgagor.^ Until default, the mortgagor is regarded both at law and in equity as the substantial owner of the property ; though for any waste, destruction, or improper appropriation of the prop- erty mortgaged, whereby the security may be impaired, the mortgagee will be entitled to remedy for his protection. And therefore, though the mortgagee, while not having such pos- session as will enable him to maintain trespass for a wrongful or fraudulent injury to the premises, may have an action on the case against the mortgagor or other person who has com- m.itted the wrongful act.^ So where it is agreed that the mortgagor shall retain posses- sion, the mortgagee has no right to possession until condition broken. It is only the land itself, the specific thing, with the improvements thereon, that is in pledge ; the rents and profits are not pledged, so long as the mortgagor is entitled to posses- sion ; but they belong to the tenant in possession, whether such tenant is the mortgagor or a third person claiming under him.^ The case of a mortgage forms an exception to the general rule, that a party shall not be allowed to sue at law and in equity for the same debt, and a mortgagee may pursue all his remedies at once, yet he is under no obligation to do so.* The mortgagor in possession may maintain ejectment against a third party who rests his defense on the possession and out- standing title of the mortgagee.^ He is also entitled to sue for damages done the estate by a third party .•* § 18. Massachusetts. — After the creation of the estate upon condition, the mortgagee has presently the same right to enter in pais and take the profits, or by judgment and execution in 1 Clagett V. Salmon, 5 Gill & J. 314 ; Evans v. Merriken, 8 Gill & J. 39 ; Mc- Guire v. Benoit, 33 Md. 181 ; Brown v. Stewart, 1 Md. Ch. 87. 2 Chelton v. Green, 65 Md. 272. 'Chelton ?;. Green, 65 Md. 272. * Brown v. Stewart, 1 Md. Ch. 87. * George's Creek Coal and Iron Co. v. Detmold, 1 Md. 225. « Railroad Co. v. Gantt, 39 Md. 115. DEFINITION AND DEVELOPMENT. 25 a writ of entry, that he has if the estate was absokite, subject to account for the profits if the mortgagor performs the con- dition, or redeems.^ As between the mortgagor and mortgagee, a mortgage is to be regarded as a conveyance in fee. But in all other respects, until foreclosure, when the mortgagee becomes the absolute owner, the mortgage is deemed to be a lien or charge, subject to which the estate may be conveyed, attached, and in all other respects dealt with as the estate of the mortgagor.^ The law of mortgage is a mixed system, derived partly from the common law in regard to real property, partly from the rules and maxims of the English courts of chancery, but principally from various statutes. Until condition broken, the rights of the parties are considered legal ; the mortgagee is deemed to be seized of a defeasible estate, and upon perform- ance of the condition by the payment of the debt, at the speci- fied time, the estate is defeated by force of the condition, and revests in the mortgagor.^ Although, as between mortgagee and mortgagor, a mortgage is the transmission of the fee, which gives the mortgagee a remedy in the form of a real action, and constitutes a legal seisin, yet to most other purposes it is, before the entry of the mortgagee, but a pledge and real lien, leaving the mortgagor to most purposes the owner.* If the mortgagor remains in possession by the wdll of the mortgagee, he cannot be called upon to account for rents and profits to the mortgagee.^ § 19. New Hampshire. — As against all persons but the mort- ' Erskine v. Townsend, 2 Mass. 493 ; Colman v. Packard, 16 Mass. 39 ; Goodwin r. Eichardson, 11 Mass. 469 ; Newall v. Wright, 3 Mass. 138 ; Taylor V. Weld, 5 Mass. 120. "Ewer V. Hobbs, 5 Met. 1. 3 Fay V, Cheney, 14 Pick. 399. *Norcross v. Norcross, 105 Mass. 265; Page v. Robinson, 10 Cush. 99; Bradley v. Fuller, 23 Pick. 1 ; Silloway v. Brown, 12 Allen, 30 ; Hapgood r. Blood, 11 Gray, 400 ; Green v. Kemp, 13 Mass. 515 ; Fay v. Brewer, 3 Pick. 203. ^Boston Bank v. Eeed, 8 Pick. 459. 26 NATURE AND REQUISITES OF THE CONTRACT. gagee, the mortgagor is considered as having the legal estate, and ma}" in every respect deal with the land as his own, sub- ject to the legal title of the mortgagee so far as such legal title is necessary to his security.^ The relation of mortgagee and mortgagor is peculiar. The mortgagee is not, under a general sense, the owner of the mortgaged estate. Before foreclosure his interest is not in fact real estate ; but he is entitled to have it treated as such so far as it may be necessary to enable him to prevent waste and to keep the land from being in any way damaged in value.^ The mortgagee takes an estate in fee ; the sole purpose of the mortgage is to secure his debt. He is to be regarded as having the legal estate for the purpose of all lawful protection of his interests ; but for other jDurposes the mortgage is, in general, held to be a mere security.^ The mortgagee may maintain an action of trespass against the mortgagor for taking down a building or other waste of the property,'' and for cutting and carrying away timber trees.^ And until an entry under the mortgage title, or an assertion of it in some mode by the mortgagee, the mortgagor is regarded as the owner of the land, notwithstanding the mortgage." While the mortgagor is in possession without any agreement to that effect, but by the assent of the mortgagee, he is not liable for the rents and profits.^ Where the mortgagee is en- titled to possession, he may at once maintain a writ of entry for tlie recovery of possession, without notice to quit.^ § 20. New Mexico Territory. — The common-law form of mortgage prevails in New Mexico Territory, with this excep- tion : in the absence of a stipulation to the contrary, the mort- ^Southerin v. Mendum, 5 N. H. 420. 2 Morse v. Whitcher, 64 N. H. 591. 3 Smith V. Moore, 11 N. H. 55 ; Fletcher v. Chamberlin, 61 N. H. 438. *Pettengill v. Evans, 5 N. H. 54. 5 Sanders v. Reed, 12 N. H. 558. ^Rigney v. Lovejoy, 13 N. H. 251. 'Furbush v. Goodwin, 29 N. H. 312. sChelhs V. Stearns, 22 N. H. 321. DEFINITION AND DEVELOPMENT, 27 gagor of real estate has the right of possession thereof, but in other respects the common -law rule prevails, so far as this rule is recognized in this country/ § 21. North Carolina. — Upon the execution of the mortgage the mortgagor becomes the equitable owner of the lands, and this relative situation remains until the land is redeemed, or the mortgage is foreclosed. Until the day of redemption the mortgagor has no special equity, but he may pay the debt according to the proviso, and avoid the conveyance at law.^ A mortgagor in possession is an equitable freeholder. He has no legal estate, but in equity he has the entire estate, sub- ject to the incumbrance of the debt secured. A freeholder is one who owns land in fee, or for life, or for some indeterminate period. As there are legal and equitable estates, so there are legal and equitable freeholds.^ The mortgagee, after condition broken, is entitled to re- cover possession of the land upon the strength of his legal title.* And the mortgagee of lands, in the absence of any stipula- tions to the contrary, is entitled to all the crops which may be produced upon the land from year to year, until the secured debt is paid, although the crops are produced by the mort- gagor's cultivation, under the possession permitted by the mortgagee.^ The mortgagee possesses two remedies which he may prose- cute at the same time, namely, one is personam for his debt, the other in rem to subject the mortgaged property to its payment by foreclosure.*' A mortgagor allowed to remain in possession by the long acquiescence and implied approval of the mortgagee is not a trespasser but a permissive occupant, and as such is entitled 1 See Comp. Laws of 1884, sect. 1593 ; Laws of 1876, ch. 36, sect. 8. ■•' Hemphill v. Ross, 66 N. Car. 477. 3 State V. Eagland, 75 N. Car. 12. * Wittkowski v. Watkins, 84 N. Car. 456. ^Coor V. Smith, 101 N. Car. 261. 6 Ellis V. Hussey, 66 N. Car. 501. 28 NATURE AND REQUISITES OF THE CONTRACT. to reasonable demand to terminate the implied license before an action can be brought to recover possession.^ A purchaser of the mortgagor's estate under execution is entitled to the right of the mortgagor.^ After the special day of payment has passed, the mortgagor still has an equity of redemption, until there is a foreclosure, and this right is regarded as a continuance of the old estate, and so long as he is permitted to remain in possession, he is considered to hold in respect to his ownership, and is not accountable for the rents and profits of the mortgaged lands.^ § 22. Ohio. — The title of the mortgaged premises remains in the mortgagor as against all the world except the mortgagee, and also as against him, until the deed becomes absolute at law, by the non-performance of the condition, and the mort- gagee takes legal steps to reduce the premises to possession.* And this legal title remains in the mortgagor while he contin- ues his possession, whether the debt for which the mortgage was given has become due or not.^ The lands mortgaged may still be sold on judgment and execution against the mortgagor.® In equity a mortgage of real estate is regarded as a mere security.^ But at law it is incorrect to say that a mortgage is no more than a creation of a mere lien upon the property. It treats a conveyance of the estate by way of pledge or security for the debt, giving to a mortgagee the benefit of all the doctrines applicable to a bona fide purchaser.* In the case of a mortgage in the usual form, the legal estate remains in the mortgagor in possession, even after the condi- ' Hemphill v. Giles, 66 N. Car. 512. ^ Hemphill v. Eoss, 66 N. Car. 477. » Hemphill v. Ross, 66 N. Car. 477. * Ely V. McGuire, 2 Ohio, 223. 5 Phelps V. Butler, 2 Ohio, 224. ^ Farmers' Bank v. Commercial Bank, 10 Ohio, 71 ; Perkins v. Dibble, 10 Ohio, 434 ; Seymour r. Kintr, 11 Ohio, 342 ; McArthur v. Franklin, 16 Ohio St. 193 ; Allen v. Evcrly, 24 Ohio St. 97. ' Swartz V. Leist, 13 Ohio St. 419. « Harkrader v. Leiby, 4 Ohio St. 602. < DEFINITION AND DEVELOPMENT. 29 tion broken as to all the world, except the mortgagee. The mortgagee may maintain ejectment or take other legal steps to obtain possession after condition broken, but until he does so, the mortgagor is at law owner of the fee. The legal title re- maining in the mortgagor is liable to levy and sale on execu- tion. It descends to his heirs, subject to the conditional estate of the mortgagee. The mortgage becomes void upon payment of the debt, without a formal reconveyance.^ § 23. Pennsylvania. — Mortgages of real estate are in form defeasible sales, and in substance grants of specific security, or interests in lands for the purpose of security. Ejectment may be maintained by the mortgagee, or he may hold possession on the footing of ownership, with all its incidents. Though it is often decided to be a security or lien, yet so far as it is neces- sary to render it effective as a security, there is always a recog- nition of the fact that it is a transfer of the title.''^ A mortgage is a formal conveyance of land.^ The mortgage passes to the mortgagee the title and right of possession to hold till payment shall be made ; he may, therefore, when no stipu- lation to the contrary, enter at pleasure, and take actual pos- session — use the land and reap its profits. This title or lawful right to possess, and actual pedis possessio, are not ideal or con- templative merely, but are real and tangible. Until condition is performed, the title and possession are as substantial and real as though they were absolute. The mortgagee may dis- possess and hold out the mortgagor until he performs the con- dition or until the perception of the profits reaches the same result."* A mortgagee may maintain ejectment against the mortgagor for the mortgaged property before condition broken unless there be a stipulation to the contrary.^ 1 Martin v. Alter, 42 Ohio St. 94. "Tryon v. Munson, 77 Pa. St. 250. ^Philipa V. Bank, 6 Harris, 394 ; Britton's Appeal, 9 Wright, 172. *Tryon v. Munson, 77 Pa. St. 250. ^ Youngman v. Railroad Co., 65 Pa. St. 278 ; Simpson r. Amnions, 1 Binn. 175 ; Smith V. Shuler, 12 S. & R. 240 ; Martin v Jackson, 3 Casey, 504. 30 NATUEE AND REQUISITES OF THE CONTRACT. A mortgage is essentially a pledge or security, and it is dis- tinguished from a trust in this only, that the property described in it is to revert to the mortgagor on the discharge of the obli- gation for the performance of which it was pledged/ A mortgagee in possession must account for the rents, issues, and profits of the mortgaged premises, so that the net proceeds thereof may be applied to payment of the sum for which the proj^erty was pledged as security. If the same be fairly paid, the mortgagor is entitled to possession ; if not, the mortgagee has the right to retain possession until out of the rents, issues, and profits, or otherwise, the residue is paid.^ § 24. Rhode Island. — The rule of the common law as to real estate mortgages prevails in this State. The mortgagee may maintain ejectment to recover possession of land, after condi- tion broken.^ He may maintain replevin against the mort- gagor for wood and timber cut on the mortgaged premises in waste of the same.* The mortgagor in possession is regarded as owner of the premises, subject to the mortgage. A purchaser under a fore- closure sale by mortgagee under the power of sale, takes not as grantee of the mortgagee, but as grantee of the mortgagor, even when the deed is in the name of the mortgagee. A mort- gagee, in exercising the power of sale, is a quasi not a techni- cal trustee. Technically he is the attorney of the mortgagor.* But the mortgagor and his assigns hold the mortgaged realty in privity with the mortgagee, and subject to the mortgagee's rights.'' § 25. Tennessee. — The legal estate vests in the mortgagee, yet there is a tacit assent that the mortgagor shall retain the possession until default of payment, and while he thus retains possession he is not bound to account for rents. But the mort- 1 Lance's Appeal, 112 Pa. St. 456. 2 Mellon V. Lemmon, 111 Pa. St. 56. ^Carpenter v. Carpenter, 6 R. I. 542. *AVaterman v. Matteson, 4 R. I. 539. 5 Reynolds v. Hennessy, 15 R. I. 215. « Doyle V. Mellen, 15 R. I. 523. DEFINITION AND DEVELOPMENT. 31 gagee may, at any time, and before default, if he chooses, put the mortgagor out of possession, by ejectment, or other proper suit.^ § 26. Virginia. — The estate of the mortgagee in the property included in the deed, until forfeiture continues as at common law, before the interference of courts of equity. After the for- feiture by failing to perform the condition, whereby the estate becomes absolute, the mortgagee may enter upon the premises and take possession, without any possibility at law of being evicted by the mortgagor. If the possession be in the mort- gagor, the mortgagee may recover it by suit, unless there be some agreement in the deed varying the rights of the parties at common law.^ In the technical sense of the term, mortgages are not used in this State, being entirely superseded in practice by deeds of trust. Deeds of trust are foreclosed by the trustee, without necessity of resorting to courts of equity. The equity of re- demption exists in the mortgagor in a mortgage, and in the grantor in a deed of trust. § 27. West Virginia. — Mortgages contain a clause of defea- sance, and can only be enforced by foreclosure in a court of equity. But mortgages are seldom used. Deeds of trust take their place, under which the property is sold by the trustee, after default in payment of the debt secured. Article 4. The States Adopting the Equitable Rule. 1 28. In General. 1 36. Indiana. 1 29. Alaska Territory. I 37. Iowa. §30. Arizona. §38. Kangas. §31. California. §39. Kentucky. §32. Colorado. §40. Michigan. §33. Florida. §41. Minnesota. §34. Georgia. §42. Montana. §35. Idaho. §43. Nebraska. 1 Henshaw v. Wells, 9 Humph. 568 ; Vance v. Johnson, 10 Humph. 214. ^ Faulkner v. Brockenbrough, 4 Rand. 245. 32 NATURE AND REQUISITES OF THE CONTRACT. 1 44. Nevada. § 50. South Dakota. § 45. New York. § 51. Utah. § 46. North Dakota. 1 52. Washington. 1 47. Oklahoma. • §53. Wisconsin. §48. Oregon. §54. Wyoming. § 49. South Carolina. § 28. In General. — Many of the States have discarded the doctrine of the common law as to the title conveyed by a mort- gage and now declare a mortgage on real estate to be a security or lien and nothing more ; that the mortgagee has no right of entry until after default and foreclosure. It conveys no estate in land, and the default in the payment of the debt secured does not change its character. Many of the States have de- clared this doctrine by statutory provisions. Thus, in Texas, a mortgage is but a security, and the title remains in the mort- gagor, and can only be divested by default and foreclosure.^ § 29. Alaska Territory. — The laws of Oregon govern in this Territory, and hence a real estate mortgage is a mere security, and a mortgagor cannot be divested of possession without fore- closure and sale. If the mortgagor gives the mortgagee pos- session, then he may hold it until the debt is paid, provided no agreement exists as to the duration of such possession.^ § 30. Arizona Territory. — In this Territory a mortgage is a mere security of a personal nature, and passes no estate in the land. The title remains in the mortgagor until foreclosure subject to the lien of the mortgage. The mortgagee before foreclosure has no legal interest in the mortgaged premises, and consequently is not entitled to possession.^ § 31. California. — It is the doctrine in California that a iMann v. Falcon, 25 Tex. 271. ^ See Annot. Laws of Oregon of 1887, p. 383, sect. 326. The laws of Oregon in force May 17, 1884, apply to real estate mortgages. No land in this Terri- tory is held in fee except twenty-one lots in Sitka and one in Kodiak, and this is by virtue of the treaty with Russia. This, however, does not apply to mining property. All other rights in real estate are simply possessory and dependent on the action of Congress. =* Eev. Stat. 1887, sect. 797. DEFINITION AND DEVELOPMENT. 33 mortgage is a mere security for a debt, and passes only a chattel interest ; that the debt is the principal and the land the inci- dent. The mortgage constitutes simply a lien or incumbrance, and that the equity of redemption is the real and beneficial estate in the land, which may be sold and conveyed by the mortgagor in any of the ordinary modes of assurance, subject only to the lien of the mortgage/ A mortgage gives a mere lien upon the property, and does not give a right of possession of the property by the mort- gagee. If the mortgage provides for possession by the mort- gagee, he can take it under the statute.^ Under the present doctrine a mortgage does not convey the title,^ but only creates a lien upon the property, the title remaining in the mortgagor subject to the lien/ The provision of the statute takes from the instrument its common-law character, and deprives the mortgagee of all right of possession, either before or after condition broken/ § 32. Colorado. — The civil code ^ of Colorado declares : " A mortgage of real property shall not be deemed a con- veyance, whatever its terms, so as to enable the owner of the mortgage to recover possession of the real property, without foreclosure and sale, and the fact of a deed being a mortgage in effect may be proved by oral testimony ; but this section shall not apply to trust deeds with powers of sale." A mortgagee has a lien merely, and if out of possession, and not entitled to possession, cannot maintain an action of tres- pass for damages. Before a right of possession springs into existence, the mortgagee must foreclose his mortgage and sell the realty mortgaged. Having no title to the premises, and 1 GodeflFroy v. Caldwell, 2 Cal. 491 ; Peters v. Bridge Co., 5 Cal. 336 ; Guy V. Ida, 6 Cal. 99; McMillan v. Richards, 9 Cal. 365; Smith v. Smith, 80 Cal. 323. 2 Civil Code, sect. 2927. 'Taylor v. Mcl^in, 64 Cal. 514; Healy ;;. O'Brien, 66 Cal. 519; Eaynor v. Drew, 72 Cal. 307. *Harp r. Calahan, 46 Cal. 222 ; Carpentier v. Brenham, 40 Cal. 221. ^Fogarty v. Sawyer, 17 Cal. 589. 6 Sect. 263, Laws of 1887, p. 174. VOL. I. — 3 34 NATURE AND REQUISITES OF THE CONTRACT. not being in any way authorized to possess or occupy the same, he cannot recover damage thereto/ § 33. Florida. — A mortgage is a specific Hen upon the prop- erty, and is not, of itself, a conveyance of the legal title. The title is divested only by forfeiture of the conditions and a sale under the decree of the court.^ It was enacted by the legislature ^ " that a mortgage is, and shall be held in our courts a specific lien upon property for a specific purpose, in point of fact as well as law, the mortgagee is incapable of acquiring possession until after decree of fore- closure." So the mortgage is a specific lien on the land it covers, and a failure to comply with its conditions does not divest the mortgagor of the legal title, nor vest it in the mortgagee.^ The mortgage is not only in equity merely a lien, but under the statutory provisions it is nothing more than this at law. It is not a conveyance of any legal title or estate, but only a lien upon the land. It gives the mortgagee no right of pos- session. The theory of any such right, either actual or tech- nical, existing in the mortgagee by virtue of the mortgage, is entirely antagonistic to both the spirit and letter of the statute. No decree gives the mortgagee, as such, possession. It is only as purchaser under a decree of foreclosure and sale, and not as simply mortgagee, that assistance of the court can be obtained for giving him possession.^ When the legal title, with full power to sell and convey the fee, is expressly given, and the estate is to be treated according to the law of trusts, the proceeds of leases and sales of the lands only being pledged to the use of the bond creditors, such conveyance cannot be treated as a mortgage." § 34. Georgia. — In this State a mortgage on land, given to ^ Railroad Co. v. Beshoar, 8 Colo. 32. ■■^McMahon v. Russell, 17 Fla. 698 ; Jordan v. Sayre, 10 South. Rep. 823. 'Law of 1853, ch- 525 ; Bush. Dig. 1872, p. 611. * Berlack v. Halle, 22 Fla. 236. ^ Jordan v. Sayre, 24 Fla. 1 . «Soutter V. Miller, 15 Fla. 625. DEFINITION AND DEVELOPMENT. 35 secure a debt, does not convey title, but only creates a lien/ It is merely security for a debt, and the mortgagee cannot enter, or maintain ejectment. All he can do is to foreclose and sell,' and make his money out of the sale. The rents and the profits belong to the mortgagor until the sale, for the reason that the title remains in him until sale and foreclosure, and another is put into possession.^ The title passes from the mortgagor only by foreclosure and sale ; no title passes by the mortgage.^ However, a deed and bond, separately or together, divest the grantor of title, and vest the title in the grantee, until the debt is satisfied by the grantor.^ And a deed absolute with a bond to reconvey passes the legal title to the grantee.^ The mortgagor takes the rents and profits until foreclosure and sale.^ §35. Idaho. — The equity rule as to real estate mortgages prevails in this State. The mortgagee cannot enter after de- fault, but must foreclose and sell in order to avail himself of his security. A real estate mortgage is a mere security, and the common-law doctrine of a conveyance is wholly aban- doned.^ § 36. Indiana. — Prior to the statute of 1843, the common-law doctrine, that the mortgage conveyed the legal estate to the mortgagee, prevailed. But now a mortgage of lajid is only a lien, and the mortgagor is considered the owner of the real estate covered by the mortgage.^ In the absence of stipulations to the contrary, the mortgagor may retain possession until foreclosure. 'Thomas v. Morrisett, 7G Ga. .384 ; Code, sect. 1954. '^ Yason v. Ball, 56 Ga. 2G8 ; Ragland v. Justices, 10 Ga. 65 ; Carter r. Gunn,' 64 Ga. 651. 3 Burnside v. Terry, 45 Ga. 621. * Gibson V. Hough, 60 Ga. 588. sphinizy v. Clark, 62 Ga. 623 ; Allen v. Frost, 62 Ga. 659. «Vason D. Ball, 56 Ga. 268. ^ Rev. Stat. 1887, sects. 3350-3355. 8 Francis v. Porter, 7 Ind. 213 ; Grable v. McCulloh, 27 Ind. 472. 36 NATURE AND REQUISITES OF THE CONTRACT. This is a statutory provision.' Judge Elliott says that the common-law doctrine, that the legal estate vested in the mortgagee, was adhered to many years in Indiana, as the earlier decisions show, but is no longer the rule. " The modern doctrine, settled in this State, is that a mortgage is but a lien on the land as a security for the debt, and the legal title remains in the mortgagor, subject to the lien of the mortgagee." So a suit in Indiana to foreclose a mortgage is simply a demand by the mortgagee that the lien created by the mortgage be enforced, and the land mortgaged be subjected to sale for payment of the debt.^ § 37. lowA. — The common-law doctrine is not accepted by the courts of this State. The mortgagee's interest is regarded as a mere lien upon the land, which may become a title by foreclosure. The legal title remains in the mortgagor and is an estate of inheritance. Upon breach of condition the mort- gagee has a right to enter.^ In the absence of stipulations to the contrary, the mortgagor retains the legal title and the right of possession, as provided by statutory provisions.* But a conveyance of the legal title to secure the payment of -m.one}'' differs from a statutory mortgage in that the legal title passes to the grantee, the grantor reserving the right in equity to redeem.^ By a statutory mortgage the legal title remains in the mort- gagor. By a conveyance of the legal title to secure the pay- • G. & H. Stat. 1872, p. 335. « Fletcher v. Holmes, 32 Ind. 497. Note. — The foreclosure of mortgages in Indiana is governed by the statute. The statute of 1881 provides that the mortgagor shall retain possession. Under this statute the mortgagee has no interest in the rents and only upon a showing of insolvency of the mortgagor, and a further showing that the mortgaged lands arc insufficient in value to pay the mortgaged debts, can the rents be aj)plied, and even then this application of rents must be made by the appointment of a receiver for the mortgaged premises. 'White V. Rittenmyer, 30 Iowa, 2GS. *Rev. Giide of 1880, sect. 1938. 'Burdick r. Wentworth, 42 Iowa, 440. DEFINITION AND DEVELOPMENT. 37 ment of money the grantor reserves the right in equity to re- deem the property, and against an action at law for the pos- session of the land he may interpose his equitable defense.^ § 38. Kansas. — The title and right of possession remain in the . mortgagor until a conveyance of the land by foreclosure. Until that time, he is entitled to the use of the land and to all the crops grown thereon that are ripened and severed.^ Under the statute a mortgage does not confer title ; ^ hence a mortgagee of real estate cannot claim, by virtue of his mort- gage, to own a house situated on the mortgaged property.* The mortgagee has no right to enter after default; his remedy under the statute is an ordinary action and sale of the mortgaged premises.^ And although a stipulation in a real estate mortgage may seem to give the mortgagee the right, after condition broken, to take possession of the mortgaged property, and to take the rents and profits thereof, still such a mortgage gives only a lien upon the mortgaged property and the rents and profits, and this lien can be enforced by an action brought in the courts, the same as in other cases. Such a stipulation does not transfer the title to the rents and profits to the mortgagee.'^ " The common-law attributes of mortgages have been wholly set aside ; the ancient theories have been demolished ; and if we could consign to oblivion the terms and phrases — without meaning except in reference to those theories — with which our reflections are still embarrassed, the legal profession, on the bench and at the bar, would more readily understand and fully realize the new condition of things." ^ ^ Richards v. Crawford, 50 Iowa, 494 ; Farley v. Goocher, 11 Iowa, 570. " Beckman v. Sikes, 35 Kans. 120. ' Vanderslice v. Knapp, 20 Kans. 647 ; Alexander v. Shonyo, 20 Kans. 705. * Bobbins v. Sackett, 23 Kans. 301. 5 Clark V. Reyburn, 1 Kans. 281 ; Chick v. Willetts, 2 Kans. 384 ; Waterson V. Devoe, 18 Kans. 223. «Seckler v. Delfs, 25 Kans. 159 ; Comp. Laws of 1879, p. 555, sect. 1 ; p. 654, Beet. 399 ; Dassler's Stat. 1876, ch. 68, sect. 1. ' Chick V. Willetts, 2 Kans. 384. 38 NATURE AND REQUISITES OF THE CONTRACT. § 39. Kentucky. — A mortgage on land is a mere security for a debt, and substantially both at law and in equity, the mort- gagor is the real owner of the property mortgaged. The rents can be claimed by the mortgagee only by virtue of his contract with the mortgagor.^ At one time the common-law doctrine prevailed, and it was held that the mortgage conveyed the legal title to the mort- gagee ; ^ but under the civil code the rule has been changed. And now rents are not an incident to a mortgage of realty, and can be subjected by the mortgagee only by virtue of con- tract, or, in certain cases, in the method pointed out in the civil code.^ The rent goes with the legal title, and the right of possession begins and ceases with it. Hence the location of the legal title and the possession at any given time determine the right to the rents and not the unauthorized assumption of con- trol of the property by the mortgagee.* So the rents and profits of the mortgaged premises go to the mortgagor until he is divested of his title, unless specifically pledged in the mortgage.^ § 40. Michigan. — A mortgagee cannot demand or enforce possession of the mortgaged premises. But if the mortgagor or owner of the fee chooses to put him in, the tenancy is, at least, a tenancy at will, and cannot be set aside without notice.*^ The mortgagee cannot take possession until foreclosure absolute.^ By statutory provisions the mortgagee of lands is not entitled to possession until foreclosure.® But this is a provision for the benefit of mortgagors, and they are not obliged to insist upon nVoolley V. Holt, 14 Bush. 788. ''Stewart v. Barrow, 7 Bush. 371. 3 Civil Code, sect. 299. * Taliaferro r. Gay, 78 Ky. 496. * Douglass V. Cline, 12 Bush. 608. ^Byers v. Byers, 65 Mich. 598. ^ Reading t). Waterman, 46 Mich. 107; Newton v. McKay, 30 Mich. 380; Lee r. Clary, 38 Mich. 223. ^ Caruthers V. Humphrey, 12 Mich. 270; Newton v. Sly, 15 Mich. 391; Wagar v. Stone, 36 Mich. 364 ; Lee v. Clary, 38 Mich. 223. ' DEFINITION AND DEVELOPMENT. 39 it. But if they give a deed which is in form absolutely in- tended as a mortgage, they thereby convey a right to posses- sion.^ The mortgagee cannot maintain ejectment for the recovery of the mortgaged premises, until the title has become absolute upon the foreclosure.^ And in general the mortgagee has no legal title in the land mortgaged, but only a lien for the se- curity of the mortgage debt.^ Under the statute the mortgagor is entitled to recover possession from his mortgagee at any time before his rights have been foreclosed.* § 41. Minnesota. — The statute of this State declares that a mortgage of real estate shall not be considered a conveyance, so as to enable the owner of the mortgage to recover possession of the premises without foreclosure.^ A mortgage is a security only, and until foreclosure the legal title to the lands mort- gaged remains in the mortgagor.^ A mortgage, though it is in effect but a lien or security, is in form a conveyance of the estate or interest in lands.'' But it is not to be deemed a conveyance so as to enable the owner of it to recover possession of the real property without foreclosvire. The effect of the statute is to cut off the common- law right to maintain an action for the possession before fore- closure.^ " And although the mortgagee may, by obtaining a strict foreclosure, eventually secure possession, and thus complete his title under the mortgage, yet, as the courts may, and in prac- tice generally do, direct the property to be sold, even when a 1 Morse v. Byam, 55 Mich. 594 ; Bennett v. Robinson, 27 Mich. 26 ; Jeffery V. Hursh, 42 Mich. 563. "Annot. Stat, of 1882, sect. 7847. ^'Comp. Laws of 1871, p. 1775; Caruthers v. Humphrey, 12 Mich. 270; Wagar v. Stone, 36 Mich. 364. * Humphrey v. Hurd, 29 Mich. 44. 5 Gen. Stat. 1878, ch. 75, sect. 29. ^Berthold v. Hohnan, 12 Minn. 335 ; Humphrey v. Buisson, 19 Minn. 221 ; Adams v. Corriston, 7 Minn. 456 ; Donnelly v. Simonton, 7 Minn. 167. ' Morrison v. Mendenhall, 18 Minn. 232. 8 Rice V. Railroad Co., 24 Minn. 464. 40 NATURE AND REQUISITES OF THE CONTRACT. strict foreclosure is asked for, he is by no means certain of ever perfecting that title which the mortgage j)urports to convey. And if the property, by direction of the court or otherwise, be sold to satisfy the mortgage, the purchaser, when he receives his deed, takes, not the title of the mortgagee, for that is ex- tinguished by the application of the proceeds of the sale ; nor does he take simply the title of the mortgagor at the time of the sale, for that is incomplete ; but he takes the title which was in the mortgagor at the time the mortgage was given, which is equivalent to both." ^ § 42. Montana. — By statute a mortgage of real estate is not deemed a conveyance as at common law. The owner of the mortgage cannot recover possession of the mortgaged premises without foreclosure and sale. The mortgagor, in absence of an agreement to the contrary, has the right of possession until default and foreclosure.^ While a mortgage of realt}^ shall not be deemed a conveyance, whatever its terms, so as to enable the mortgagee to recover possession of the premises without foreclosure and sale, yet where the mortgagor, after the maturity of the mortgage, gives the mortgagee permission to enter, the mortgagee may rightfully do so, and hold possession until the debt is paid. Such possession will sustain his right to hold the premises in an action of ejectment.^ So a conveyance in trust to secure a mortgage giving the trustee full power to convey the property to the cestui que trust or mortgagee, upon default in the payment of the debt, does not entitle the cestui que trust or mortgagee to the possession of the land mortgaged without foreclosure and sale.'* § 43. Nebraska. — The common-law rule has never prevailed in this State, it being held that a mortgage is a mere security ^ Adams v. Corriston, 7 Minn. 456. ^^Code of Civil Procedure, sect. 359 ; Comp. Stat, of 1887. *Fee V. Swingly, 6 Mont. 596. * Fee V. Swingly, 6 Mont. 596. Judge Bach pays that a mortgagee in pos- session of the mortgaged premises, after condition broken, and with consent of the mortgagor, is entitled to possession until the debt is paid, and the mortgagor cannot eject him until the debt is paid. DEFINITION AND DEVELOPMENT. 41 creating a lien upon the mortgaged property, but conferring no title and vesting no estate/ Hence a mortgage is not a con- veyance as at common law.^ So where the owner of real estate executes an absolute deed as security for a payment of money, and receives a defeasance in writing, the transaction is a mere mortgage, and the mort- gagor, in the absence of a contract to the contrary, is entitled to retain possession of the property.^ The statutes make a mortgage nothing but a lien. " In the absence of stipulations to the contrary the mortgagor of real estate retains the legal title and the right of possession thereof." ' The mortgagee, having neither the possession nor the right of possession of such property, has no interest therein he can convey by lease.^ The mortgagor has the right to continue in possession until he is deprived of it by an order of judgment of the court in a foreclosure proceeding, unless voluntarily surrendered.*^ § 44. Nevada. — The statute declares that " a mortgage of real property shall not be deemed a conveyance, whatever its terms, so as to enable the owner of the mortgage to recover possession of the real property, without foreclosure and sale." ^ This statute confines the mortgagee and the purchaser of his interest to one remedy only — that is, to the remedy of fore- closure and sale.* A quit-claim deed conveys whatever interest the mortgagor 1 Kyger r. Ryley, 2 Nebr. 28 ; AVebb v. Hoselton, 4 Nebr. 318 ; Tootle v. White, 4 Nebr. 403 ; Hurley v. Estes, 6 Nebr. 386 ; Gregory v. Hartley, 6 Nebr. 362 ; Simmons Hardware Co. v. Brokaw, 7 Nebr. 405 ; Buel v. Farwell, 8 Nebr. 224 ; Merriman v. Hyde, 9 Nebr. 113 ; Union Mutual Ins. Co. v. Lovitt, 10 Nebr. 301 ; Davidson v. Cox, 11 Nebr. 250; Blanchard v. Jamison, 14 Nebr. 246. -' McHugh V. Smiley, 17 Nebr. 620. ^Connelly v. Giddings, 24 Nebr. 131. *Gen. State, 1881, ch. 61, sect. 55 ; 1885, p. 482. 5 Union Mutual Ins. Co. v. Lovitt, 10 Nebr. 301. 8 Union Mutual Ins. Co. r. lovitt, 10 Nebr. 301. T Gen. State, 1885, Civ. Proced., sect. 3284. 8Hyman v. Kelly, 1 Nev. 179. 42 NATURE AND REQUISITES OF THE CONTRACT. has in the property at the time the conveyance is made ; and although it is intended as a mortgage, it will, if absolute in form, vest the legal title in the grantee, and is sufficient to protect the rights of an innocent purchaser for value/ The title does not pass from the mortgagor until default, foreclosure and sale.^ § 45. New York. — The mortgagor is the owner of the free- hold, notwithstanding the mortgage, and may even sustain an action of trespass against the mortgagee, or those under him, if he or they enter while the mortgagor is in possession.^ Before foreclosure, the mortgagor remains seized of the free- hold, and the mortgagee has merely a chattel interest, a pledge for his debt.* The only right of the mortgagee to take possession before default is by consent of the mortgagor.^ The mortgagee can- not maintain an action to recover possession of the mortgaged premises.^ A mortgagor or his assignee in possession may maintain tres- pass against the mortgagee, and if the mortgagee reply liberum tenementum, the mortgagor can reply freehold in himself.^ The mortgagee has no estate in the land capable of being sold or conveyed.* He has no interest capable of being sold under execution.'' The mortgagor is, for every substantial purpose, the owner of the land, and the mortgagee has merely a lien upon it.^'^ The legal title to mortgaged premises remains in the mort- gagor, and his title is not affected by default in payment or by iBrophy Min. Co. v. Brophy & Dale Gold & Silver Co., 15 Nev. 101. nVhitmore v. Shiverick, 3 Nev. 288. ^Jackson r. Bronson, 19 Johns. 325 ; Dickinson v. Jackson, 6 Cow. 147. * Jackson v. Willard, 4 Johns. 41. nVaring v. Smyth, 2 Barb. Ch. 119 ; 2 Rev. Stat. 312, sect. 57. «Civ. Code Proced. 1880, sect. 1498. ' Runyan v. Mersereau, 11 Johns. 534. 8 Aymar v. Rill, 5 Johns. Ch. 570. ^ Morris v. Mowatt, 2 Paige, 586. 1" Astor V. Miller, 2 Paige, 68 ; Astor v. Hoji;, 5 Wend. 603 ; Waring v. Smyth, 2 Barb. Ch. 119 ; Gardner v. Heartt, 3 Denio, 232. DEFINITION AND DEVELOPMENT. 43 surrender of possession to, or the taking of possession b}' the mortgagee/ One claiming under a conveyance in form of a deed, but in fact given as security or mortgage, cannot maintain ejectment against the grantor or any other person. Reconveyance by the grantee to the grantor is not necessary to reinvest the latter with the absolute title ; it is necessary only to clear up the record title.^ A deed absolute in form, but in fact given simply as security for a debt, does not convey the title, but is both at law and in equity a mortgage only,^ The mortgagor has the legal estate, and yet it is called the equity of redemption ; but this is to be said only in respect of his relation to the mortgagee ; as to all the world he is the owner. The mortgagee has a mere lien for the payment of his debt, and it is a chattel interest. He has no legal estate in the land which enables him to exercise dominion over it. He may take all needful measures to protect his security, but nothing more.* When an absolute deed is given as a mortgage, the title does not pass to the grantee.^ § 46. North Dakota. — A mortgage does not entitle the mortgagee to the possession. The mortgagor may agree to the possession of the mortgagee upon a sufficient considera- tion.^ The equity rule prevails in this State, and mortgages of real estate do not convey the legal title to the mortgagee. The mortgagor has the right of possession until default, foreclosure, and sale.'' ' Trimm v. Marsh, 54 N. Y. 599. "" Shattuck V. Bapcom, 105 N. Y. 39 ; Murray v. Walker, 31 N. Y. 399 ; Horn r. Keteltas, 46 N. Y. 605 ; Carr r. Carr, 52 N. Y. 251. 3 Barry v. Ins. Co., 110 N. Y. 1. * Trimm v. Marsh, 54 N. Y. 599. 5 Barry v. Ins. Co., 110 N. Y. 1 ; Thorn v. Sutherland, 123 N. Y. 236 ; Shat- tuck r. Bascom, 105 N. Y. 46. «Rev. Code, 1883, sect. 1733. "• Rev. Code, 1877, sect. 1733. 44 NATURE AND REQUISITES OF THE CONTRACT. § 47. Oklahoma Territory. — In this Territory the doctrine is established that the mortgagee is not seized of the freehold, either at law or in equity, either before or after default. In the absence of stipulations to the contrary, the mortgagor re- tains the legal title and the right of possession. § 48. Oregon. — In Oregon a mortgage does not operate as at common law, to vest in the mortgagee an estate upon condition, the breach of which works a forfeiture of the estate which then becomes absolute. It is, in fact, a mere security for the pay- ment of the debt or obligation, and serves simply to create a lien upon the property. It is still the property of the mort- gagor, in law and in equity ; it is liable for his debts ; may be sold under execution, or conveyed or devised.* A lien upon real estate other than that of judgment o^ de- cree, created by mortgage or otherwise, shall be foreclosed by suit, and the property adjudged to be sold to satisfy the debt secured thereby.^ A mortgage is literally a security for a debt or the performance of the acts there mentioned ; but in form it is a conveyance.^ But a suit to foreclose a mortgage is not for the determination of any right, or claim to, or interest in, real property. It is the mere collection of a debt charged upon specific property by resorting to the property as a means of satisfying it.* A mortgagor cannot be divested of his possession of the mort- gaged premises, even after default, without a foreclosure sale. But the mortgagor may place the mortgagee in possession of the mortgaged premises if he chooses to do so. And where the duration of the possession of the mortgagee thus acquired is not limited by his agreement with the mortgagor, he may retain possession until the debt is paid. This doctrine does not conflict with the rule that a mortgage is simply a security for a debt and vests in the mortgagee no legal title to or inter- est in the mortgaged premises.^ > Sellwood V. De Lashmutt, 11 Ore. 534. '^ Verdier v. Eigne, 16 Ore. 208 ; Hill's Code, sect. 414. MVatson V. Dundee Mortg. & Invest. Co., 12 Ore. 474. * Anderson r. Baxter, 4 Ore. 105 ; Annot. Laws of 1887, p. 383, sect. 326. * Civil Code of 1872, sect. 323 ; Roberts v. Sutherlin, 4 Ore. 219. DEFINITION AND DEVELOPMENT. 45 §49. South CaroliNxI. — The legal title to the real estate, upon the execution of a mortgage, remains in the mortgagor, and the mortgagee is not entitled to maintain possessory action^ for the real estate mortgaged, even after default. The mort- gagor shall be deemed the owner of the land, and the mortga- gee as owner of the money lent or due.^ The mortgagee shall be entitled to recover satisfaction for the sum due on the land by foreclosure and sale according to law.^ A mortgage of land since the Act of 1791,^ is not an alien- ation, but a security by lien for the payment of the debt. This act changed entirely the character of a mortgage, mak- ing it merely a security for a debt instead of a conveyance on condition, declaring that the legal title shall remain in the mortgagor, and that " when the same lands are mortgaged at divers times, the debts meant to be secured by such mortgage shall be paid in the order the same are recorded." * The mortgage is not restored to its original character at common law, where it was regarded as a conveyance of the legal title to the mortgagee, by the provisions in the Act of 1797.^ § 50. South Dakota. — The equity rule prevails in this State.*' A mortgage on real estate does not entitle the mortgagee to possession. But by agreement, the mortgagee may be entitled to possession, upon a sufficient consideration. The mortgage is not a conveyance of the title to the mortgagee, and the mortgagor has the right of possession of the mortgaged prem- ises until foreclosure and sale.^ § 51. Utah Territory. — In this Territory a mortgage does not convey the legal title to the mortgagee. The mortgagee 1 Gen. Stat., sect. 2299 ; Rev. Stat. 1873, p. 536. "^ Johnson v. Johnson, 27 S. Car. 309. "5 Stat. 169. * Warren v. Raymond, 17 S. Car. 163. * Navassa Guano Co. v. Richardson, 26 S. Car. 401. «Rev. Code of 1883, sect. 1733. ■' Rev. Code of 1877, sect. 1733. 46 NATURE AND REQUISITES OF THE CONTRACT. cannot recover possession until default, foreclosure, and sale ; so a mortgage is not deemed a conveyance, so as to entitle the mortgagee to recover possession without foreclosure/ § 52. Washington. — The equity rule prevails in this State. It is provided by statute that a mortgage of real property shall not be deemed a conveyance, so as to enable the owner of the mortgage to recover possession of the real property without foreclosure and sale.^ § 53. Wisconsin. — In Wisconsin a mortgage upon lands is a mere lien or security. The title remains in the mortgagor, and the mortgagee holds the mortgage as such security for the debt. And a deed of trust given by the mortgagor to secure the payment of certain bonds, containing a clause that if the bonds were duly paid, the estate thereby created should cease and become void, is in effect a mortgage and the legal title remains in the mortgagor.^ Even a deed in fee simple, given to secure a debt with parol defeasance, is nothing more nor less than a mortgage. It leaves the title in the grantor, and gives to the grantee a mere security for his debt, to be enforced by an original mortgage.^ The statute ^ has essentially changed the rule of the common law in relation to the position of the fee of the mortgaged premises after condition broken. The fee does not vest upon default of the mortgagor, in the mortgagee, or his assignee. The fee only vests upon sale and foreclosure." However, if the mortgagee obtains the peaceable possession of the mortgaged premises without foreclosure sale, after condi- tion broken, the mortgagor cannot turn him out of such possession by an action of ejectment, or by any other legal or equitable proceeding, until he pays the amount due on the 1 Comp. Laws of 1876, p. 478 ; Civil Practice Act of 1870, sect. 260. =! Code of 1881, sect. 5-46 ; Gen. Laws of 1877, sect. 350 ; Boyd v. Forbes, 3 Wash. T. 318. 'Wisconsin Cent. R. R. Co. v. Wisconsin River and Land Co., 71 Wis. 94. *Schriber v. Le Clair, 66 Wis. 586. 5 Rev. Stat. 1871, p. 1671 ; 1878, sect. 3095. «Wood V. Trask, 7 Wis. 566. DEFINITION AND DEVELOPMENT. 47 mortgage, or until the same has been paid by the appUcation of the rents and profits.^ But the act of the mortgagee's taking peaceable possession, does not give him legal title to the fee of the land mortgaged. He can maintain his possession upon the ground of equity, having a lien upon the property in his possession by con- tract with the owner of the fee, and his right to 2:)ayment of the amount of his lien which has matured and remains undischarged ; it is equitable that the lien-holder, being in possession of the property to which his lien attaches and out of which his debt is to be paid, should be permitted to hold such possession, and apply the rents and profits which can be derived by such possession to the discharge of his debt, until the same shall be paid.^ The mortgagor in possession holds the estate in some respects as trustee for the benefit of the mortgagee, and a court of equity will interfere to prevent the destruction or waste of the mortgaged estate by the mortgagor.^ § 54. Wyoming. — In this State the common-law doctrine of a real estate mortgage does not prevail. A real estate mortgage is simply a lien on the land, or security for the debt, and the mortgagee has no title in the fee, and has no remedy but fore- closure and sale to satisfy his indebtedness against the mort- gagor. Article 5. The States Adopting a Modification of the Common-Law Rule. § 55. Delaware. ^ 58. New Jersey. § 56. Mississippi. ? 59. Vermont. ^57. Missouri. § 55. Delaware. — In this State a mortgage, as between the mortgagor and the mortgagee, so long as the former continues 1 Gillett V. Eaton, 6 Wis. 30 ; Tallman v. Ely, 6 Wis. 244 ; Stark v. Brown, 12 Wis. 572 ; Hennesy v. Farrell, 20 Wis. 42 ; Roche v. Knight, 21 Wis. 324. '^Schreiber v. Carey, 48 Wis. 208. ^ Avery v. Judd, 21 Wis. 262 ; Jones v. Costigan, 12 Wis. 677 ; Seatoflf v. An- derson, 28 Wis. 212 ; Fairbanks r. Cudworth, 33 Wis. 358. 48 NATURE AND REQUISITES OF THE CONTRACT. in possession of the mortgaged premises, is merely a security for the payment of money, and does not absolutely convey the legal title to the premises, but it is a lien on the property of so high a nature that it is not divested by a sale on judgment subsequently obtained against the mortgagor ; yet if the mort- gagee is in possession under the mortgage after condition broken, the mortgagor cannot recover the possession in eject- ment. His only right is to redeem the premises by paying the mortgage. After condition broken, the mortgagee being in possession, he is then the owner and holder of the legal title.' A mortgage creates no trust, and establishes no fiduciary re- lations ; the mortgagee has but a chose in action.^ Judge Grubb says : " In England and some of the American States, the early common-law doctrine prevails, to a greater or less extent, that the mortgagee has the legal title to mortgaged premises, and the right to immediate possession, both before and after default, as well as the right of strict foreclosure. In this State this view has been greatly modified. Here a mort- gage, though in form a conveyance of the land, is a mere security for the payment of money. The mortgagor in posses- sion is the real owner of the land ; and the mortgagee, before foreclosure, or possession of the mortgaged premises after con- dition broken, has but a chattel interest." ^ The mortgagee may, after condition broken, pursue his remedy at law or in equity, and he cannot be restrained from proceeding at his election upon either or both his remedies.* § 56. Mississippi. — Upon the maturity of the debt and default, the legal title vests in the mortgagee, who has then the right of possession. But equity, looking to the original design of the parties, in creating the mortgage as only a security for a debt, will not permit the mortgagor nor the mortgagee to enjoy a legal ^Hall V. Tunnell, 1 Houst. 320. '^Cooch V. Gerry, 3 Har. 280 ; Cornog v. Cornog, 3 Del. Ch. 416; Walker v. Farmers' Bank, 10 At. Rep. 94. nValker v. Farmers' Bank, 14 At. Rep. 819. ♦Newbold v. Newbold, 1 Del. Ch. 310. DEFINITION AND DEVELOPMENT. 49 right to the prejudice of the other, and will adopt the course of proceeding which will attain the proper end.^ The Revised Code of 1857 ^ declares that the mortgagor or grantor shall be deemed the owner of the legal title of the property mortgaged, " except as against the mortgagee and his legal assigns, after breach of the conditions of the mortgage or deed of trust." ^ But after breach of the condition, the legal title vests in the mortgagee/ The mortgagee's estate is not in the land before default, but in the security. The debt is considered the principal, and the mortgage as an incident only. Until foreclosure, whether the mortgagee has possession or not, the estate mortgaged is a pledge only. Although the mortgagee has a chattel interest only, yet in order to render this pledge available and give him the intended benefit of his security, it is considered as real property to enable him to maintain ejectment for the recovery of the possession of the land mortgaged after default ; when contemplated in every other point of view, it is personal prop- erty. The land mortgaged is only a security for a debt.^ While the legal title vests in the mortgagee after default, yet the mortgaged estate is regarded as a pledge only.® The legal title may be asserted by the mortgagee after de- fault, but only for the protection of his debt, and to make the security available for its payment.^ § 57. Missouri. — The legal title pro forma is vested in the mortgagee, after forfeiture, for the purpose of securing his debt. So a mortgagee may maintain an action of ejectment against the mortgagor, or those claiming under him, after condition broken.* ^ Hill V. Robertson, 24 Miss. 368. 2 Rev. Code, p. 303, art. 12. 'Code of 1880, sect. 1204. * Heard v. Baird, 40 Miss. 799. 5 Buckley v. Daley, 45 Miss. 338. * Carpenter v. Bowen, 42 Miss. 28. ^Buck V. Payne, 52 Miss. 271. 8 Walcop V. McKinney, 10 Mo. 229 ; Meyer v. Campbell, 12 Mo. 603 ; Sutton V. Mason, 38 Mo. 120 ; Hubble v. Vaughan, 42 Mo. 138. 50 NATURE AND REQUISITES OF THE CONTRACT. In a mortgage or deed of trust in the nature of a mortgage, the legal title, after condition broken, passes to the mortgagee or trustee/ Where a mortgaged debt is payable in installments, the con- dition is broken by non-payment of any one of them, and the mortgagee may thereupon enter or bring ejectment.^ A mort- gagee in the absence of agreement to the contrary, may main- tain ejectment for the mortgaged premises, after breach of con- ditions, and so, it seems, may also a trustee in a deed of trust.^ After the condition is broken and the legal title has passed to the mortgagee, the mortgage is merely a security for the debt, and is extinguished, and the title revested, whenever the debt is satisfied.'* The addition of a power to sell, without judicial proceedings to foreclose will not avoid the legal effect of the grant.^ § 58. New Jersey. — It is the established doctrine of this State that a mortgage of lands is not a common-law conveyance on condition, but a mere security for the mortgaged debt; the legal estate being considered as subsisting in the mortgagee only for that purpose. The consequence is the separation in legal contemplation, of the estate of the mortgagor from that of the mortgagee, and the recognition of an actual and distinct legal estate in each. The legal estate of the mortgagee, after breach of condition, has all the incidents of a common-law title, for the purpose of an action of ejectment ; but its exist- ence is, nevertheless, regarded as compatible with a legal estate at the same time in the mortgagor. This legal estate of the mortgagor is capable of conveyance, mortgage, or a sale under execution against him, at any time before his estate is divested by foreclosure. " The cases clearly recognize the equity of redemption of a 1 Johnson r. Houston, 47 Mo. 227. ^ Reddick v. Gressman, 49 Mo. 389. ^ Siemers v. Schrader, 88 Mo. 20. * Pease v. Pilot Knob Iron Co., 49 Mo. 124 ; Logan v. Wabash & C. Co., 43 Mo. App. 71. nVoods V. Hilderbrand, 46 Mo. 284; Kennett v. Plummer, 28 Mo. 142. DEFINITION AND DEVELOPMENT. 51 mortgagor as a legal estate, and as such it must subsist until extinguished in the manner in which legal estates are by law extinguishable. Entry on the mortgaged premises does not work an extinguishment. It merely operates to transfer the possession to the mortgagee with all the rights that actual pos- session confers, leaving the ultimate rights of the j)arties un- affected." ' The mortgagee cannot enter immediately upon the execu- tion of the mortgage as at common law, but only u]3on breach of condition.^ A mortgage on real estate is regarded as a security for the debt,^ the legal estate being considered as subsisting only for that purpose.* If the mortgagee is in possession after the condition is broken, it is held in courts of law that, as to tresspassers, he is the owner out and out. But out of possession, he is limited to the redress of such wrongs as in their consequence, impair or destroy his security. He, therefore, may sue for injuries di- rect or indirect which occasion loss to him by reason of the impairment of his security.'^ § 59. Vermont. — In this State statutory provisions declare for the possession of the mortgagor until condition broken,'' After condition broken, the mortgagee may, without notice, enter upon the mortgaged premises and take possession thereof, if he can do so peaceably and unresisted/ Whenever the condition of a mortgage is broken, at law the interest of the mortgagor in the premises thereupon becomes absolutely vested in the mortgagee, and he has a right to the immediate possession of the premises.'^ ^ Woodaide v. Adams, 40 N. J. L. 417, opinion by Judge Depue. '^Sanderson v. Price, 1 Zab. 637. 3 Shields v. Lozear, 34 N. J. L. 496. * Wade V. Miller, 32 N. J. L. 296 ; Schalk v. Kingsley, 42 N. J. L. .32. ^ Mayor v. Kiernan, 50 N. J. L. 246. « Rev. Stat. 1847, 215, sects. 7, 8, 11 ; Rev. Stat. 1880, sect. 1258. ^Wilson V. Hooper, 13 Vt. 653; Lull v. Matthews, 19 Vt. 322; Fuller v. Eddy, 49 Vt. 11. ^Hagar v. Brainerd, 44 Vt. 294. 52 NATURE AND REQUISITES OF THE CONTRACT. If the mortgagor is allowed to retain possession after condi- tion broken, he becomes a mere tenant at will/ A mortgagee can maintain • an action on the case, in the nature of waste, against the mortgagor for timber cut on the mortgaged prem- ises after decree of foreclosure, and before the expiration of the time limited for redemption.^ An equity of redemption is tantamount to a fee at law, and is descendible by inheritance, demisable by will, and alienable by deed, precisely as if it were an absolute inheritance at law.^ The mortgagor, until condition broken, has, as against the mortgagee, the legal right ^ to the possession of the mortgaged premises, unless otherwise stipulated in the mortgage ; hence whatever he severs from the real estate before condition broken, becomes his property.^ Article 6. The State whose Mortgage is a Species of a Pledge. I 60. Louisiana. § 60. Louisiana. — The Civil Code® of this State defines a mortgage to be a right granted to the creditor over the property of his debtor, for the security of his debt, giving him the power of having the property seized and sold in default of payment. It is a species of pledge, the thing mortgaged being for the payment of the debt or fulfillment of the obligation.^ The property cannot be engaged to a second creditor to the preju- dice of the first.^ Mortgages exist only on immovables, ships, steamboats, and other vessels, or such rights as are described by law. The mortgage subjects the property to the rights of the creditor on ^ Morey v. McGuire, 4 Vt. 327. 'Lan regulating assignments for the benefit of creditors, the decisions of the highest courts of the State are of controlling authority.^ The laws of voluntary assignments of the different States are not interpreted alike in some of the States. But the interpre- tation within one State becomes a part of the law of that State, as much so as if incorporated into the body of it by the legis- lature.* Therefore, in Missouri, a deed of trust given on the property of a party to secure the payment of his debts therein named, and reserving in the clearest terms a right of redemp- tion to the grantor, by providing that he shall pay those debts the deed shall be void, as well as by authorizing the trustee to sell the property only in case of his failing to pay those debts or any part thereof for five days after they become payable, is a mortgage only and not an assignment.^ So, also, the assignment law is inapplicable to a deed of trust, conveying all the debtor's property, real and personal (except his homestead and household furniture and a horse and buggy), to a trustee in trust to secure the payment of a part of his debts for which he was liable either as principal or surety, which appeared upon a view of all its provisions as ap- plied to the facts of the case, to be not an absolute indefeasible ' Woodruff V. Robb, 19 Ohio, 216. " Kiser v. Dannenburg, (Ga.) 15 S. E. Rep. 17. 'Union Bank v. Kansas City Bank, 136 U. S. 223 ; Jaffray v. McGehee, 107 V. S. 361 ; Peters v. Bain, 133 U. S. 670. * Christy v. Pridgeon, 4 Wall. (U. S.) 196. * Union Bank v. Kansas City Bank, 136 U. S. 223. CONDITIONAL SALES, ETC., DISTINGUISHED. 69 assignment of all the grantor's title, both legal and equitable, in the property, in trust for his creditors ; it is a deed of trust to secure the payment of debts and other liabilities in which the grantor has an interest in the property conveyed, for the protection of which equity gives him a right of redemption, though no clause of defeasance is inserted in the deed.^ The assignment law of Missouri is not, in letter or spirit, a bankrupt or insolvent debtor's act. A debtor, whether solvent or insolvent, may, in good faith, sell, deliver in payment, mort- gage or pledge the whole or any part of his property for the benefit of one or more of his creditors, to the exclusion of others, even though such transfer may have the effect of delaying them in the collection of their debts, and the transaction will not be interpreted as a mortgage.^ § 72. Voluntary Assignments Under the Statutes of Ohio. — In Ohio, under the statute of that State, it has been held that mortgages made by a party after he has become in- solvent, and had ceased to do business, to prefer some of his creditors, were invalid and ineffectual against his creditors generally, without regard to the question whether the mort- gages were or were not parts of the same transaction as an as- signment under the statute.^ Thus, where an insolvent party under the statute granted and assigned all his property, real and personal, to an as- signee, in trust, to sell and dispose of it, and to apply the pro- ceeds, after paying the expenses of executing the trust, to the payment of all his creditors, the asssignor, contempora- neously with the assignment, made five mortgages to prefer creditors. It was held that these mortgages were invalid as against general creditors, under the Ohio statute.* § 73. Voluntary Assignments Under the Illinois Stat- ute. — The opinion of the United States Supreme Court holds ^Hargadine v. Henderson, 97 Mo. 375. ^ Crow V. Beardsley, 68 Mo. 4.35. And see Holt v. Simmons, 16 Mo. App. 97 ; Sampson v. Shaw, 19 Mo. App. 274 ; Smith v. Thurman, 29 Mo. App. 186. 'Eouse V. Merchants' Bank, 46 Ohio St. 493. * Smith MiddUngs Purifier Co. v. McGroarty, 136 U. S. 237. 70 NATUKE AND REQUISITES OF THE CONTRACT. that, in Illinois, the surrender by an insolvent debtor of the dominion over his entire estate, with an intent to evade the operation of the voluntary assignment act, and the transfer of the whole, or substantially the whole of his property to a part of his creditors in order to give them a preference over other creditors, whether made by one instrument or more, and what- ever their form may be, operate as an assignment under the act, the benefit of which may be claimed by any unpreferred creditor who will take appropriate steps in a court of equity to enforce the equality contemplated by the statute.^ The Illinois Supreme Court does not accept the interpreta- tion thus given. It holds that the voluntary assignment act does not affect the right of a failing debtor to prefer creditors by giving judgment notes, though all his property be sold on execution to satisfy them, since such notes, not being voluntary assignments, are not within the purview of the act ; that the act does not purport, by its terms, to regulate or prohibit pref- erences generally, but only preferences in any assignment. An assignment as to the form and contents has always been un- derstood to be a written deed of convej^ance, executed by the assignor to the assignee, reciting the grantor's indebtedness and inability to pay, and conveying his property, real and per- sonal, by apt words of sale and transfer to the assignee, in trust, to take possession of and sell the same, and to collect the outstanding debts, and out of the proceeds to pay the creditors. The object of the law is to prohibit discrimination by a debtor making a voluntary assignment in favor of particular creditors, and it is not preference of a creditor itself that is condemned, but preference as a feature of such assignment.^ Notwithstanding this act, a debtor may, in good faith, sell his property, mortgage or pledge it to secure a bona fide debt, or create a lien upon it by operation of law, and such action on his i>art will not constitute an assignment.^ 1 White V. Cotzhauscn, 129 V. S. 329. '^Farwell v. Nillson, 133 111. 45. 3 Preston v. Spauldinj;, 120 111. 20S. The Illinois Supreme Court holds in Farwell v. Nillson, 133 111. 45, that the CONDITIONAL SALES, ETC., DISTINGUISHED. 71 § 74. General Statement. — It will serve no useful pur- pose to discuss the voluntary assignment act, because the decisions thereunder are made in view of peculiar statutes in the respective States, and may not serve to illustrate the law as generally held in other jurisdictions. Still it is generally held that a debtor may secure special creditors. Thus, in New Hampshire it is held that a mortgage or pledge by a debtor of all his property to secure a portion of his debts, leav- ing others unprovided for, is not an assignment within the meaning of the statute providing for an equal distribution of property assigned for the benefit of creditors.^ So, in Vermont, the statute prohibiting general assignments must be construed so as to embrace only those transfers of property which are made in trust for creditors ; hence a trans- fer by a debtor of all his property is not a general assignment, unless the transfer is to a trustee in trust for other creditors, and, consequently, if a debtor conveys his property directly to creditors for their debts, and no trust is created for others, the transfer is to be regarded as a mortgage or pledge, and not an assignment.^ So an assignment by an insolvent debtor of all his personal property, made directly to a creditor, reserving the surplus, if an}', to the assignor, is in effect, a chattel mortgage.^ § 75. Voluntary Assignments do not Embrace all Cases OF Assignments Made by Insolvent Debtors. — The statutes doctrine of White v. Cotzhausen, 129 U. S. 329, is not in accordance with the decisions of that court. The court says : " Much as we respect the conclu- sions of that learned court, we are, upon questions involving the construc- tion of statutes of our o"mi State, bound by the decisions of our own Supreme Court. If our court had not, as we conceive it has, already made its con- struction of the voluntary assignment act plain, we should, nevertheless, find great difficulty, as ^411 appear from what we have already said, in as- senting to the view taken in White v. Cotzhausen." ^ Low V. Wyman, 8 N. H. 536 ; Barker v. Hall, 13 N. H. 298 ; Danforth v. Denny, 25 N.H. 155. 2 Peck V. Merrill, 26 Vt. 686 ; McGregor v. Chase, 37 Vt. 225. ^Dunham r. Whitehead, 21 N. Y. 131. See also. Gage v. Chesebro, 49 Wis. 486 ; Briggs ?'. Davis, 21 N. Y. 574 ; McClelland v. Remsen, 3 Abb. Dec. (N. Y.) 74 ; Van Busliirk v. Warren, 4 Abb. Dec. (N. Y.) 457. 72 NATURE AND REQUISITES OF THE CONTRACT. relating to assignments of the property of a failing debtor, for the purpose of preferring creditors, do not embrace all cases of assignments made by an insolvent debtor ; but only refer to those cases where the assignee stands in the character of a trustee, other than his merely receiving a conveyance to secure his own debt. Thus, where a party executes to another cer- tain notes evidencing a debt, and has, at the same time, exe- cuted a bond and power of attorney to confess judgment for the same debt, and the payee having assigned the notes to his creditors, and having entered up judgment in his own name for the amount of the debt on the bond and warrant of attor- ney, and having afterward received an assignment of property from the maker of the notes, who is in failing circumstances, for the security of the debt, the assignee,, in such case, must be held to be a trustee, and the assignment thus made to him must enure to the benefit of all the creditors of said debtor, under the statute.^ The statute relating to conveyances to trustees in trust to prefer creditors, does not apply to the case of a creditor taking security for a debt, from an insolvent debtor, where the security is taken in good faith, and where the sole object of it is to secure a debt,^ And it is generally held that a conveyance by a debtor, known to be insolvent, of all his property, to one or more of his creditors, in discharge of their debts and liabilities, not ex- ceeding the amount due and payable to them, and not for the benefit of the creditors at large, or any of the creditors than the immediate grantees, is not a voluntary assignment, within the meaning of the act.^ Thus, certain insolvent debtors transferred their property directly to particular creditors, and it was held that the statute relating to assignments by debtors for the benefit of creditors, and prohibiting preferences in such assignments, has no appli- cation to cases of this kind.* Notwithstanding the statute a ^ Doremus v. O'Harra, 1 Ohio St. 45. 2 Atkinson v. Tomlinson, 1 Ohio St. 237. "United States v. McLelland, 3 Sum. C. 0. 345. *Schroeder v. AValsh, 120 111. 403. CONDITIONAL SALES, ETC., DISTINGUISHED. 73 debtor may pay cue creditor in full, either in money or by sale of his property. The statute applies only to conveyances of property to an assignee or trustee, in trust, to convert the same into money for the benefit of creditors of the assignor, which can be made only under the act. Thus, where the in- struments by which the goods and chattels were transferred to certain mortgagees were in the form of chattel mortgages, and each purported to be given to secure a promissory note executed by the mortgagor to the mortgagees, due one day after date ; and it was recited in said mortgages that the possession of the mortgaged property was given to the mortgagees, and they were empowered to dispose of the same at public or private sale, and in bulk or at retail ; and it was provided that upon payment of said notes, and all costs and charges, said instru- ments should be null and void, they did not constitute a volun- tary assignment for the benefit of creditors, within the meaning of the statute ; but were mere chattel mortgages, executed for the sole benefit of the mortgagees, and creating no trust in favor of any of the creditors of the mortgagor.^ A voluntary assignment unquestionably means an assign- ment of all the debtor's property in trust to pay debts, as con- tradistinguished from a mere sale thereof to a creditor in pay- ment of his debt, or the pledge or hypothecation of the property to a particular creditor, as a mere security, in the nature of a mortgage.^ A voluntary assignment for the benefit of creditors implies a trust, and contemplates the intervention of a trustee. As- signments directly to creditors and not upon trust are not vol- untary assignments for the benefit of creditors. Unless a trust is created by the conve3''ance in favor of creditors, it is not within the class of instruments known as assignments for the benefit of creditors.^ MVeber v. Mick, 131 111. 520. ^ Bias V. Bouchaud, 10 Paige (N. Y.), 445, opinion by Chancellor Walworth. ' Burrill on Assignments, sects. 2, 3. 74 nature and requisites of the contract. Article 4. A Chattel Mortgage Distinguished. § 76. Distinction. ? 78. A Similar View Taken by the ? 77. This Distinction not Recognized Massachusetts Court, by Some Courts. § 76. Distinction. — Under the common law, the principles governing a chattel mortgage are the same that apply to a mortgage of real estate. But there is a wide difference between a mortgage of land and a mortgage of chattels, in those juris- dictions where the equitable rule applies to real estate mort- gages and the common-law rule to chattel mortgages. Thus, in New York, in case of a real estate mortgage, the estate sub- ject to the mortgage, remains in the mortgagor, and may be sold under execution against him, as such mortgage is regarded merely as a security for the debt, and not as a transfer of the title. A mortgage of chattels, however, in all cases, vests the legal title in the mortgagee, and when by the terms, or by the legal construction of the instrument, the mortgagee has an im- mediate right of possession, although the possession may not in fact, have been changed, and, in judgment of law, he is the absolute owner, and it is merely as his bailee and by his suf- ferance that the mortgagor retains possession, the mortgagor has no interest that is bound by, or can be sold under, an exe- cution against him. Where by the terms of the mortgage the mortgagor is to remain in possession for a certain time, his temporary interest, subject to the mortgage, may be levied on and sold, but his interest, in other cases, is a right of redemp- tion only, a mere chose in action which, unless united to a right to the possession for a definite period, can never be the subject of a levy and sale under execution.^ The interest of a mortgagor of personal property, even be- fore forfeiture, where he has not the right of possession for a definite period, is but a right of redemption merely, which is not the subject of levy and sale upon execution.^ ^Stewart V. Slater, 6 Duer (N. Y.), 99. == Mattison v. Baucus, 1 Comst. (N. Y.) 295 ; Hull v. Carnley, 2 Duer (N. Y.), 105. CONDITIONAL SALES, ETC., DISTINGUISHED. 75 A mortgage upon real estate is a mere security and incum- brance upon the land and gives the mortgagee no title or estate therein whatever. A chattel mortgage is more than a security ; it is a sale of the thing mortgaged and operates as a transfer of the whole legal title to the mortgagee, subject only to be defeated by the full performance of the condition.^ This rule has been closely adhered to in New York. A real estate mortgage is only a lien, and conveys no title to the land, while a chattel mortgage transfers the title at once, subject to a defeasance by performance of the conditions annexed, the payment of the debt. This distinction is of much importance in case of tender by the mortgagor after the law-day, because a tender of money due on a real estate mortgage, even after default, is good at any time before foreclosure ; but otherwise in case of a chattel mortgage, when made after default and before foreclosure.^ § 77. This Distinction not Recognized by Some Courts. — In those jurisdictions where a chattel mortgage is considered as a mere lien, the same as a mortgage on lands, there is no distinction, and there is no conflict of authority. In some States where a chattel mortgage is not considered a lien, but a sale with a defeasance, it has been endeavored to apply the prin- ciples of a real estate mortgage, though the latter is merely a lien upon the property. Thus in Minnesota, Judge Collins says: " The character of the real estate mortgage, and the status of the land covered thereby, are the same in this State under our statutes as they were declared to be by the courts of New York many years ago, while the same distinction between chattel mortgages and those upon real property exists here as it does there ; for it has been announced repeatedly in the decisions of this court that the former vests in the mortgagee a defeasible title in the mortgaged property, and upon default he is entitled to possession without foreclosure, unless stipulated ^ Butler V. Miller, 1 Comst. (N. Y.) 496. *Noyes v. Wyckoflf, 30 Hun (N. Y.), 466. 76 NATURE AND REQUISITES OF THE CONTRACT. to the contrary, subject to the mortgagor's right of redemption. . . . Although technically the legal title to the mortgaged property is vested in the mortgagee, he has been deprived of many of the rights which formerly resulted from that rule of law." The learned judge holds that in truth very little difference can be pointed out between the rights, privileges, and remedies of the mortgagor of real and personal property, either in struc- ture of the mortgage or its effects. " We can discover no reason for a distinction which commends itself, and no reason is sug- gested in the decisions cited by the respondent, except that based upon the technicality before referred to, that a mortgage upon real estate is a mere lien, while mortgage on personal property vests the legal title thereof in the mortgagee. This is not satisfactory, and, in analogy with the rule laid down in case of real estate security, which is well supported on prin- ciple and by authority, we are of the opinion that the effect of a tender of the amount of a debt secured by a chattel mort- gage, though made after maturity, is to extinguish and dis- charge the lien, the debt only remaining." ^ § 78. A Similar View Taken by the Massachusetts Court. — In Massachusetts a mortgage, both real and chattel, conveys an estate or title defeasible on the performance of a condition subsequent. If the condition is performed according to its terms, the mortgage immediately becomes void, and the mort- gagee is divested of his title.^ The right of redemption in the mortgagor limits the right and title of the mortgagee. This right is not equitable, in the sense that the interposition of a court of equity is required to enforce it ; but it is a legal right growing out of the statute under which the parties make their contract.^ In regard to tender the equitable rule of real estate mortgages as it prevails in New York, is adopted as to both real and chattel ^ Moore v. Norman, 43 Minn. 428. ^Darling r. Chapman, 14 Mass. 101. 'Iron Works v. Montafrue, 108 Mass. 248; Gordon r. Clapp, 111 Mass. 22; Stone V. Jenks, 142 Mass. 519. CONDITIONAL SALES, ETC., DISTINGUISHED. 77 mortgages. The definition of a chattel mortgage is substan- tially the same in New York and Massachusetts. But in the former a real estate mortgage is a mere lien, and in the latter a sale with a defeasance. The Massachusetts court, in appl}^- ing the equitable rule to a chattel mortgage in the matter of tender by the mortgagor after jdefault, but before foreclosure, seeks authority under the statute, and declares that the statute gives the payment or tender of payment of the debt and all proper charges at any time before foreclosure the same effect upon the rights of the parties in the property which it would have had if made when the debt was due. In either case, if the mortgagee refuses the tender, he may afterward sue for his debt, but he loses his security.^ This is similar to that of the Minnesota court, but in con- flict with the New York decisions as to chattel mortgages, and with those where the common-law doctrine prevails. 1 Weeks v. Baker, 152 Mass. 20. CHAPTER III. absolute sales distinguished. Article 1. Absolute Conveyance with Defeasance. § 79. Absolute Conveyance as Security. ^ 83. Absolute Conveyance with Sep- ^ 80. In Equity. arate Defeasance, g 81. Character of the Defeasance at g 84. The Defeasance must be an In- Law. strument of as High a Nature §82. Character ofDefeasance in Equity. as the Deed Itself. 1 85. Cancellation of Defeasance. § 79. Absolute Conveyance as Security. — Where a deed for land is absolute on its face, and, at the same time it is made, a written agreement is entered into by the parties, show- ing that the object of the deed is to secure to the grantee money and indemnify him against liability, such deed is only a mortgage, and the right of redemption by the mortgagor is incident to it.^ The defeasance need not necessarily be inserted in the deed. It may be added or appended to the deed,^ or written upon the back of the mortgage or deed, which taken together constitute the mortgage.^ The essence of the defeasance is that it defeats the principal deed, and makes it void if the condition is performed,* but a term equivalent to this proviso is sufficient.^ The instrument must have words indicating that it is given 'Smith ('. Smith, 80 Cal. 325 ; Kelly t). Leach man (Idaho), 29 Pac. Eep. 849 ; Breckenridge v. Auld, 1 Rob. (Va.) 143. 2 Perkins r. Dibble, 10 Ohio, 433 ; Baldwin v. Jenkins, 23 Miss. 206. nVhitney v. French, 25 Vt. 663. *4 Kent's Com. 141. * Hoyt V. Fass, 64 Wis. 273 ; Adams v. Stevens, 49 Me. 362 ; Pearce v. Wil- son, 111 Pa. St. 14; Lanfair v. Lanfair, 18 Pick. (Mass.) 299. See, also, Whitcomb v. Sutherland, 18 111. 578 ; Austin v. Downer, 25 Vt. 558 ; Scott v. McFarland, 13 Mass. 309. 78 ABSOLUTE SALES DISTINGUISHED. 79 for a security, either in the condition expressed in the terms or in a separate defeasance.' Where the instrument is in the nature of a mortgage, it will be so declared.^ § 80. In Equity. — As to what constitutes a mortgage courts of equity hold that the particular form or words of the con- veyance are unimportant; and the general rule is that wherever a conveyance transferring an estate is originally intended between the parties as a security for money, or for any other incumbrance, whether this intention appears from the same instrument or any other, it is always con- sidered in equity as a mortgage, and consequently is redeema- ble upon the performance of the condition or stipulation con- tained in it.^ In equity, the character of the conveyance is determined by the clear and certain intention of the parties ; and any agree- ment in the deed, or in a separate instrument, showing that the parties intended that the conveyance should operate as a security for the repayment of money, will make it such, and give to the mortgagor the right of redemption.* § 81. Character of the Defeasance at Law. — At law the defeasance must be in favor of the grantor himself, and not in favor of a third party. The reconveyance must not be made to a third party, but to the grantor, in order to avail him. If the reconveyance is made to a third party, the instrument can- not be considered a mortgage.^ ^ Goddard v. Coe, 55 Me. 385. See, also, Booth v. Hoskins, 75 Cal. 271. '^ Fountain v. Lumber Co. (Mo.), 18 S. AV. Rep. 1147 ; Gray «. Shelby (Tex.), 18 S. W. Rep. 809. 'Lounsbury v. Norton, .59 Conn. 170; Elliott v. Wood, 53 Barb. (N. Y.) 285. * Taylor v. Weld, 5 Mass. 109 ; James v. Morey, 2 Cow. (N. Y.) 246 ; Carey V. Rawson, 8 Mass. 159 ; Wharfs;. Howell, 5 Binn. (Pa.) 499 ; Dabney v. Green, 4 Hen. & Munf. (Va.) 101 ; Hughes v. Edwards, 9 Wheat. (U. S.) 489 ; Hicks V. Hicks, 5 Gill. & Johns. (Md.) 75. * Carr v. Rising, 62 111. 14 ; Magnusson v. Johnson, 73 111. 156 ; Payne v. Patterson, 77 Pa. St. 134 ; Shaw v. Erskine, 43 Me. 371 ; Warren v. Lovis, 53 Me. 463. 80 NATURE AND REQUISITES OF THE CONTRACT. § 82. Character of the Defeasance in Equity. — In equity the defeasance may be to some other party than the grantor. In equity it is a question of fact which may be de- termined by the inquiry into the relation of the parties and the circumstances of the case, which may indicate that the transac- tion was a mortgage, or a sale absolute or upon condition.' § 83. Absolute Conveyance with Separate Defeasance. — An absolute deed and separate defeasance made at the same time constitute a mortgage.^ But to constitute a mortgage at law the conveyance and defeasance must be a part of the same transaction, and must take effect at the same time.^ The dates of the two instruments need not be the same, but they must be delivered at the same time.* The practice of placing the conveyance in fee and the con- dition or defeasance which is to qualify it, in separate instru- ments, is liable to accident and abuse, and may be productive of injury to the mortgagor ; and the Court of Chancery has fre- quently discouraged such transactions.^ A deed executed simultaneously with the grantor's taking from the grantee a bond for the repayment of the money bor- rowed is, with the bond, a mortgage.*' An absolute deed given as a security for the payment of money is a mortgage as much as if a defeasance were expressed 1 McNees v. Swaney, 50 Mo. 388 ; Micou v. Ashurst, 55 Ala. 607 ; Stinch- field V. Milliken, 71 Me. 567 ; Eice v. Rice, 4 Pick. (Mass.) 349 ; Todd v. Camp- bell, 32 Pa. St. 250 ; Barton v. May, 3 Sand. Ch. (N. Y.) 450 ; Jeflfery v. Hursh, 58 Mich. 246. ^ Friedley v. Hamilton, 17 Sarg. & R. (Pa.) 70 ; Corpman v. Baccastow, 84 Pa. St. 363 ; Jaques v. Weeks, 7 Watts (Pa.), 261 ; Wilson v. Shoenberger, 7 Casey (Pa.), 295. ^Bennock v. Whipple, 12 Me. 346. See, also, Newhall v. Burt, 7 Pick. (Mass.) 157 ; Swetland v. Swetland, 3 Mich. 482 ; Clement v. Bennett, 70 Me. 207 ; Montgomery r. Chadwick, 7 Iowa, 114 ; Vance v. Lincoln, 38 Cal. 586. * Harrison v. Phillips, 12 Mass. 456 ; Newhall v. Burt, 7 Pick. 157 ; Mclntier V. Shaw, 6 Allen (Mass.), 83 ; Haines v. Thomson, 70 Pa. St. 434 ; Kelleran V. Brown, 4 Mass. 443. See Bryan v. Co wart, 21 Ala. 92. ^ Lord Talbot, in Cotterell v. Purchase, Cases Temp. Talbot, 64 ; Bac. Tracts, 37 ; Baker v. Wind, 1 Ves. 160. « Clark V. Lyon, 46 Ga. 202. ABSOLUTE SALES DISTINGUISHED. 81 in the body thereof or executed simultaneously with it.^ And this is especially so if the deed and the defeasance bear even date, or are agreed upon at the same time.^ § 84. The Defeasance must be an Instrument of as High a Nature as the Deed Itself. — The defeasance must be of as high a nature as the deed itself; hence, a writ- ing not under seal, at law, cannot operate as a defeasance of an absolute deed.^ If not under seal, the defeasance in equity will constitute the agreement a mortgage.* § 85. Cancellation of Defeasance. — Parties to the trans- action can cancel the defeasance, and thus make the convey- ance absolute, provided the rights of third parties are not affected, and the transaction is conducted with fairness, both as between the parties and as against creditors of the grantor.* So where an absolute deed is given, accompanied by a simul- taneous instrument, operating by way of defeasance, and the parties, by fair mutual stipulations, agree that the defeasance shall be surrendered and cancelled, with an intent to vest the estate unconditionally in the grantee by force of the first deed, the estate becomes absolute in the mortgagee by such surrender and cancellation. Such cancellation operates as an estoppel arising from the voluntary surrender of the legal evidence.® A separate deed of defeasance, made at the same time with the absolute deed, may afterward, upon sufficient considera- tion, be cancelled as between the parties in such a manner as to give an absolute title to the mortgagee when no intervening rights of third parties are affected.^ 1 Odell V. Montross, 68 N. Y. 499. ^Reitenbaugh v. Ludwick, 31 Pa. St. 131 ; Shaw r. Erskine, 43 Me. 371. ' Kelleran v. Brown, 4 Mass. 443 ; Flint v. Sheldon, 13 Mass. 443 ; Murphy V. Galley, 1 Allen (Mass.), 107 ; Jewett v. Bailey, 5 Me. 87 ; Warren v. Lovis, 53 Me. 463. * Cutler V. Dickinson, 8 Pick. (Mass.) 386 ; Eaton v. Green, 22 Pick. (Mass.) 526. * Harrison v. Phillips, 12 Mass. 456; Rice v. Rice, 4 Pick. (Mass.) 349. ^ Trull V. Skinner, 17 Pick. (Mass.) 213. ^Waters v. Randall, 6 Met. (Mass.) 479. VOL. I. — 6 82 NATURE AND REQUISITES OF THE CONTRACT. Thus, if a bond of defeasance, which was executed by the grantee of land to the grantor at the time of taking the deed, is surrendered and destroyed at the expiration of the time limited therein, and a new bond given upon a consideration partly new, by which the grantee agrees to reconvey the premises to the grantor upon the payment within an addi- tional time of a larger sum, the grantor thereby surrenders and abandons his title as mortgagor, and the grantee becomes owner of the land in fee,^ and under the new contract to con- vey no mortgage could arise.^ If a party make an absolute conveyance of land as a security for the payment of money, he may abandon the payment of the debt, cancel the secret agreement, and treat his conveyance as absolute instead of a mortgage ; he will be bound by such election.* So a right to treat a contract as a security for a loan by verbal agreement between the parties, may be shown to have been voluntarily abandoned or rescinded by the agreement of the parties. When such agreement appears in the written con- tract then a release or satisfaction would be necessary.* When the defeasance has been cancelled it cannot afterward be revived by the grantor or his heirs.^ But this doctrine does not hold good in those States where a i^ortgage, in whatever form, merely creates a lien upon the land, and the legal title remains in the mortgagor. So a mort- gage in the shape of a deed absolute, with defeasance in a separate writing must be foreclosed in the same manner as a pure mortgage, and the premises be sold by order of court, with like privilege of redemption to the mortgagor.® When a conveyance, under this rule that a mortgage is only n lien on tlie land, is shown to be a mortgage, no matter what the form, the title does not pass to the grantee any more than it ' Palis V. Conway Mut. Fire Ins. Co., 7 Allen (Mass.), 46. * Stetson V. Gulliver, 2 Cush. (Mass.) 494 ; Maxfield v. Patchen, 29 111. 39. ^ Carpenter v. Carpenter, 70 111. 457. * Maxfield v. Patchen, 29 111. 39. ^Shubert v. Stanley, 52 Ind. 4(3. ^Sage V. McLaughlin, 34 Wis. 550. ABSOLUTE SALES DISTINGUISHED. 83 does where there is an ordinary mortgage. By a mortgage in its ordinary form there is an absohite grant of the title to the lands in terms to the mortgagee, with a defeasance as a sepa- rate clause ; the fact that this separate clause is in a separate paper or by parol does not in the least enlarge or change the nature of the grant. Hence, the cancellation of the defeas- ance will not give the grantee a title in fee.^ Article 2. Deed Intended as Security, § 86. An Absolute Deed Intended as a § 88. "When Intention Will Control. Security Will be Declared a § 89. To Establish the Fact that an Mortgage. Instrument is a Mortgage. § 87. Once a Mortgage Always a Mort- gage. § 86. An Absolute Deed Intended as a Secuihty Will be Declared a Mortgage. — It is the general rule that absolute deeds intended as a security for money will be in effect mort- gages, if it clearly appears from the transaction that such was the intent of the parties.^ Thus, a debtor conveyed real estate to his creditor by deed absolute in form, and also gave his note for the sum found due on settlement, payable in two years, with interest. At the same time the grantee gave the grantor a contract for a reconveyance of the land upon pay- ment of the note and interest. This agreement gave the cred- itor the right to possession, and to rent or lease the premises, and further provided that the creditor should pay all taxes and make necessary repairs from the rents received, applying the surplus rents upon the note. It was held that the deed, note, and contract to reconvey all constituted one transaction, ^Brinkman v. Jones, 44 Wis. 498. ^ Kemp V. Small (Neb.), 49 N. W. Rep. 169 ; Lounsbury ?'. Norton, 59 Conn. 170 ; Weide v. Gehl, 21 Minn. 449 ; O'Neill v. Capelle, 62 Mo. 202 ; Little- wort V. Da\ds, 50 Miss. 403 ; Judge v. Reese, 24 N. J. Eq. 387 ; Steinruck's Appeal, 70 Pa. St. 289 ; Meehan r. Forrester, 52 N. Y. 277 ; Church v. Cole, 36 Ind. 34 ; French v. Burns, 35 Conn. 359 ; Jackson v. Lynch, 129 111. 72 ; Stahl V. Dehn, 72 Mich. 645 ; Walbridge v. Hammack, 7 Maekey (D. C), 154. 84 NATURE AND REQUISITES OF THE CONTRACT. which was a mortgage, and not an absolute sale and resale, and that the relation of the creditor to the debtor was that of a mortgagee in possession.^ So an absolute deed executed by a judgment debtor to in- demnify against loss one who has become liable as replevin bail, is, in legal effect, a mortgage.^ Whatever form a contract or instrument may have, if the attending circumstances show it to have been intended a security for a debt or loan of money, or anything but a clear- cut bargain and sale, a court of equity will always decree redemption.^ The doctrine that a deed absolute on its face may be shown to be a mortgage is old and well-established by all the courts.'' Chief Justice Andrews says that where a party to real estate is entitled to a reconveyance on the payment of a stipulated sum, which sum is the amount of a debt owed by him to the grantee, either previously existing or arising so that the pay- ment of the stipulated sum would be the payment of the debt, then the whole transaction amounts to a mortgage, whatever language the parties may have used or whatever stipulations they may have inserted in the instrument.^ But if the grantee 'Jackson v. Lynch, 129 111. 72. See, also, Glass v. Doane, 15 111. App. 66 ; Sutphen v. Cushman, 35 111. 186 ; Snyder v. Griswold, 37 111. 216. ^ Ashton V. Shepherd, 120 Ind. 69. See, also, Butcher v. Stultz, 60 Ind. 170 ; Franklin v. Ayer, 22 Fla. 654. 3 Taylor r. Luther, 2 Sumn. C. C. 228 ; Eogan v. Walker, 1 Wis. 527 ; Wood- ward V. Pickett, 8 Gray (Mass.), 617. * Daniels v. Lowery, 92 Ala. 519; Johnson v. Van Velsor, 43 Mich. 208 ; Barber v. Milner, 43 Mich. 248 ; Dow v. Chamberlin, 5 McLean, C. C, 282 ; Rogan v. Walker, 1 Wis. 527 ; Wilson v. Drumrite, 21 Mo. 325 ; Bloodgood V. Zeily, 2 Gaines' Gas. 124 ; Strong v. Stewart, 4 Johns. Ch. 167 ; Eiseman v. Gallagher, 24 Neb. 79 ; Van Buren v. Olmstead, 5 Paige (N. Y.), 9 ; Jackson v. Green, 4 Johns. 187 ; Wadworth v. Loranger, Har. Ch. (Mich.) 113 ; Swetland v. Swetland, 3 Mich. 482 ; Fuller v. Parrish, 3 Mich. 214 ; Adams v. Cooty, 60 Vt. 395 ; Reilly v. Brown 87 Mich. 163 ; Gazley v. Her- ring (Tex. Sup.), 17 S. W. Rep. 17; Murdock v. Clarke, 90 Cal. 427. See Keough V. Meyers, 43 La. Ann. 952. *Lounsbury v. Norton, 59 Conn. 170; Rogers v. Jones, 92 Cal. 80; Sibley v. Ross (Mich.), 50 N. W. Rep. 379 ; Conant v. Riseborough (111.), 28 N. E. Rep. 789, affirming 30 111. App. 498 ; Moisant v. McPhee, 92 Cal. 76 ; Marshall V. WilUams (Ore.), 28 Pac. Rep. 137. 1 ABSOLUTE SALES DISTINGUISHED. 85 is to sell the land and deduct the amount of the grantor's debt and pay him the surplus, the deed does not thereby become a mortgage/ § 87. Once a Mortgage Always a Mortgage. — The fact once established that a deed is intended for a mortgage, the rights of the parties are measured by the rules of law applica- ble to mortgagors and mortgagees. The conveyance remains a mortgage until the equity of redemption is foreclosed.^ The relation of mortgagor and mortgagee, once established, continues until the mortgage is redeemed and discharged or the right of redemption is legally barred. No other subse- quent change in the circumstances or conditions will change it. " Once a mortgage always a mortgage." ^ But it is well settled that from the mere fact of an agree- ment to reconvey, either with or without an advance in price, an absolute conveyance will not be turned into a mortgage.* If the transaction was originally a mortgage, its character cannot be changed except by a subsequent agreement, and no intervening interests of other parties have arisen.^ The subsequent release must be upon a sufficient considera- tion.^ Such release must be clear and unequivocal.^ § 88. When Intention Will Control. — Contracts for re- purchase, made contemporaneously with conveyances of real estate, absolute in form, are sometimes strong evidence tending to show that the conveyances are intended to be mortgages ; but when it appears that the parties really intended an abso- ' Wilson V. Parshall, 120 N. Y. 223. 2 HoUiday v. Arthur, 25 Iowa, 19 ; Murray v. Walker, 31 N. Y. 399 ; Decamp V. Crane, 4 Green (N. J.), 166. 2 Reed v. Reed, 75 Me. 264 ; McPherson v. Hay ward, 81 Me. 329 ; IMiller v. Thomas, 14 111. 428. * Glover v. Payn, 19 Wend. (N. Y.) 518 ; Stahl v. Dehn, 72 Mich. 045. * Cooper r. Whitney, 3 Hill (N. Y.), 95; Elliott v. Wood, 53 Barb. (N. Y.) 285 ; Henry i'. Davis, 7 Johns. Ch. (N. Y.) 40 ; Williams r. Thorn, 11 Paige (X. Y.), 459. ^Niggeler r. Maurin, 34 Minn. 118 ; Linnell v. Lyford, 72 Me. 280. ^Peugh r. Davis, 96 U. S. 332. 86 NATURE AND REQUISITES OP THE CONTRACT. lute sale, and a contract allowing grantor to repurchase, such intention must control.^ To ascertain the intention of the parties whether a deed is absolute in fact as in form, or merely a conveyance to secure an indebtedness, the court will look beyond the writings to the circumstances surrounding the transaction ; and judging from such circumstances attending, it must appear clear that the parties at the time regarded it as an absolute sale, with simply an option on the part of the grantor to repurchase at an ad- vanced price ; such intention must control.^ But an absolute deed, with a bond or separate defeasance or agreement to reconvey the estate upon the payment of a cer- tain sum of money, constitutes a mortgage, if the instruments are of the same date, or executed and delivered at the same time and as one transaction, in which case it is a conclusion of law that they constitute a legal mortgage.^ Where the deed does not contain the defeasance, the pre- sumption arises that the conveyance is absolute ; the c^uestion is, what was the understanding and the intention of the j)ar- ties at the time the instrument was made ; and this depends for its support upon what was said and done by the parties at the time, together with all the other circumstances bearing upon the question.* A deed containing no words of defeasance, conveying land in trust for the benefit of designated parties, which contains no direction as to how the property is to be available, and which is made for the sole use and benefit of parties named therein in proportion to the debts specified as being due to each from the grantor, conveys an absolute title to be disposed of by the trustee as the beneficiaries may direct.^ Where a conveyance is in form absolute, in order to change 1 Hanford v. Blessing, 80 111. 188 ; Smith v. Crosby, 47 AVis. 160 ; Stahl v. Dehn, 72 Mich. (>45. ''Stahl V. Dehn, 72 Mich. 645; Brant v. Robertson, 16 Mo. 129; O'Neill v. Capelle, 62 Mo. 202. 3 Jeffery v. Hursh, 58 Mich. 257. * McMillan v. Bissell, 63 Mich. 66. ^Catlett V. Starr, 70 Tex. 485. ABSOLUTE SALES DISTINGUISHED. 87 its character to that of a mortgage it must be clearly shown that such was the intent of the parties/ § 89. To Establish the Fact that an Instrument is a Mortgage. — In establishing the fact that an instrument was intended to operate as a mortgage, it is not necessary to show any particular time was agreed upon when the mortgage was to be paid. This will be implied. Neither is it necessary to show what interest was agreed upon between the parties the mortgagor should pay. If the mortgage was due presently, the law will imjjly the agreement as to interest, and also fix the rate.^ A debt owing to the mortgagee, or a liability incurred for the grantor, either pre-existing or created at the time the deed is made, is essential to give the deed the character of a mort- gage. The relation of debtor and creditor must appear ; the existence of the debt is one of the tests.^ A deed absolute in form, with general warranty, will not operate as a mortgage unless it is clearly shown to have been intended as a security for a loan or debt. The proof must be clear, unequivocal, and convincing."* Where one has a contract for a conveyance of land to him, and procures another to complete the payments for him, and such other person does so, and takes the deed in his own name as security for his advances, the transaction constitutes a mort- gage of the land between the parties.^ If the purchaser has a complete equitable title, having paid ^Bailey v. Bailey, 115 111. 551 ; Darst r. INIiirphy, 119 111. 216; Workman v. Greening, 115 111. 477 ; Strong v. Strong, 126 111. 301 ; Freeman v. Baldwin, 13 Ala. 246; Lund v. Lund, 1 N. H. 41; Kelly v. Thompson, 7 Watta (Pa.), 404 ; ]Mason v. Moody, 26 :\Iiss. 184. 2 McMillan v. Bipsell, 63 Mich. 66. ^ Crane v. Buchanan, 29 Ind. 570; McNamara v. Culver, 22 Kan. 661; McMillan v. Bissell, 63 Mich. 66 ; Pace v. Bartles, 47 N. J. Eq. 170. *Coyle V. Davis, 116 U. S. 108 ; Wallace v. Johnstone, 129 U. S. 58 ; Cadman V, Peter, 118 U. S. 73 ; Rowland r. Blake, 97 U. S. 624. * Stoddard v. Whiting, 46 N. Y. 627 ; Carr r. Carr, 52 N. Y. 251 ; Smith v. Cremer, 71 111. 185 ; Houser v. Lamont, 55 Pa. St. 311 ; McPherson v. Hay- ward, 81 Me. 329. 88 NATURE AND REQUISITES OF THE CONTRACT. the purchase-money, and takes a conveyance from his vendor to a creditor as a security for a debt, the deed may be declared and enforced in equity as a mortgage.^ When a deed absolute in form, is declared a mortgage, it must be made to appear that such a conveyance was intended to be a mortgage at the time of its execution. The question is one of intention to be ascertained from all the circumstances.^ Thus, the owner of a lot of ground, desiring to make a sale of it, but finding it impracticable to do so except in connection with certain premises adjoining, which he did not own, ap- plied to the owner of the latter premises to convey them to him for a certain sum mentioned, a part to be paid in cash on the sale of the entire premises, and certain deferred payments to be secured. The conveyance was made, and the grantee sold the entire property, but did not make the cash payment as agreed, nor did he secure the deferred payments. On the question whether the transaction relating to the conveyance of the adjoining premises, as had been sought, was a mere mort- gage, or a sale, it was held to be an absolute sale. The failure on the part of the grantee to perform, did not convert the deed into a mortgage, nor change his estate into a mere naked trust. The interest remaining in the grantor was merely that of a vendor's lien.^ A conveyance of land to secure the payment of money, though the grantee is put into possession, under an agreement for an accounting for the rents and profits, is only a mortgage, and does not pass the legal title.* If a deed absolute in form is made merely to secure the payment of money to the grantee, it is a mortgage, and does not pass the title. Such a deed gives a mere lien upon the property as if the parties had put their agreement in the form of a mortgage, and consequently ^ Parmer v. Parmer, 88 Ala. 545. "Sharp V. Smitherman, 85 111. 153 ; Bartling v. Brasuhn, 102 111. 441 ; Bent- ley V. O'Bryan, 111 111. 53; Workman v. Greening, 115 111. 477; Helm t?. Boyd, 124 111. 370 ; Strong v. Strong, 126 111. 301. » Strong V. Strong, 126 111. 301. See, also, Howe v. Austin, 40 La. Ann. 323 ; Miller v. Shotwell, 38 La. Ann. 890. ♦ Murdock v. Clarke, 90 Cal. 427. ABSOLUTE SALES DISTINGUISHED. 89 does not give the right of possession to the grantee/ but merely operates as a mortgage between them ; yet, being absolute in form, it constitutes a cloud on the title of the grantor which he may remove upon doing equity by redemption and pay- ment of the mortgage debt, regardless of possession by the grantee.^ Article 3. Agreement to Reconvey. § 90. Deed \fith. Agreement to Recon- 1 94. Conveyance and Subsequent vey. ' Defeasance. § 91. Construction of Agreement to § 95. When Not a Sale and Resale. Reconvey. ^ 90. To Determine the Question §92. Pre-existing Debt Owing to the Whether a Mortgage or an Grantee. Agreement to Reconvey. 1 93. The Grantee in Possession. § 90. Deed with Ageement to Reconvey. — A deed with agreement to reconvey is only a mortgage. Thus, where a party advances money, and at the same time receives a deed and gives a bond to the grantor for a reconveyance, the trans- action is a loan and a security in the nature of a mortgage.^ But a deed of bargain and sale, absolute in terms, and pur- porting to convey the fee for money advanced, passes title ; and an entry indorsed upon it and signed by the grantee to the effect that the deed is to be returned to the grantor cancelled, on condition that the grantor shall pay the grantee the sum of money advanced by a specified date, with interest, do not convert the instrument into a mere mortgage. In this case Chief Justice Bleckley says : " It will be noticed that this entry does not recite that there is any debt due from one of these parties to the other. It simply gives an option to the party who made the deed to 'Smith V. Smith, 80 Cal. 323; Booth v. Iloskins, 75 Cal. 271; Healy v. O'Brien, 66 Cal. 519. ^ Hall V. Arnott, 80 Cal. 348. ^ Lounsbury v. Norton, 59 Conn. 170 ; Holton v. Meighen, 15 INIinn. 69 Sharkey v. Sharkey, 47 Mo. 543 ; Fiedler v. Darrin, 59 Barb. (N. Y.) 651 Robinson v. Willoughby, 65 N. Car. 520 ; Bunker v. Barron, 79 Me. 62 Peterson v. Clark, 15 Johns. (N. Y.) 205. 90 NATURE AND REQUISITES OF THE CONTRACT. have it returned cancelled, on condition that he pays the sum specified, with interest from, date, and a time is appointed for the payment to be made. Now this may have been a debt, or it may have been a contract simply to allow the maker of the deed to have the land back on condition that he paid for it the price agreed upon. The parties did not put in writing, either in the deed itself or in the indorsement any evidence that it was made to secure a debt. They left that in parol; and to constitute a mere mortgage, passing no title and creating only a lien, the mortgage as a whole must be in writing. It must show a debt, and it must show a purpose to secure the payment of the debt. There could be no action maintained upon the indorsement in favor of the holder of the deed against the maker." This indorsement contained no promise to pay ; no obligation was taken by the grantor upon himself to pay the money advanced. He simply had the option to make the payment, and get his deed back if he did make it. " Upon the question whether the deed was in fact given as a security, the indorsement, though not direct, is very powerful circum- stantial evidence, and aided by other evidence, might establish the fact in a proceeding to redeem, but the objection was made to the instrument simply upon its own terms when it was tendered in evidence ; and we think the objection was properly overruled, for the deed, with or without the indorsement, is a conveyance of title and not a mortgage. Though no particular form is necessary to constitute a mortgage, it must clearly in- dicate the creation of a lien, specify the debt to secure which it is given, and the property upon which it is to take effect." ^ This doctrine does not seem to accord with a decision in Vermont. It was held that where a deed absolute upon its face was indorsed with a condition that if the grantor paid a certain note described in said condition, then said deed should become void, was in effect a mortgage. The condition was of even date with the deed, but not signed. The condition, it was held, formed a part of the deed.^ 1 Jay V. Whelchel, 78 Ga. 786. 2 Whitney v. French, 25 Vt. 663. ABSOLUTE SALES DISTINGUISHED. 91 However, the authorities agree that an agreement indorsed upon a deed absolute in form, to the effect that the grantee shall execute certain notes for the purchase-money, with se- curity, and that the agreement shall " act as a lien " U23on the land mentioned in the deed until the notes shall be satisfied in full, signed, sealed, and acknowledged by the grantor and grantee, and recorded with the deed, is to be regarded as a part of the deed, and operates as a deed upon the land.^ Where it appears that the parties to the deed, absolute on its face, intended an absolute sale, with simply the right to re- purchase, the bond for reconveyance containing no condition which might stamp the transaction as a mortgage, such inten- tion must control, and the instrument declared a deed.^ Under the code of Georgia,^ which provides that whenever a person conveys real estate by deed to secure a debt, and takes back a bond for reconveyance on payment of the debt, the conveyance shall pass the title to the vendee, applies only where an absolute deed is made and bond for reconveyance taken ; and a mortgage which recites that it is executed under the statute is nevertheless only a mortgage, and under section 1954 conveys no title to the grantee.* ' Baldwin v. Jenkins, 23 Miss. 206 ; Harrison v. Trustees, 12 Mass. 456. 2 Pitts ('. Cable, 44 111. 103 ; Morrison v. Brand, 56 N. Y. 657. See, also, Bunker v. Barron, 79 Me. 62 ; Brinkman v. Jones, 44 Wis. 498 ; HoflEman v. Ryan, 21 W. Va. 415 ; Reynolds v. Scott, Brayton (Vt.), 75 ; Lanahan v. Sears, 102 U. S. 318 ; Teal v. Walker, 111 U. S. 242 ;" Dow v. Chamberlin, 5 McLean C. C. 281 ; Baxter v. Dear, 24 Tex. 17 ; Hammonds v. Hopkins, 3 Yerg. (Tenn.) 525 ; Sims v. Gaines, 64 Ala. 392 ; Walker v. Tiffin Min. Co., 2 Colo. 89 ; Guthrie v. Kahle, 46 Pa. St. 331 ; Marshall v. Stewart, 17 Ohio, 356 ; Robinson v. Willoughby, 65 N. Car. 520 ; Clark v. Lyon, 46 Ga. 202 ; Bearss v. Ford, 108 111. 16 ; Lentz v. Martin, 75 Ind. 228 ; Radford v. Folsom, 58 Iowa, 473 ; Over- street V. Baxter, 30 Kan. 55; Peterson v. Clark, 15 Johns. 205; Vliet v. Young, 34 N. J. Eq. 15 ; Sharkey v. Sharkey, 47 Mo. 543 ; Butman v. James, .34 Minn. .547; Honore r. Hutchins, 8 Bush (Ky.), 687; Warren v. Lovis, 53 Me. 463 ; Judd r. Flint, 4 Gray, 557 ; Ferris v. Wilcox, 51 Mich. 105 ; Enos v. Sutherland, 11 Mich. 538 ; Clement v. Bennett, 70 Me. 207 ; Ewart v. Walling, 42 111. 453; Kerr v. Gilmore, 6 AVatts (Pa.), 405; Plato v. Roe, 14 Wis. 453; Friedley v. Hamilton, 17 Sarg. & R. 70 ; Lane v. Shears, 1 Wend. (N. Y.) 433 ; Crassen r. Swoveland, 22 Ind. 427. 'Civil Code, 1873, sects. 1969-1971. * Woodward v. Jewell, 140 U. S. 247. 92 NATURE AND REQUISITES OP THE CONTRACT. § 91. Construction of Agreement to Reconvey. — A grantor can redeem, from a deed absolute on its face which was intended as a mortgage, but he is entitled to a reconveyance only of the interest conveyed by him, and cannot claim a con- veyance of any adverse or superior title which may have been thereafter acquired by the grantee. The grantor cannot obtain nor require in such a conveyance any adverse or superior title subsequently and in good faith acquired by the grantee ; and a reconveyance from the mortgagee or grantee must be limited to the interest conveyed by the deed of the grantor.^ Where, in an action by the grantor to have a deed declared a mortgage, to secure the sum of $60 debt and $440 to be thereafter advanced, the grantee answered, admitting the debt, but denying the agreement for future advances, and alleging that the deed was intended as a conveyance upon an adequate consideration consisting of board, lodging, and services ren- dered by the grantee to the grantor to the value of $700. But the grantee failed to bring clear and unequivocal proof of his claim, and the court allowed the grantor to redeem.^ A party's land was about to be sold under a judgment. His brother-in-law paid the debt, taking a, deed from the owner, and by conveyance gave the owner's wife the use of the land for life. At the same time he executed an agreement to recon- vey to the owner on payment to him during his lifetime of the amount of the judgment and interest. The brother-in-law died, leaving the land by will to another party. The wife of the original owner died three years later. The owner had made several payments on the debt according to the agreement with his brother-in-law. It was held by the court that the conveyance to the brother-in-law was a mortgage, and that he could redeem by paying the balance due on the judgment.* A debtor conveyed real estate to his creditor by deed absolute in form, and also gave his note for the sum found due on settle- ment, payable in two years, with interest. The grantee at the 1 Hall V. Arnott, 80 Cal. 348. ^ Newman v. Edwards, 22 Neb. 248. .^Sherrer v. Harris (Ark.), 13 S. W. Rep. 730. ! II ABSOLUTE SALES DISTINGUISHED. 93 same time gave the grantor a contract for a reconveyance of the premises upon payment of the note and interest. The contract gave the creditor the right to possession, and to rent or lease the premises, and further provided that the creditor should pay all taxes and make necessary repairs from the rents re- ceived, applying the surplus rents upon the note. It was held that the deed, note, and contract to reconvey all constituted but one transaction, which was a mortgage, and not an abso- lute sale and resale, and that the relation of the creditor to the debtor was that of a mortgagee in possession. Justice Schol- field says that this transaction was a mortgage, and not an ab- solute sale and resale, because the original indebtedness is not extinguished, but is put in the form of a promissory note, pay- able two years after date, wdth interest at the rate of ten per cent, per annum. This note the grantee may sue upon and collect at any time after maturity, notwithstanding anything that appears in the contract between them. The grantee is required to account for rents and profits, and, after payment for repairs and taxes, to apj)ly the amount due on account thereof in liquidation of the note. He has no discretion in this respect, and should the amount ultimately equal or exceed the amount due upon the note, he would be compelled at once to reconvey to the grantor, thus occupying the relation to the grantor of a mortgagee in possession.^ A case arose in Kansas where a grantor executed a convey- ance of real estate to the clerk of the district court, as his friend or agent, with the understanding that if the clerk should obtain the satisfaction of a judgment rendered in the court against the grantor, then the deed should be recorded and the land belong to the judgment creditor. Subsequently the judgment creditor at the instance of the clerk accepted the deed and de- livered to the clerk a written satisfaction of the judgment and paid the costs thereof, and also the taxes on the land. It was held that the land belonged to the judgment creditor, notwith- standing the clerk failed to file or record the satisfaction of the judgment and the deed. A satisfaction of a judgment by a con- ^ Jackson v. Lynch, 129 111. 72. 94 NATURE AND REQUISITES OF THE CONTRACT. veyauce of land, though accompanied by a verbal agreement that if the grantor makes a sale of the land within five or six months the land should be reconveyed to him, is not a mort- So, also, an absolute deed containing an agreement on the part of the grantee to give to the grantor a bond to reconvey upon the payment of a certain sum, does not show a debt to be secured from the grantor to the grantee, and, hence, is not a mortgage.^ But the following transaction is a mortgage. A third party advanced money to mortgagors to redeem the land from fore- closure sale by the mortgagee. In consideration thereof he received a deed absolute in form from the mortgagors, and entered into a simultaneous agreement, under which the mort- gagors agreed to purchase the land for a sum equal to the amount paid for redemption, the expenses of preparing instru- ments, the premiums on policies of insurance, and an addi- tional sum as compensation to the party advancing the money ; and it was stipulated that time should be the essence of the contract, and that upon failure to fulfill the agreement to re- purchase, the grantee of the deed would be released from all obligations to reconvey said property, and should be entitled to immediate possession of the same, but there was no agree- ment that in any contingency the grantors should be released from their obligation to pay, and the court held the transaction a mortgage.^ § 92. Pre-existing Debt Owing to the Grantee. — ^Upon construing a deed absolute on its face and a contemporaneous written contract, if it appears that at the time they were exe- cuted there was a pre-existing debt owing to the grantee, the subsequent payment of which by the grantor would entitle him to a reconveyance of the property, and that the grantee sur- rendered no remedy previously available to him for the coUec- ^ Elston V. Chamberlain, 41 Kan. 354. ^ Cnandler v. Chandler, 76 Iowa, 574. ' Baker v. Fireman's Fund Ins. Co.j 79 Cal. 34. ABSOLUTE SALES DISTINGUISHED. 95 tion of his debt, and that the obligation of the grantor remained the same, such deed and contract constitute a mortgage, and not a conditional sale. An absolute conveyance without any other consideration than that assumed, coupled with an agree- ment to reconvey, will be regarded as a mortgage/ Whatever form the transaction may have assumed, if the relation of debtor and creditor, with its reciprocal rights, con- tinues between the contracting parties, or if such relation was then created by a loan or advance, and if the agreement, whether in the deed or in a separate instrument concurrently executed is such that the debtor, by merely paying his debt, becomes entitled to insist upon a reconveyance or otherwise to defeat the estate conveyed, the conveyance w^ill be regarded as a security for such continuing or newly incurred debt.^ It does not follow, however, that a debtor may not convey property to his creditor in payment of an existing debt, nor that the parties may not, by an agreement made at the time of a conveyance so made thereafter occupy the relation of grantor and grantee toward each other in respect to the prop- erty conveyed. If the pre-existing liability of the grantor is extinguished and the personal remedy of the grantee is released in consideration of a sale and conveyance of the property, the fact that a contract to reconvey, upon certain terms and condi- tions, is entered into, does not constitute the transaction a mortgage. Or if, as a result of the agreement, the debt is ex- tinguished, leaving the grantor the oj^tion to pay or not, as he pleases, and thereby entitle himself to a reconveyance, the transaction operates as a conditional sale, and is not a mort- gage.^ § 93. The Grantee in Possession. — The grantee in posses- sion under a deed absolute in form, but given by w^ay of 1 Voss V. Eller, 109 Ind. 260. 2 Cornell r. Hall, 22 Mich. 377 ; Cox r. Ratcliffe, 105 Ind. 374 ; Peugh v. Davis, 96 U. S. 332 ; Russell v. Southard, 12 How. (U. S.) 139 ; Hanlon v. Doherty, 109 Ind. 37 ; Voss v. Eller, 109 Ind. 260. ^ Hays V. Carr, 83 Ind. 275 ; Flagg v. Mann, 14 Pick. (Mass.) 467 ; Conway v. Alexander, 7 Cranch (U. S.), 218 ; Smith v. Crosby, 47 Wis. 160. 96 NATURE AND REQUISITES OF THE CONTRACT. security merely, does not stand in exactly the same position in reference to an accounting for the rents and profits as ordinary mortgagees who have taken possession by way of enforcing their security ; he is an agent of the grantor as well as mort- gagee, and is chargeable for any failure to obtain full rental value for the premises only on the same ground as an agent thus put in possession.^ But such a deed gives a mere lien upon the property as if the parties had put their agreement in the form of a mortgage, and consequently does not give the right of possession to the grantee,^ because the deed is made to secure an indebtedness to the grantee, and does not pass the title.^ The mortgagor is entitled to retain possession under such a conveyance. Thus, where the owner of real estate executes an absolute deed as security for the payment of money and re- ceives a defeasance in writing, the transaction is a mere mort- gage, and the mortgagor, in the absence of a contract to the contrary, is entitled to retain possession of the property, and a lease executed by the grantee in the deed will not entitle the lessee to possession.'* Where one tries to enforce a parol trust and to redeem, and alleges an advance of a certain sum for which the land is held as security, and offers to pay that sum only, he cannot recover on proving an advance of a larger sum, which there is no oflfer to repay .^ § 94. Conveyance and Subsequent Defeasance. — If the deed and the defeasance are of the same date and executed at the same time, and are one transaction, the transaction will be considered as a mortgage.® It is sufficient that the deed and written agreement be sub- 1 Barnard v. Jcnnison, 27 Mich. 230. => Smith V. Smith, 80 Cal. 323. 3 Raynor v. Drew, 72 Cal. 307. See Thaxton v. Roberts, 66 Ga. 704. * Connolly v. Giddings, 24 Neb. 131. ^ Edwards v. Rogers, 81 Ala. 568. ^Newhall v. Burt, 7 Pick. (Mass.) 157 ; Nugent v. Riley, 1 Met. (Mass.) 117; Lanfair v. Lanfair, 18 Pick. (Mass.) 299. ABSOLUTE SALES DISTINGUISHED. 97 stantially contemporaneous and are manifestly intended to constitute one transaction.^ And a conveyance absolute on its face, and a defeasance subsequently executed in pursuance of an agreement made at the time the conveyance was signed, will be regarded as con- temporaneous acts, and construed as forming one contract and transaction.^ The character of the deed must be determined by the inten- tion of the parties clearly and satisfactorily proved. When it is shown by a separate written instrument that the transaction is not an unconditional sale, as the deed imports, but either a mortgage or a sale with right to repurchase, the court, in the interest of complete justice, is inclined to construe the transac- tion as a mortgage. Any doubt arising as to the intention will be resolved in favor of the construction that the conveyance is a security for a debt.^ A deed was made and recorded without the knowledge of the grantee. Upon his being informed of the transaction, he made defeasance to reconvey. Held, that the transaction amounted to a mortgage, and that the two instruments were substantially contemporaneous.* It is only necessary that the deed and defeasance be executed at the same time, or are agreed upon at the same time. The law will conclude that they form a legal mortgage.^ If the two instruments are of different dates, it may be shown that they are parts of the same transaction, and that together they are intended to constitute a mortgage.*^ In general, if at the time of executing an absolute deed the parties verbally agree that a defeasance shall be subsequently ' Jeffery v. Hursh, 58 Mich. 246. ^ Cosby V. Buchanan, 81 Ala. 574. 'Mitchell V. Wellman, 80 Ala. 16. * Harrison v. Trustees, 12 Mass. 456. * Jeffery v. Hursh, 58 Mich. 246 ; Reitenbaugh v. Ludwick, 31 Pa. St. 131 ; Wilson V. Shoenberger, 31 Pa. St. 295. « Kelly V. Thompson, 7 Watts (Pa.), 401 ; Tillson v. Moulton, 23 111. 648 ; Preschbaker v. Feaman, 32 111. 475 ; Gay v. Hamilton, 33 Cal. 686 ; Newhall v. Burt, 7 Pick. (Mass.) 157. VOL. I. — 7 98 NATURE AND REQUISITES OF THE CONTRACT. executed, such defeasance will relate back to the deed and make it a mortgage/ When a contemporaneous agreement with the deed is after- ward reduced to writing, it relates back to the execution of the deed.^ § 95. When not a Sale and Resale. — The whole transac- tion must be taken into consideration to determine its nature. Thus, a debtor conveyed real estate to his creditor by deed absolute in form and also gave his note for the sum found due on settlement, payable in two years, with interest. The grantee at the same time gave the grantor a contract for a reconvey- ance of the premises upon payment of note and interest. This contract gave the grantee the right to possession and to rent or lease the premises, and further provided that the grantee should pay all taxes and make necessary repairs from the rents received, applying the surplus rents upon the note. It was held that the deed, note, and contract to reconvey all consti- tuted but one transaction, which was a mortgage, and not an absolute sale and resale, and that the relation of the grantee to the grantor was that of mortgagee in possession. Judge Schol- field said this transaction was a mortgage, and not an absolute sale and resale, because the indebtedness was not extinguished, but put in the form of a promissory note, which the grantee may sue upon and collect at any time after maturity, notwith- standing anything that appeared in the contract between them. The grantee was required to account for rents and profits, and, after 2:)ayment for repairs and taxes, to apply the amount due on account thereof in liquidation of the note ; that the grantee had no discretion in this respect, and should the amount ulti- mately equal or exceed the amount due upon the note, he ' Cosby V. Buchanan, 81 Ala. 574 ; Lovering v. Fogg, 18 Pick. (Mass.) 540 ; Scott V. Henry, 13 Ark. 112 ; Lund v. Lund, 1 N. H. 39. * Waters v. Crabtree, 105 N. Car. 394. This case holds such defeasance may afterward be executed, but only in pursuance of the agreement made at the time the deed was executed, and, in that case, it will relate back to that time. Such writing, whether deed or not, becomes evidence of the nature and pur- pose of the deed absolute upon its face. ABSOLUTE SALES DISTINGUISHED. 99 would be compelled at once to reconvey to the grantor, thus occupying the relation to the grantor of a mortgagee in posses- sion/ However, parties may make a valid sale and resale of prop- erty which is not in the nature of a mortgage. Thus, a grantor conveyed land to a grantee who, by a contemporaneous agi-ee- ment, stipulated to reconvey on payment of a stated -b'^itii within a year. Two days thereafter the ' gratti^e leased the land to the grantor for one year, at^a 't^tated rental. Th!? agreement to reconvey was signed by the grantor only. The grantor did not agree to pay the amount in the agreeiaent to reconvey. No loan was referred ' toi Held, that the transac- tion was not a mortgage, but a si^le and resale.'^ It is quite impossible to conceive of a conveyance that would or could be a mortgage unless such conveyance is given to secure the performance of some act or obligation. No conveyance can be a mortgage unless it is made for the purpose of securing the payment of a debt or the performance of a duty, either ex- isting at the time the conveyance is made or to be created, or to arise in the future.^ The promise to pay the debt may be implied from the facts. But the absence of any writing showing an exj)ress promise to pay is strong evidence that the transaction was a sale.* A sale of land with contract to reconvey will be upheld where a sale, and not a mortgage, is intended.^ So a conveyance of land in satisfaction of a judgment, though accompanied by a verbal agreement that if the grantor makes a sale of the land within five or six months, the land should be reconveyed to him, is not a mortgage, but a sale. This did not render the conveyance a mort- gage, and the grantee was not compelled by any agree- 1 Jackson v. Lynch, 129 111. 72. * Gassert v. Bogk, 7 Mont. 585. 'Worley r. Dryden, 57 Mo. 226. *Horn V. Keteltas, 46 N. Y. 605 ; Morris v. Budlong, 78 N. Y. 543. ^Trucks V. Lindgey, 18 Iowa, 504 ; Scott i'. Newhirter, 49 Iowa, 487 ; Presch- baker v. Feaman, 32 111. 475 ; Clark v. Finlon, 90 111. 245. 100 NATURE AND REQUISITES OF THE CONTRACT. ment to resell, and the rights of the verbal understanding were not reciprocal.^ So the following transaction is not in the nature of a mort- gage. It was a deed by the grantor to the grantee which con- tains the following unilateral contract entered into by the graiij;ee: That the grantee hereby assumes the payment of a coriain mortgage on the premises conveyed ; that the grantee agrees to ghef the grantor a bond, binding the obligor to redeed the property when the grantor shall have paid the sum o)[ tWenty-five hundred' ^>3llars. The court holds, per- "Judge Beck, that this deed cannot be interpreted, so as to show-ai;! indebtedness from the grantee. "It expresses tM',G^igation'6iHhe grantee to reconvey the land when twenty-five hiuidi'ed dollars is paid to him by defend- ants, or rather that the grantee shall execute a bond to that effect. But it is not said, and it cannot be so understood, that the defendants owe the grantee twenty-five hundred dollars. The language rather implies an obligation to sell the land to de- fendants and convey it to them in consideration of twenty-five hundred dollars. But certain it is the language of the instru- ment does not show the existence of a debt from defendants to the grantee, and that the instrument is made as security therefor." ^ § 96. To Determine the Question Whether a Mortgage OR AN Agreement to Reconvey. — To determine this ques- tion all the evidence in the case will be considered. Thus, a separate agreement was executed between the grantor and grantee, by which the latter agreed to reconvey to the former on payment of a specified sum. It was held that this did not show conclusively that such deed was executed to secure a debt, but the question whether the transaction was a sale, with an optional right to purchase, or a mortgage, must be deter- mined from all the evidence in the case.^ ' Elston V. Chamberlain, 41 Kan. 354. See, also, McNamara v. Culver, 22 Kan. 661 ; Eckert v. McBee, 27 Kan. 232. "^ Chandler v. Chandler, 76 Iowa, 574. 'Devere v. Woodrufi; 1 N. Dak. 143. ABSOLUTE SALES DISTINGUISHED, 101 A deed absolute upon its face is not to be considered a mort- gage, unless it be made to appear clearly to have been so in- tended at the time of its execution/ and where the original in- tention of the parties was to execute a conveyance to secure a debt, the transaction is a mortgage.^ And when a grantee in an absolute deed of real estate at the same time executes an instrument to reconvey the premises to his grantor on payment of certain specified debts, such instrument is a defeasance, and converts what would otherwise be an absolute deed into a mortgage.^ In general, if the instrument of defeasance is in other re- spects sufficient, the fact that it provides for a reconveyance, instead of declaring that the absolute deed shall become void, is immaterial, and such instruments are valid defeasances.^ While a deed absolute on its face may be and is treated in equity as a mortgage, yet this can be done only where the par- ties to it certainly so intended and agreed by mere words or some writing to be evidence of such intention and purpose. Such purpose and agreement must appear by strong and satis- factory proof. Otherwise, the deed must be accepted as ex- pressing the settled intention of the parties to it. It is gener- ally made as the strongest evidence of that purpose, and will be so accepted and treated until it shall appear that some con- dition or modification in connection with and part of it has been omitted from it.^ ^Sutphen r. Cushman, 35 111. 186; Remington v. Campbell, 60 111. 516; Magnusson v. Johnson, 73 111. 156. 'Tedens v. Clark, 24 111. App. 510. 'Snow V. Pressey, 82 Me. 552. This case holds that mortgages of real estate include not only those made in the usual form, in which the condition is set forth in the deed itself, but also those in which an absolute deed is given and a separate defeasance is executed. Clark v. Woodruff (Mich.), 51 IST. W. Rep. 357. * Bunker v. Barron, 79 Me. 62; Bayley r. Bailey, 5 Gray (^Mass.), 505; Knight V. Dyer, 57 Me. 174 ; Newhall r. Burt, 7 Pick. (INIass.) 156 ; Smith v. Ins. Co., 50 Me. 96 ; Reed v. Reed, 75 Me. 264. * Waters v. Crabtree, 105 N. Car. 394; Robinson v. Willoughby, 65 N. Car. 520. In Waters ?'. Crabtree, 105 N. Car. 394, Chief Justice Merriman says : " Neither courts of law nor courts of equity can make or modify valid con- 102 NATURE AND REQUISITES OF THE CONTRACT. In determining whether an absolute sale of land, together with a contract to reconvey upon payment of a fixed sum on a future day, constitutes a mortgage or not, Vice-Chancellor Pit- ney ably says that the court will look at all the circumstances, the most important of which are: 1. Is there an obligation on the part of the grantor to pay the purchase-money which is enforceable at law ? 2. Is the land conveyed worth consider- able more than the purchase price ? 3. Does the grantor re- tain possession of the land granted upon terms of paying a rent equal to the interest on the purchase price ? ^ The first of these, the continuance of the debt, has always been looked upon as a strong circumstance, and as being almost, if not absolutely controlling. With regard to the second, the difference of value has been applied freely in cases of absolute assignments of moneyed securities, bonds, mortgages, and the like, whose value was easily ascertainable with approximate certainty, and where the assignment has been for a consideration much less than the intrinsic and ab- solute value of the security assigned. The third is found in the conduct of the parties with regard to the possession and use of the subject of the grant after the date of the grant. The line of distinction between a defeasance and a contract to reconvey is very shadowy and indistinct. But an agree- ment, to be sufficient to convert an absolute deed into a mort- gage, should be mutual — that is, that the grantor should be bound to pay the debt, and the grantee to reconvey on pay- ment. It is not, perhaps, necessary in all cases to convert an absolute deed into a mortgage, that the liability of the grantor to pay the debt should remain ; and yet a continu- traets ; they can only determine what they are and give them effect. Courts of equity can onlj' give to and administer rights created by and growing out of them, tliat courts of law cannot, by reason of their peculiar organization and vigorous methods of procedure." ^ Pace V. Bartles, 47 N. J. Eq. 170. See, also, Goodman v. Grierson, 2 Ball & B. 274 ; Slutz v. Desenberg, 28 Ohio St. 371 ; Williams v. Owen, 5 Myl. & C. 303 ; Flagg v. Mann, 14 Pick. (Mass.) 478 ; Brown v. Dewey, 1 Sandf. Ch. (N. Y.) 56 ; Holmes I'. Grant, 8 Paige (N. Y.), 243; Robinson v. Cropsey, 2 Edw. (N. Y.) 138 ; 6 Paige (N. Y.), 480 ; Glover v. Payn, 19 Wend. (N. Y.) 518. ABSOLUTE SALES DISTINGUISHED. 103 ing debt seems so much a part of a mortgage that the proof that an absolute deed was intended as a mortgage must be very plain where the debt does not remain, or is considered as paid by giving the deed.^ When the question is whether the transaction constitutes a mortgage, or is a sale with an agree- ment to reconvey, the fact whether there is a continued debt or liability of the mortgagor is very important.^ The fact that there is no continuing debt is a strong circumstance, where there is any doubt, to show that a transaction is a contract for repurchase, and not a mortgage.^ Article 4. Sale with Right to Repurchase. I 97. Sale with Contract to Eepurchase. ? 99, Collateral Agreement by the § 98. Sale A Remere. Grantee to Reconvey to the Grantor. § 97. Sale with Contract to Repurchase. — The question whether a particular transaction amounts to a mortgage, or to a sale with right of repurchase, must, to a large extent, depend on its own special circumstances, because such question finally turns in all cases upon the real intention of the parties, as shown upon the face of the writings, or as disclosed by extrinsic evidence. If a loan is made to the grantor at the time of the convey- ance and the continued existence of his indebtedness is evi- denced by some collateral agreement given by the grantor, such as a note or bond, the case would be simple, and the transaction clearly a mortgage. However, if this antecedent debt is wholly satisfied and extinguished by the conveyance, so that no liability remains under any circumstances against the grantor then there is no mortgage, since there is no debt to be secured thereby.* ' Hogan V. Jaques, 19 N. J. Eq. 123, 128. * De Camp v. Crane, 19 N. J. Eq. 166, 171. ^Pliillips V. Hulsizer, 20 N. J. Eq. 308, 314 ; Goodman v. Grierson, 2 Ball & B. 274 ; Williams v. Owens, 5 Myln. & C. 303 ; Conway v. Alexander, 7 Cranch (U. S.), 218. * Pomeroy's Eq. Jur. 1195. 104 NATURE AND REQUISITES OF THE CONTRACT. Thus, where it appears from the terms of a deed which acknowledges the payment of the consideration and contains a clause of warranty, and from the possession and use of the land by the grantee for ten years without question, or anything being said about a debt, such transaction will be construed a deed, although based upon an inadequate consideration, and was accompanied by a verbal agreement, afterward reduced to writing and lost, that the grantee would reconvey to the grantor on the payment of the purchase-money, with interest and taxes/ In an action to have a deed declared a mortgage and to redeem therefrom, it was agreed b}^ the parties at the trial that the deed was executed and recorded in 1858 ; that thereafter, until 1887, the grantor never made any claim to the land or to any interest therein, and never paid any taxes thereon or in any way exercised any ownership thereof ; that on the settle- ment of other loans made to him by the grantee no claim was made by either party that the matter of this deed was an un- settled transaction. At the trial the grantor tried to show that the grantee had promised to reconvey the same lands to the grantor at any time he should be required to do so by the grantor upon the payment of the amount of purchase-money, with interest. The court decided that this transaction was not in the nature of a mortgage.^ If the party procures the conveyance of the property to one who pays the price or makes an advance upon it, with an arrangement that upon the payment of the money the property shall be reconveyed, he has a right to redeem.^ The grantee has a lien upon all the land, though he advances but a part of the purchase-money, and not merely upon an undi- vided interest in proportion to the amount of his payment.* 1 Hodge V. Weeks, 31 S. Car. 276. * Becker v. Howard, 75 Wis. 415. 'Rector v. Shirk, 92 Ind. 31 ; Stinchfleld v. Milliken, 71 Me. 567 ; Fisk v. Stewart, 24 Minn. 97 ; Carr v. Carr, 52 N. Y. 251 ; Wright v. Shumway, 1 Biss. C. C. 23 ; Lindsay v. Matthews, 17 Fla. 575 ; Sweet v. Mitchell, 15 Wis. 641 ; Hardin v. Eames, 5 111. App. 153 ; Smith v. Knoebel, 82 111. 392 ; Bar- nett V. Nelson, 46 Iowa, 495. * Hidden v. Jordan, 21 Cal. 92. ABSOLUTE SALES DISTINGUISHED. 105 § 98. Sale A IIem6r6. — In Louisiana, in a contract relating to real estate situated in this State, between parties residing in a State where the common law prevails, it was stated substan- tially that one of the parties sells to the other the immovable for a designated price, and further, that the said sum men- tioned as the price was a debt owing to the alleged purchaser by the vendor, and that should said debt be paid by a time stated, the act or conveyance should be void. The act was termed by the parties " a deed of mortgage," and was recorded in the mortgage book of the parish where the property was situated. It was held that the instrument was a common-law mortgage and did not have the effect of passing title to the property.^ An instrument purporting to be a sale, with condition that on payment of the debt, the property shall be reconveyed, does not convey a title to the property, and is only a mortgage given to secure the payment of a debt.^ So a contract purporting to be a sale cl remere, which divides the price, which was for an antecedent debt, to be returned in two installments, and declared the forfeiture of the right to redeem on a failure to pay the first installment, is pignorative in character, and an antichresis. The mortgage rights of the creditor are nor destroyed by the pledge of the immovable to him, if they have been preserved on the property.^ § 99. Collateral Agreement by the Grantee to Re- convey TO the Grantor. — The fact of a collateral agreement by the grantee in a deed of real estate to reconvey to the grantor on the payment of a sum of money at a future day is not inconsistent with the idea of a sale.^ Hence, a deed of lands, absolute in form, with general warranty of title, and an agreement by the grantee to reconvey the property to the grantor, or to a third person, upon his payment of a fixed sum within a specific time, do not of themselves constitute a mort- gage ; nor will they be held to operate as a mortgage unless it 1 Howe V. Austin, 40 La. Ann. 323. * Miller v. Shotwell, 38 La. Ann. 890. ' Payne v. Habbard, 42 La. Ann. 395. * Wallace v. Johnstone, 129 U. S. 58. 106 NATURE AND REQUISITES OF THE CONTRACT. is clearly shown, either by parol evidence or by the attendant circumstances, such as the condition and relation of the parties, or gross inadequacy of price, to have been intended by the parties as a security for a loan or existing debt/ Such deeds generally have none of the indicia by which courts are led to construe such instruments to be intended as a mortgage or a security for a loan ; nothing from which there can be inferred the existence of a debt or the relation of bor- rower and lender between the parties to the instruments.^ Article 5. Purchasing at Judicial Sales. §100. Sheriff's Deed — Agreement to § 101. Advancement of Money by Reconvey. Third Parties to Redeem at Foreclosure Sale. § 100. Sheriff's Deed — Agreement to Reconvey. — Often- times when the debtor's land is sold under order of court, he agrees with his creditors to bid for and buy the land, with the understanding that it shall be reconveyed to the debtor so soon as he pays off the debt and expenses incurred. Then the question arises whether such a transaction is in the nature of a mortgage. Thus, a creditor had obtained a judgment against his debtor, and it was agreed that the creditor should bid in the debtor's land, which was to be sold to satisfy the judg- ment ; and on payment of the judgment and the costs of the sale, the land was to be reconveyed to the debtor. Under this agreement the creditor bid in the land, worth $12,000, for $625, and received a sheriff's deed therefor. The debtor re- mained in possession of part of the property without payment of rent, made valuable improvements, and paid off an incum- ^Cadman v. Peter, 118 U. S. 73 ; Coyle v. Davis, 116 V. S. 108 ; Howland v. Blake, 97 U. S. 624 ; Horbach v. Hill, 112 U. S. 144 ; Corbit v. Smith, 7 Iowa, 60 ; 71 Am. Dec. 431 ; Knight r. McCord, 63 Iowa, 429 ; Budd v. Van Orden, 33 N. J. Eq. 143 ; Saxton v. Hitchcock, 47 Barb. (N. Y.) 220 ; Spence v. Stead- man, 49 Ga. 133 ; West v. Hendrix, 28 Ala. 226 ; Ruffier v. Womack, 30 Tex. 332. =* Wallace v. Johnstone, 129 U. S. 58. ABSOLUTE SALES DISTINGUISHED. 107 brance of $1,500 th.reon. Other parts of the land were sold by the creditor, but always on consultation with the debtor, who also fixed the price ; and for a number of years the cred- itor, by his acts and declarations, recognized the debtor's rights under the agreement. It was decided by the court that the agreement and subsequent transactions between the parties converted the sherifi"'s deed into a mortgage, and the fact that they resorted to the court to carry out the agreement, would not defeat it so as to enable the creditor to perpetrate a fraud on the debtor.^ . A sheriff 's deed under such circumstances may be converted into a mortgage by a parol agreement which allows the debtor to redeem the property.^ The evidence in such a case must be clear, explicit, and un- equivocal in respect of the facts to be established and relevant to the issue, in order to make a sheriff's deed a mortgage.^ In general, parol agreement between a judgment creditor and his debtor that the creditor should become the purchaser at a sheriff's sale of the land of the debtor, and hold the same as collateral security for his debt, is in effect a mortgage, and the debtor may redeem. Thus, a creditor purchased the land and took possession of it, and afterward attempted to collect the portion of the judgment which was not paid by the sheriff's sale. It was held that he must account for the rents and profits according to the terms of the parol agreement, because he was a mortgagee in possession and bound to apply the rents of the property to the debt for which it was pledged.* A sheriff 's deed may be converted into a mortgage by proof of a parol agreement that it was made as security for a debt or loan.-^ And when a party purchases at a sheriff's sale, it may ' Gaines v. BrockerhofF, 130 Pa. St. 17o ; 26 Week. N. C. 258. The cases of Fox r. Hefftier, 1 Watts & S. 372, and Jackman v. Ringland, 4 Watts & S. 149, are distinguished. ■■'Sweetzer's Appeal, 71 Pa. St. 264. See, also, Heath's Appeal, 100 Pa. St. 1 ; Logue's Appeal, 104 Pa. St. 136 ; Saunders v. Gould, 124 Pa. St. 237. 'Jones /'. Pierce, 134 Pa. St. 5.33. * Harrison v. Soles, 6 Pa. St. 393. * Logue's Appeal, 104 Pa. St. 136. f 108 NATURE AND REQUISITES OF THE CONTRACT. be shown that he acted for the owner, and was to reconvey on payment of the purchase price/ And when a grantor under an agreement with his debtor to hold land as security for the debt, got a title thereto by levy of execution and judgment obtained by consent and by foreclosure of the mortgagor, it was held that the transaction was a mortgage, and that the general devisee of the grantee could be compelled to reconvey.^ § 101. Advancement op Money by Third Parties to Re- deem AT Foreclosure Sale. — Third parties advanced money to the mortgagor to redeem land from a foreclosure sale by the mortgagee. In consideration thereof the third parties received a deed -absolute in form from the mortgagor and entered into a simultaneous agreement, under Mdiich the mortgagor agreed to purchase the land for a sum equal to the amount paid for redemption, the expenses of preparing the instruments, the premiums on policies of insurance, and an additional sum as compensation to the party advancing the money. It was also stipulated that time was the essence of the contract, and that upon failure to fulfill the agreement of purchase the grantee of the deed " shall be released from all obligations to convey said property, and shall be entitled to immediate possession of the same," but there was no agreement that in any contingency the parties of the second part are to be released from their ob- ligation to pay ; held, that the transaction was a mortgage.^ And where a third party agrees to buy land at a judicial sale and then agrees to reconvey it to the rightful owner in order to save further litigation, he is bound by his contract, and a party buying from him, acquainted with all the circum- stances, cannot hold the real estate discharged of the first owner's lien.* iGuinn v. Locke, 1 Head (Tenn.), 110; Price v. Evans, 26 Mo. 30; Sweet- zer's Appeal, 71 Pa. St. 264. * Cullen V. Carey, 146 Maps. 50. »Bakerr. Ins. Co., 79Cal. 34. * Blake v. McMurtry, 25 Neb. 290. Chief Justice Reese held that even though a specific performance of a contract to convey real estate might not be enforced where the vendor had no title at the time the contract was made, ABSOLUTE SALES DISTINGUISHED. 109 Not wishing to deprive the owner of his land, and desiring to avoid further Ktigation, a party can compromise with the owner, agreeing to buy and then reconvey ; where such a con- tract is needed, it is supported by ample consideration.^ The party thus buying at a foreclosure sale, is deemed a trustee of the party for whom he buys.^ Thus, land having been advertised for sale under a senior mortgage, the owner and the junior mortgagee agreed with a third party to purchase the land for the amount of both mortgages, and the junior mort- gagee furnished the amount of money due on the senior mort- gage, with the understanding that the owner might have fur- ther time to redeem. This was held to be a mortgage, and that the owner could pay off the incumbrance according to the agreement with the junior mortgagee.^ Article 6, The Rights of the Parties Under Deeds of Trust. ? 102. Deed by Mortgagor to a Third I 103. The Court will Look through Person aa Trustee. the Form into the Actual Character of the Trangac- tion. § 102. Deed by Mortgagor to a Third Person as Trustee. — If the conveyance be in the form of a trust deed and intended as a security it will be construed as a mortgage. It is the gen- eral rule that whenever property is transferred, no matter in what form, if in reality as a security for the debt, the transfer will be treated as in effect a mortgage, and the relation of mortgagor and mortgagee be held to exist. Tlius, if a third person is appointed as a trustee of the legal title as between yet such written contract having l:)een made after purchase, in pursuance of the previous agreement, and by which the owner had been induced to forego further litigation, the maker of such contract and those holding under him with notice of all the circumstances, would not be heard to assert its inval- idity. 1 Hewett V. Currier, G3 Wis. 386 ; Parker v. Enslow, 102 111. 272. ''Ryan v. Dox, 34 N. Y. 307 ; Reece v. Roush, 2 Mont. 586; SandfoGS v. Jones, 35 Cal. 481 ; McDonough v. O'Neil, 113 Mass. 92 ; Brown v. Lynch, 1 Paige (N. Y.), 147. * Klock V. Walter, 70 111. 416. See Pemberton v. Simmons, 100 N. Car. 316. 110 NATURE AND REQUISITES OF THE CONTRACT. the parties, and the transaction be in effect a mortgage, it will thus be held by the courts ; and it is not material that a third person be made a trustee of the legal title and that new securi- ties be substituted for the old, nor that any personal obligation of the debtor be preserved/ So a trust deed of lands given by a railroad company to secure the payment of bonds and providing that if there should be no default the estate, right, title, and interest of the trustee should cease, determine, and become void, is in effect a mort- gage, and leaves the legal title in the grantor.^ When such a trust deed is given as a mere security for money it is, in legal effect, nothing more than a mortgage.^ Such a trust deed is, in legal effect, a mortgage, and leaves whatever right, title, or interest the grantor has in the land at the time of giving the conveyance still in him, subject to the lien thereby created.* The general rule is, that where a deed of trust is executed with the understanding between the parties that it is a mere security for a debt, and that when the debt is paid the title shall revest in the grantor, such deed of trust is a mortgage.^ § 103. The Court will Look through the Form into the Actual Character of the Transaction. — It may be laid down as a general rule that whenever property is transferred, no matter by what conveyance or contrivance for the transfer thereof, equity will treat the transfer as a mortgage when so intended ; and it is not material that the person in whom the right of redemption is recognized has only an equitable title, or that the conveyance is made by a third party, nor whether any personal obligation of the debtor, or personal remedy, is preserved against him or not. The courts will look through the form into the actual character of the transaction.® 1 Marshall v. Thompson, 39 Minn. 137. ^ Wisconsin Cent. R. R. Co. v. Wisconsin Riv. L. Co., 71 Wis. 94. ^Hoyt V. Fass, &4 Wis. 279. * Bernstein v. Humes, 71 Ala. 265. 5 McDonald v. Kellogg, 30 Kan. 170. ^Niggeler v. Maurin, 34 Minn. 118; Marshall v. Thompson, 39 Minn. 137; absolute sales distinguished. ill Article 7. Rights of Subsequent Purchasers for Value and Without Notice. I 104. Rights of Third Persons. ? 105. Liability of Grantee who Sells Mortgaged Property. § 104. Rights of Third Persons. — If the purpose of a deed absolute on its face with a separate defeasance or trust deed is, in effect, a mortgage as between the parties, it cannot have that effect against subsequent bona fide purchasers for value and without notice.^ As to them, it is secret, fraudulent, and void, and a court of equity will not enforce it against them.^ In such conveyances there is a subsisting equity of redemp- tion in the mortgagor.^ The debtor is not allowed to agree in the transaction that he waives his right of redemption.* The grantee, as to third persons, can exercise all the rights of an absolute owner.^ And a purchaser who has knowledge that his grantor holds the property only as a mortgagee, ac- quires only a defeasible estate, controlled by the same terms and conditions as those in the hands of the grantee.^ And one Hoile V. Bailey, 58 Wis. 434 ; Russell v. Southard, 12 How. (U. S.) 139 ; Carr V. Carr, 52 N. Y. 251 ; Morris v. Budlong, 78 N. Y. 543 ; Church v. Kidd, 3 Hun (N. Y.), 254 ; Bowery Nat. Bank v. Duncan, 12 Hun (N. Y.), 405 ; King V. Remington, 36 Minn. 15 ; Fisk v. Stewart, 24 Minn. 97. ^ Gruber v. Baker, 20 Nev. 453 ; Waters v. Crabtree, 105 N. Car. 394. ^ Gregory v. Perkins, 4 Dev. (N. Car.) 50. ^ Snow V. Pressey, 82 Me. 552 ; Linnell v. Lyford, 72 Me. 284 ; Wyman r, Babcock, 2 Curt. C. C. 386. * Clark V. Condit, 18 N. J. Eq. 358 ; Pierce v. Robinson, 13 Cal. 116 ; Clark v, Henry, 3 Cow. (N. Y.) 324 ; Cherry v. Bowen, 4 Sneed (Tenn.), 415 ; Simon v. Schmidt, 41 Hun (N. Y.), 318; Henry v. Davis, 7 Johns. (N. Y.) Ch. 40; Wright V. Bates, 13 Vt. 341 ; Enos v. Sutherland, 11 Mich. 538. 5 Jenkins v. Rosenberg, 105 111. 157; Frink v. Adams, 36 N. J. Eq. 485; Digby V. Jones, 67 Mo. 104 ; Fiedler v. Darrin, 59 Barb. (N. Y.) 651 ; McCar- thy V. McCarthy, 36 Conn. 177 ; Pico v. Gallardo, 52 Cal. 206; Weide v. Gehl, 21 Minn. 449 ; Turner v. Wilkinson, 72 Ala. 361 ; Pancake v. Cauffman, 114 Pa. St. 113. "Zane v. Fink, 18 W. Va. 693 ; Houser v. Lamont, 55 Pa. St. 311 ; Bartling r. Brasuhn, 102 111. 441 ; Radford v. Folsom, 58 Iowa, 473 ; Lawrence v. Du Bois, 16 W. Va. 443 ; Kuhn v. Rumpp, 46 Cal. 299 ; Graham v. Graham, 55 Ind. 23. 112 NATURE AND REQUISITES OF THE CONTRACT. who deals with an agent is bound to know by what authority- he acts in conveying the property/ § 105. Liability of Grantee who Sells Mortgaged Prop- erty. — A grantee is Hable to the grantor for the sale of the property, but he can deduct the amount due him, with reason- able compensation for making the sale.^ And the grantee can deduct the amount paid to quiet an outstanding title.^ But w^hen the grantee has conveyed the land without con- sent of the grantor and the condition is not broken, the grantor may elect to take the proceeds of the sale less the debt,* or the value of the land less the debt at the time the debt is due and payable.^ The grantee is not allowed to show that he received a price larger than the value of the land.'' A claim for excess by the grantor is barred by the statute of limitations applicable in actions of assumpsit.^ The grantee can also have relief in proper cases. Accordingly where an absolute conveyance was made by an agent, and the principal claimed that the conveyance was taken as a security for a loan, the court held that the burden of establishing an absolute sale was on the agent, and decreed that the sale should be rescinded.^ Article 8. Assignment of Contracts to Purchase. ■ § 106. An Assignment of a Contract to Purchase may be a Mortgage. § 106. An Assignment of a Contract to Purchase may be a Mortgage. — An assignment of a contract to purchase 1 Gilbert v. Deshon, 107 N. Y. 324. 2 Van Dusen v. Worrell, 4 Abb. App. Dec. (N. Y.) 473. ^ Adkins v. Lewis, 5 Ore. 292. *Meehan v. Forrester, 52 N. Y. 277. * Booth V. Feist (Tex.), 19 S. W. Rep. 398; 15 S. W. Eep. 799; Enos o. Sutherland, 11 Mich. 538 ; Hart v. Ten Eyck, 2 Johns. Ch. (N. Y.) 62. 6Budd V. Van Orden, 33 N. J. Eq. 143. ' Hancock v. Harper, 86 111. 445 ; Wyman v. Babcock, 2 Curtis C. C. 386 ; s. c, 19 How. (U. S.) 289 ; Amory v. Lawrence, 3 Cliff. C. C. 523. ^Tappan v. Aylsworth, 13 R. I. 582. ABSOLUTE SALES DISTINGUISHED. 113 may be, in effect, only a mortgage. Thus, a party assigned a contract of purchase, with defeasance that if the assignee should be obliged to pay any part of a specified sum for which he had become security, and the assignor should not repay the same by a given date, the assignee was to have absolute owner- ship in the contract; but if the assignor repaid, then the assignee was to surrender all claim thereto. This was held to be a mortgage of the land and no more.^ So where a purchaser of land assigns his contract of pur- chase to another in trust, and the trustee advances the pur- chase-money when due, at the request of the cestui que trust, to save a forfeiture, and the vendor conveys the title to such trustee and transfers to him the notes given for the price, by consent of the cestui que trust, as a security for the repayment of the sum so advanced, the transaction will, in equity, be treated as a mortgage, and it will not concern the cestui que trust to whom the money is decreed to be paid, whether to the trustee or his devisee.^ Where the deed absolute in form is once shown to be a mortgage, it will retain that character until the equities of the mortgagor have been in some way foreclosed. This character continues through whatever changes it may undergo in the hands of an assignee. An assignment of a contract of purchase as security is a mortgage, and where the assignee has com- pleted the payment and taken a conveyance to himself, the relation of the parties remain the same.^ The assignment of several mortgages by deed absolute in form made as collateral security for a loan, is a mortgage.* ^ Meigs V. McFarlan, 72 Mich. 194. '^ Stewart v. Fellows, 128 111. 480. 'Smith V. Cremer, 71 111. 185. *Pond V. Eddy, 113 Mass. 149. See, also, Briggs v. Rice, 130 Mass. 50. VOL. I. — 8 CHAPTER IV. EVIDENCE TO ESTABLISH THE CHARACTER OP THE CONVEY- ANCE. Article 1. To Establish a Conditional Sale. § 107. In Equity. § 109. A Formal Mortgage Cannot § 108. The Intention Governs. be Shown to be a Condi- tional Sale. § 107, In Equity. — Parol evidence is inadmissible to con- tradict or substantially vary the legal import of a written agreement.^ But parol evidence is admissible when there is an allegation oi" fraud, mistake, or surprise in making or exe- cuting a conveyance, which comes under the jurisdiction of courts of equity and not of law.^ But parol evidence is not admissible in a court of law to change the face of a convey- ance.^ Chancellor Kent says : " The general rule is certainly not to be questioned or dis- turbed. It ought not to be a subject of discussion. It is as well grounded in reason and policy as it is in authority. Nor does this case come within any exception admitted here to the operation of the rule ; for there is no allegation of fraud, mis- take, or surprise in making or executing the mortgage ; and those, I believe, are the only cases in which parol evidence is admissible in this court against a contract in writing." * And Senator Putnam says : " I have therefore come to the conclu- sion that, upon principles of policy and from a regard to what is due to the rights of property, the rule on this subject, as » Stevens v. Cooper, 1 Johns. Ch. (N. Y.) 429. 2 Chaplin v. Butler, 18 Johns. (N. Y.) 169 ; Ring v. Franklin, 2 Hall (N. Y.), 1 ; Swart v. Service, 21 Wend. (N. Y.) 36. "Webb V. Rice, 6 Hill (N. Y.), 219. * Stevens v. Cooper, 1 Johns. Ch. (N. Y.) 419. 114 EVIDENCE TO ESTABLISH CHAKACTER OF CONVEYANCE. 115 heretofore understood and acted upon by our courts, should remain the law of the land. And it is difficult for me to dis- cover any good reason why the application of the rule may not as properly be entrusted to our courts of law as to the court of chancery." ^ In cases of fraud, or mistake of material facts, where it would be unconscionable to enforce the agreement according to its written terms, or where the parties mistook the meaning of any particular words, or to decipher words, or explain their technical or local meaning, or where extraneous facts are necessary to a proper understanding of the contract, or where there is a latent ambiguity, and perhaps in some other cases, parol evidence is admissible. Thus, where a grantee fraudulently attempts to convert into an absolute sale that which was intended to be only a security for a debt, parol evidence may be introduced to determine the character of the conveyance.^ Parol evidence is offered and received to show what the transaction really is from first to last. It is introduced not to contradict or vary the writing, but to show the facts.^ § 108. The Intention Governs. — To determine whether a conveyance is a conditional sale or a mortgage, parol evidence may be admitted to show the intention of the parties at the time of the transaction. This intention is to be ascertained by looking at the written memorials of the transaction, and its attendant facts and circumstances.* Thus, where the plaintiff introduces parol evidence for the purpose of showing that an instrument which prima facie evidences a conditional sale, is a mortgage, the defendant may introduce parol evidence to rebut that which has been intro- duced by the plaintiff.^ 1 Webb V. Rice, 6 Hill (N. Y.), 219. ^Morris V. Nixon, 1 How. (U. S.) 126. ^Rankin v. Mortimere, 7 Watts (Pa.), 372. * Cornell v. Hall, 22 Mich. 377 ; Smith v. Crosby, 47 Wis. 160 ; Henley v. Hotaling, 41 Cal. 22. *Buse V. Page, 32 Minn. 111. 116 NATUKE AND REQUISITES OF THE CONTRACT. In determining whether a deed absolute on its face, or an instrument in the form of a conditional sale, is a mortgage, great weight is attached to the fact that the alleged price was greatly inadequate ; that the vendor remained in possession of the property, and that there had been pending negotiations for a loan. These facts may be proved by parol, as also the relation of debtor and creditor.^ In determining whether a conditional sale is intended, when it is not otherwise clear, the circumstances attending may be given in evidence, and such facts as the inadequacy of the price paid,^ and the continued possession of the grantor.^ But where a deed and a written contract were simultaneously executed, and the evidence showed a pre-existing debt, it was held that if there was a continuing obligation for the debt, the transaction was a mortgage, although the deed expressly stated that the debt was fully satisfied and that the contract was intended as a conditional sale, and not as a mortgage.* The want of a covenant to repay the money is not complete evidence that a conditional sale was intended, but is a circum- stance of no inconsiderable importance.* But this rule of the admission of parol evidence does not extend to an official conveyance, because the parol evidence contemplated is always upon the question of intention of the parties to the conveyance. Thus, a sheriff, master in chancery, or other officer in selling property under process, decree of judg- ment of the court, cannot make a valid agreement with a pur- chaser to convey any other estate than such as the judgment or decree will warrant.^ § 109. A Formal Mortgage Cannot be Shown to be a Conditional Sale. — A formal conveyance may certainly be »Da\as V. Demming, 12 W. Va. 246. * Campbell v. Dearborn, 109 Mass. 130; Freeman v. Wilson, 51 Miss. 329 ; Rnssell v. Southard, 12 How. (U. S.) 139 ; Brown v. Dewey, 2 Barb. (N. Y.) 28. » Gibson V. Eller, 13 Ind. 124. *Ruffier ('. Womack, 30 Tex. 332. * Conway v. Alexander, 6 Cranch (U. S.), 2W, 'Ryan v. Dox, 25 Barb. (N. Y.) 440v EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 117 shown to be a mortgage by extrinsic proof, but a formal mortgage may not be shown to be a conditional sale by the same means. In the one case the proof raises an equity consistent with the writing, and in the other it contradicts it.^ This rule, that a written mortgage cannot be converted by parol into a conditional sale, is applicable to both parties of the instrument; this rule rests upon a sound principle of policy.^ In this case Judge Lewis says : " In the one case there is an equity to be protected which is perfectly consistent with a legal conveyance. The equity of redemption, so far from being in contradiction of a conveyance, presupposes its existence. Parol evidence to establish this equity, therefore, does not contradict the written conveyance. Besides, an equitable defense of this character commends itself to the con- sideration of the chancellor, and fixes itself upon the con- science of the grantee as a trust, which it would be a fraud to violate. In the other case, where the instrument is a mort- gage, the parol evidence to prove it a conditional sale would directly contradict the WTiting." Parol evidence is admissible to show that a formal convey- ance, with a defeasance executed some time afterw^ard, consti- tutes, in fact, a mortgage, and not a conditional sale. Thus, where a mortgagor by deed and defeasance, under a mistaken idea of the effect of the defeasance upon the rights of third parties, executed a release of his equity of redemption, parol evidence is admissible to show that the parties did not intend thereby to affect their relation of mortgagor and mort- gagee. But such evidence is admissible, not to contradict the release, but to give to it the effect and operation intended by the parties, and to prevent its being set up with a different effect and for a different purpose.^ Parol proof is not introduced to contradict or vary the ^ Kunkle v. Wolfe rsberger, 6 Watts (Pa.), 126. See, also, Cohvell v. Woods, 3 Watts (Pa.), ISS. nVoods V. Wallace, 22 Pa. St. 171. 'Reitenbaugh v. Ludwick, 31 Pa. St. 131. 118 NATURE AND REQUISITES OF THE CONTRACT. written instrument, but to show that tlie transaction was a mortgage, and not a conditional sale/ But parol evidence is inadmissible to show that an absolute conveyance was intended to operate as a conditional sale.^ Article 2. To Prove an Absolute Deed a Mortgage. 110. The Admission of Parol Evi- dence Does Not Conflict with the Statute of Frauds. 111. This Evidence Must be Clear, Unequivocal, and Convincing. 112. The Statute of Frauds Does Not Permit the Introduction of Parol Evidence to Create a Trust. 113. Parol Evidence May be Ad- mitted to Show the Intention of the Parties. 114. Inadequacy of Price as an Ele- ment Showing that the Trans- action was Intended as a Mortgage. 115. If the Transaction Shows that the Relation of Debtor and Creditor is . Created, it will be Considered a Mortgage. 116. A Pre-existing Indebtedness as a Consideration. ni7. 118. im. ?120. Possession Eemaining with Grantor is a Circumstance Indicating a Mortgage. Laches of the Grantor have Great Significance. When the Evidence is Not Satisfactory, the Transaction "Will be Declared a Sale. The Grantor Who Seeks Equity Must Do Equity. I 121. The Rights of Creditors of the Grantor. I 122. In General, the Legal Effect of the Instrument is a Ques- tion for the Court. I 123. A Question for the Jury Un- der Proper Instructions from the Court. Instructions which Enunciate the Law. Instructions which are Er- roneous. U24. ?125. § 110. The Admission of Parol Evidence Does Not Con- flict WITH THE Statute of Frauds. — It is well settled that parol evidence may be admitted to prove an absolute deed a mortgage, and the admission of such evidence does not contra- vene the statute of frauds. To allow the statute of frauds to exclude parol evidence would be to make it a guard and protection of fraud, instead of a security against it; as is the design and intention of it.* > Colwell V. Woods, 3 Watts (Pa.), 188 ; Jaques r. Weeks, 7 Watts (Pa.), 261. "Peagler v. Stabler (Ala.), 9 South. Rep. 157; Egerton v. Jones, 107 N. Car. 284. ^Swegle V. Belle, 20 Oreg. 323 ; Walker v. Walker, 2 Atk. 98. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 119 The principle of the court is that the statute of frauds is not made to cover fraud. If the real transaction between the par- ties is that it shall be a mortgage, it is in the eye of the court a fraud to insist on the conveyance as being absolute, and parol evidence must be admissible to prove a fraud/ And it was early said, " They who take a conveyance of an estate as a mortgage without any defeasance are guilty of a fraud." ^ It has been held, and justly, that a failure to insert the de- feasance in the deed is an imposition.^ The conversion of a deed without a defeasance, into a mort- gage at first met with great opposition. The principal ob- stacle was that the admission of parol evidence was in contra- vention of the statute of frauds ; another was that parol testi- mony cannot contradict or vary written contracts. At an early date of the chancery court these difficulties were surmounted by placing the right upon the ground of fraud, one of the primary sources of equity jurisdiction. The same view adopted in England has been received in the United States. Both on principle and authority, it is clear that extrinsic evi- dence is admissible, and to insist on what was really a mort- gage as a sale is in equity a fraud.* Whenever the statute of frauds has been interposed as a bar to the admission of extrinsic evidence, the answer is that this statute does not apply. While the reasoning of the courts has not always been harmonious, and in some instances not satisfactory, yet the doctrine is firmly established and uni- formly acquiesced in.^ So parol evidence is admissible in equity to show that an absolute deed is intended as a mort- gage, and that the defeasance was omitted or destroyed by fraud, surprise, or mistake.^ 1 Lincoln v. Wright, 4 DeG. & J. 22 ; Reigard v. McNeil, 38 111. 400. ''Cotterell v. Purchase, Cas. Temp. Talb. 61, 63. 3 Baker v. Wind, 1 Ves. Sr. 160. * Russell V. Southard, 12 How. (U. S.) 139, 151 ; Conway v. Alexander, 7 Cranch (U. S.), 218, 238. " Campbell t;. Dearborn, 109 Mass. 130; Carr t-. Carr, 52 N. Y. 251, 258; Horn V. Keteltas, 46 N. Y. 605, 610 ; Moore v. Wade, 8 Kan. 380, 387 ; Sewell V. Price, 32 Ala. 97 ; Klein v. McNamara, 54 Miss. 90. «4 Kent's Com. 143. 120 NATURE AND REQUISITES OP THE CONTRACT. " It is determined on the statute of frauds, that, if a mortgage is intended by an absolute conveyance in one deed, and a de- feasance making it redeemable in another, the first is executed and the party goes away with the defeasance, that is not within the statute of frauds." ^ And it is a general rule that one who has induced another to act upon the supposition that a writing had been or would be given, shall not take advantage of that act and escape re- sponsibility himself by pleading the statute of frauds on account of the absence of such writing, which has been caused by his own fault.^ This doctrine was established after a struggle, but it is now established, and the courts refuse to permit the statute designed to prevent frauds and perjuries to be used as an instrument of fraud, injustice, or oppression.^ Chief Justice Rice says : " The ground on which a court of equity permits parol evi- dence to show a conveyance absolute on its face to be a mort- gage, or that it was executed upon certain parol conditions or trusts, is that it would be a fraud to allow the grantee to hold the property discharged of the conditions or trusts which by his consent were attached to the conveyance, and which he agreed to fulfill." * Justice Field states the doctrine and says : " It is an established doctrine that a court of equity will treat a deed, absolute in form, as a mortgage when it is exe- cuted as a security for a loan ; that courts look beyond the terms of the instrument to the real transaction, and where that is shown to be one of security and not of sale, they will give effect to the actual contract of the parties. As the equity upon ' Dixon V. Parker, 2 Ves. Sr. 219, 225. See, also, Joynea v. Statham, 3 Atk. 388 ; Maxwell v. Mountacute, Prec. Ch. 626 ; Washburn v. Merrills, 1 Day (Conn.), 139 ; Daniels v. Alvord, 2 Root (Conn.), 196 ; Brainerd v. Brainerd, 15 Conn. 575 ; Story's Eq., sect. 768. 2 Glass V. Hulbert, 102 Mass. 24 ; Bartlett v. Peckersgill, 1 Eden, 515 ; 1 Cox Ch. 15 ; Browne on Statute of Frauds, sect. 94. . ^Carr v. Carr, 52 N. Y. 251, 260 ; Wyman v. Babcock, 2 Curtis C. C. 3S6, 399 ; Reed v. Reed, 75 Me. 264 ; Bonham v. Newcomb, 2 Vent. 364. *Sewell V. Price, 32 Ala. 97. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE, 121 which the court acts in such case arises from the real character of the transaction, any evidence, written or oral, tending to show this, is admissible. The rule which excludes parol testi- mony to contradict or vary a written instrument, has reference to the language used by the parties. That cannot be qualified or varied from its natural import, but must speak for itself. The rule does not forbid an inquiry into the object of the par- ties in executing and receiving the instrument. Thus it may be shown that a deed was made to defraud creditors, or to give preferences, or to secure a loan, or for any other object not ap- parent on its face. The object of the parties in such cases will be considered by a court of equity. It constitutes a ground for the exercise of its jurisdiction, which will always be as- serted to prevent fraud or oppression, and to promote justice." ^ But when no fraud or breach of good faith can be imputed to the grantee in relation to the transaction, he is entitled in a court of equity, as well as in a court of law, to the full protec- tion and stringent application of the general rule, that parol evidence shall not be received to vary the terms of a written contract.^ When a mortgagee liolding a formal legal mortgage under- takes to enforce his rights there-under, he is proceeding to en- force rights resting in contract, and hence he is confined to the terms of the contract as agreed upon by the parties at the time the contract was entered into in the solemn form of mortgage. He cannot, therefore, be permitted to show that his mortgage, which was originally intended to secure one debt, has by a subsequent parol agreement been so extended as to cover another debt not contemplated by the parties at the time the contract which he is seeking to enforce was entered into. But where one holding the legal title to a tract of land under an absolute conveyance, seeking to enforce his legal rights there- under, is met by a showing on the part of the grantor that, although he holds the legal title, equity will not permit him iPeugh r. Davis, 96 U. S. 332. See, also, Hughes v. Edwards, 9 Wheat. (U. S.) 489 ; Taylor v. Luther, 2 Sumn. C. C. 228 ; Pierce v. Robinson, 13 Cal. 116. *Sewell V. Price, 32 Ala. 97 ; Holmes v. Fresh, 9 Mo. 201. 122 NATURE AND REQUISITES OF THE CONTRACT. to enforce it, because at the time it was executed sucli paper was not intended to operate as an absolute conveyance, but was intended merely as a security for the jjayment of a debt, and hence, if the paper were allowed the effect of an absolute con- veyance it would operate as a fraud, it is not a question of contract but one of pure equity/ § 111. This Evidence Must Be Clear, Unequivocal, and Convincing. — The general rule is, if the conveyance is in fee, with a covenant of warranty, and there is no defeasance, either in the conveyance or a collateral paper, j)arol evidence to show that is was intended to secure a debt, and to operate only as a mortgage, must be clear, unequivocal, and convincing, or the presumption that the instrument is what it purports to be must prevail.^ Barker, P. J., says that the burden of proof rests upon the grantor to overcome the strong presumption arising from the terms of a written contract ; that the rule is that if the proofs are doubtful and unsatisfactory, if there is a failure to over- come this presumption by testimony entirely plain and con- vincing beyond reasonable controversy, the writing will be held to express correctly the intention of the parties. " A delib- erate deed or writing is of too much solemnity to be brushed away by loose or inconclusive proofs." ^ Justice Bailey has truly said that the burden is on the com- plainant to prove by clear and satisfactory evidence, that the instrument was in fact a mortgage, and to show that such was the intent of the parties.* ^Levi V. Blackwell (S. Car.), 15 S.E. Rep. 243. See, also, Lindsay v. Garvin, 31 S. Car. 259 ; O'Neill v. Bennett, 33 S. Car. 243. *Cadman v. Peter, 118 U. S. 73 ; Rowland v. Blake, 97 U. S. 624 ; Coyle v. Davis, 116 U. S. 108 ; Case v. Peters, 20 Mich. 298 ; Tilden v. Streeter, 45 Mich. 533. ^Shattuck V. Bascom. 55 Hnn (N. Y.), 14 ; Mclean v. Ellis, 79 Tex. 398. * Strong V. Strong, 126 111. .301 ; s. c, 27 111. App. 148. See, also, Bailey v. Bailey, 115 111. 551 ; Darst v. Murphy, 119 111. 345 ; Cobb v. Day, 106 Mo. 278 ; Workman v. Greening, 115 111. 447 ; Clark v. Finlon, 90 111. 246 ; Hartnett V. Ball, 22 111. 43 ; Bartling v. Brasuhn, 102 111. 441 ; Knowles v. Knowles, 86 111. 1 ; Hinton v. Pritchard, 107 N. Car. 128. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 123 Thus, where the complainant testifies to facts tending to show a loan, and is confirmed in the testimony by two other parties, but none of them testifies to any distinct agreement to reconvey, or any actual payment, or offer to pay, the whole of the loan, but the defendant denies most emphatically that there was any loan or any agreement to reconvey, such evi- dence is not clear, precise, and indubitable that such transac- tion was intended as a mortgage, and the complainant must fail.^ The rule that, in order that an absolute deed may be estab- lished by parol testimony as a mortgage, the evidence must be clear and certain,^ applies also to an instrument which clearly shows upon its face to be a conditional sale. Thus, property may be conveyed by deed which will be construed as evidenc- ing a conditional sale, and not a mortgage, though the con- sideration is the payment of a debt due from the vendor, with a condition for repurchase by paying the amount of the origi- nal debt and interest wdthin a designated time. This occurs when it is intended and stipulated that the debt is paid by the conveyance. If the deed was intended merely as a security for the debt, it would be regarded as evidencing a mortgage. If the deed recites in terms that the sale is conditional, the burden of proof is uj^on one who seeks to have it construed as a mortgage, and, to recover, he must so establish it wdth clear- ness and certainty.^ The rule is general that a deed of land, absolute on its face, with no defeasance in the instrument or in a collateral paper, may be shown to be a mortgage by parol evidence, if the evi- dence is clear, unequivocal, and convincing ; otherwise, the presumption is that the instrument is what it purports to be on its face.* 1 Pancake v. Cauffman, 114 Pa. St. 113. 'Morton ?-. Woodford (Ky.), 16 S. W. Rep. 528; Hunter v. Maanum, 78 Wi?. 656; Downing v. AVoodstock Iron Co. (Ala.), 9 South. Eep. 177 ; More- land V. Barnhart, 44 Tex. 275 ; Pierce v. Fort, 60 Tex. 464 ; Dean v. Lyona, 47 Tex. 18 ; McNeel r. Auldridge, 34 W. Va. 748. See Wallace v. Berry (Tex.), IS S. W. Rep. 595. * Miller v. Yturria, 69 Tex. 549. *Peagler v. Stabler, 91 Ala. 308; Arnold v. Mattison, 3 Rich. Eq. (S. Car.) 124 NATURE AND REQUISITES OF THE CONTRACT. Both parties must understand that the instrument was intended as a mortgage, or the evidence must clearly show this ; that the grantor alone understood it to be a mortgage, is not sufficient,^ and contradictory evidence on the part of the vendor will not make an absolute deed a mortgage.^ How- ever, when the transaction indicates a security, it will be de- clared a mortgage.^ §112. The Statute of Frauds Does Not Permit the In- troduction OP Parol Evidence to Create a Trust. — The rule permitting parol evidence to convert an absolute deed into a mortgage might, by analogy, sustain the introduction of parol evidence to take a case of express trust out of the statute of frauds. But the statute of frauds does not permit the in- troduction of parol evidence to create a trust. The general rule, however, recognizes that there is fraud in permitting the grantee to hold the deed as an absolute conveyance, and also 153 ; Lance's Appeal, 112 Pa. St. 456 ; Albany & S. W.D. Co. v. Crawford, 11 Ore. 243 ; Erwin v. Curtis, 43 Hun (N. Y.), 292 ; Holmes v. Grant, 8 Paige (N. Y.), 243 ; Bingham v. Thompson, 4 Nev. 224 ; Quick v. Turner, 26 Mo. App. 29 ; Williams v. Stratton, 10 Sm. & M. (Miss.) 418 ; Faringer v. Eamsay, 2 Md. 365 ; Knight v. McCord, 63 Iowa, 429 ; Conwell v. Evill, 4 Blackf. (Ind.) 67 ; Walker v. Bank (N. J.), 14 Atl. Rep. 819 ; Goree v. Clements (Ala.), 10 Rep. 906 ; Mitchell v. Wellman, 80 Ala. 16 ; Williams v. Cheatham, 19 Ark. 278 ; Adams v. Adams, 51 Conn. 544; Matthews v. Porter, 16 Fla. 466; Town- send V. Petersen, 12 Colo. 491 ; Marsh v. Marsh, 74 Ala. 418 ; Satterfield v. Malone, 35 Fed. Rep. 445 ; Turner v. Wilkinson, 72 Ala. 361 ; HoAvland v. Blake, 7 Biss. C. C. 40 ; s. c, 97 U. S. 624 ; Moore v. Ivey, 8 Ired. Eq. (N. Car.) 192. 1 Holmes v. Fresh, 9 Mo. 201 ; Andrews r. Hyde, 3 ClifT. C. C. 516 ; Phoenix V. Gardner, 13 Minn. 430. See, also, Todd v. Campbell, 32 Pa. St. 250 ; Ross v. Brusie, 64 Cal. 245 ; Matheney v. Sandford, 26 W. Va. 386 ; Snavely v. Pickle, 29 Gratt. (Va.) 29 ; Phelps v. Seely, 22 Gratt. (Ya.) 573 ; Edwards r. Wall, 79 Va. 321. * Kahn v. Weill, 14 Saw. C. C. 502 ; 42 Fed. Rep. 704 ; Adams r. Pilcher, 92 Ala. 474 ; Edwards v. Rogers, 81 Ala. 568 ; Blazy v. McLean, 129 N. Y. 44 ; Etheridge v. Wisner, 86 Mich. 166 ; Miller r. Green, 138 111. 565. ^Trimble v. McCormick (Ky.), 15 S. ^Y. Rep. 358; Blazy v. McLean, 59 Hun (N. Y.), 616; Kraemer r. Adelsberger, 122N. Y.467, reversing 55 N. Y. Super. Ct. 245 ; Lewis v. Bayhss, 90 Tenn. 280 ; Conant v. Riseborough, 139 111. 383 ; Wilson v. Parshall, 129 N. Y. 223. See, also, Worley v. Dryden, 57 Mo. 226 ; Cobb v. Dav, 106 Mo. 278. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 125 fraud in procuring the deed, accident, or mistake in the execu- tion of the deed. Thus when a deed is made absolute upon its face without any mistake or fraud on the grantee's part, his mere refusal to perform the trust, is not such a fraud as will justify the admission of parol evidence and the enforcement of the trust. ^ So tliis principle is illustrated in the following case : A tes- tator was about to change his will so as to give one of the legatees a much larger amount than he had designated in the will. It was suggested to him by his attorney that if the other legatees would give a bond to pay the amount it would be sufficient, and one of the others being present, promised that they would do it, and the alteration of the will was abandoned. The bill was filed to enforce the promise, but the chancellor held it to be against the statute of frauds; that there was no ground for relief on the head of accident or fraud ; that every breach of promise is not a fraud, nor does it appear that the testator was drawn in by this promise not to add the legacy to the codicil. This was then a refusal by one having the legal title without fraud to execute a trust, which the testator had by parol declared, and which the devisee had promised to execute.^ So, again, the question arose as to the admissibility of parol evidence to show that a devise of lands was in trust, and it was conceded that it could not be admitted, except on the ground of fraud, and the question then occurred whether the mere refusal to perform the trust was such fraud as would justify its admission. The court says : " The question has been as to the circumstances which con- stitute such a fraud as will be made the foundation of a de- cree. A mere refusal to perform the trust is undoubtedly not enough, else the statute which requires a will of land to be in writing would be altogether inoperative, and it seems to be requisite that there should appear to have been an agency * Easdall r. Rasdall, 9 Wis. 379 ; McCormick v. Herndon, 67 Wis. 648 ; Butler V. Butler, 46 Wis. 430 ; Rockwell v. Humphrey, 57 Wis. 410. ^Whitton V. Russell, 1 Atk. 448. 126 NATURE AND REQUISITES OF THE CONTRACT. active or passive, on the part of the devisee in procuring the devise." ^ So a grantor in an absohite conveyance of land not alleging fraud or mistake, cannot prove by parol that the grant was in trust for himself, because no parol trusts of land can be allowed without overthrowing the provisions of the statute of frauds.^ The fact that, though the grantor was to retain posses- sion, there was no time appointed to pay the principal, nor any stipulation to pay interest, nor an}^ note or security taken for the debt connected with the absolute form of the deed, may suffice to show that no mortgage was intended.^ The mere refusal of the grantee to execute a parol trust, is not such a fraud as will take the case out of the provisions of the statute of frauds.* The fraud which justifies the admissi- bility of parol evidence, must be such as affects the transfer or disposition of the property.^ Because a trust is created by parol contract it does not necessarily follow that it may not be enforced in equity. On the contrary, if it be afterward ad- mitted and the party does not insist upon the defense of the statute of frauds, a court of equity will decree a specific per- formance.^ §113. Parol Evidence May be Admitted to Show the Intention op the Parties. — The admission of oral testimony to show a deed absolute on its face to be a mortgage, is not a violation of the rule which precludes such admission for the purpose of varying or contradicting the terms of a written agreement ; that rule has reference to the language of which 1 Hoge r. Hoge, 1 Watts (Pa.), 163. See, also, Pinnock v. Clough, 16 Vt. 500; Thomas v. McCormack, 9 Dana (Ky.), 109. ' Sturtevant v. Sturtevant, 20 N. Y. 39. ^Edwards v. Wall, 79 Va. 321. * Dean V. Dean, 6 Conn. 28-4 ; Bander v. Snyder, 5 Barb. (N. Y.) 63 ; La- throp V. Hoyt, 7 Barb. (N. Y.) 59. ^Streator v. Jones, 1 Murph. (N. Car.) 449; Thompson v. Patton, 5 Litt. (Ky.) 74. « Barren v. Joy, 16 Mass. 221 ; Cottington v. Fletcher, 2 Atk. 155 ; Forster v. Hale, 3 Ves. 696 ; 5 Ves. 308 ; Hampton v. Spencer, 2 Vem. 288. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 127 the instrument is the repository ; but this permits an inquiry as to the intention of the parties in executing and receiving the instrument, and equity exercises jurisdiction to carry out such intention, and to prevent fraud and imposition and to promote justice/ It is a question of intention which may be proved by parol evidence.^ To insist on what was really a mortgage as a sale, is to equity a fraud which cannot be successfully practiced under the shelter of any written contract, however precise and complete it may be, and the court will admit oral evidence to find out the intention of the parties at the time of the trans- action.^ To attempt to convert a mortgage into an absolute sale is a fraud. It is in this view of the case that parol evidence is admitted to ascertain the truth of the transaction and the intent of the parties.* The intention of the parties may be shown by extrinsic and parol evidence, and convert a conveyance of land, absolute on its face, into a mortgage as between the original parties.^ In connection with parol evidence, the following circum- stances have great weight in determining that a deed absolute on its face is merely a mortgage : 1. That the grantor was hard pressed for money and that the grantee was a known money-lender. 2. That the actual execution of the deed was preceded by a negotiation for a loan of money by the grantor to the grantee. 3. That the parties did not apparently consider or contemplate the quantity or value of the land when the deed was made. 4. That the price professedly given for the land was grossly inadequate. 1 Nat. Bank v. Ashmead, 23 Fla. 379. See, also, Peugh v. Davis, 96 U. S. 336 ; Franklin v. Aver, 22 Fla. 654 ; Shear r. Robinson, 18 Fla. 379 ; Pierce v. Robinson, 13 Cal. 116; Lindsay v. Matthews, 17 Fla. 585. ^ Crane v. Bonnell, 1 Green, Ch. (N. J.) 264 ; Youle v. Richards, Sax. (N.J.) 537. 'ConAvay v. Alexander, 7 Cranch (U. S.), 238. ♦Prince v. Bearden, 1 A. K. Marsh. (Ky.) 170; Oldham v. Halley, 2 J. J. Marsh. (Ky.) 114 ; Overton v. Bigelow, 3 Yerg. (Tenn.) 513. * Edwards v. Wall, 79 Va. 321 ; Snavely v. Pickle, 29 Gratt. (Va.) 27. 128 NATURE AND REQUISITES OF THE CONTRACT. 5. Thcat the possession of the land had remained with the grantor whether rent be nominally reserved or not, and if no rent is ever professedly reserved, this last circumstance is en- titled to very great weight if unexplained/ Courts of equity will give the instruments the effect con- templated by the parties. If they are dealing with reference to a loan and the deed intended as security for money loaned, parol evidence is admissible to explain the true character of the transaction, and it may be construed to be a mere security for the money loaned.^ But the intention may show that the instrument is a sale. Thus, prior to the execution of a deed, the grantor was in- debted to the grantee in the sum of $1,800, and a deed was given in satisfaction of this indebtedness. At the time of the execution the grantor gave the grantee his note for $500, under an agreement that if the proceeds of the land conveyed did not amount to $1,800 and interest, then the note would be paid, but not otherwise, and if the proceeds amounted to more than that sum, or if after that sum was realized any remained, the surplus of land or money should belong to the grantor. It was held that there was no intention to mortgage.^ Declarations made after the execution of the deed by the grantee of his intention to hold the propert}^ under the deed, or any facts tending to show after intention, are only admissi- ble in evidence so far as they tend to prove the original inten- tion at the time the instrument was made.^ And in an action to recover land where defendant claims that his absolute deed to plaintiff was a mortgage, he will, under the rule that one asking equity must do equity, be required to pay not only the amount intended to be secured 1 Kerr v. Hill, 27 W. Va. 576. See, also, Matheney v. Sandford, 26 W. Va. 386 ; Vangilder r. Hoffman, 22 W. Va. 2. 2 Freeman v. Wilson, 51 Miss. 329 ; Kenton v. Yandergrift, 42 Pa. St. 339 ; Littlewort v. Davis, 50 Miss. 407. 'Manasse v. Dinkelspiel, 68 Cal. 404. * McMillan v. Bissell, 63 Mich. 66. See, also, Jackson v. Mumford, 74 Tex. 104 ; Buffum v. Porter, 70 Mich. 623 ; Gilchrist v. Beswick, 33 W. Va. 168 ; Hoflfman v. Ryan, 21 W. Va. 415 ; Vangilder v. Hoffman, 22 Va. 1. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 129 thereby, but also whatever else he may owe the holder of such title.' § 114. Inadequacy of Price as an Element Showing that THE Transaction was Intended as a Mortgage. — Inade- quacy of price ma}^ be an element of considerable importance in showing the intention of the parties. But the mere fact that the property was conveyed for a less sum than its real value, is not, of itself, sufficient to authorize a court to declare a deed absolute upon its face to be a mortgage ; because a man in embarrassed circumstances may often be compelled by the lawful desire to pay his debts, to dispose of his property, hon- estly, for much less than its true value.^ Still great inadequacy between the value of the property covered and the price alleged to have been paid for it, is a circumstance tending strongly to show that a deed absolute in form is only a mortgage.'^ One of the circumstances tending strongly to show that a deed absolute in form is only a mort- gage, is the fact that there is great inequality between the value of the property conveyed and the price alleged to have been paid for it. And it is generally held that, in examining this question, it is of great importance to inquire whether the consideration is adequate to induce a sale. When no fraud is practiced, and no inequitable advantages taken of pressing wants, owners of property do not sell it for a consideration manifestly inadequate, and therefore, in cases on this subject, great stress is justly laid upon the fact that what is alleged to have been the j)rice, bore no proportion to the value of the thing said to have been sold.^ 'Levi V. Blackwell (S. Car.), 15 S. E. Rep. 243. nValkor v. Bank (Del.), 14 Atl. Rep. 819; Pierce v. Traver, 13 Nev. 526. ^ Husheon v. Husheon, 71 Cal. 407. * Russell V. Southard, 12 How. (U. S.) 139 ; Morris v. Nixon, 1 How. (U. S.) 126; Vernon v. Bethell, 2 Eden, 110; Oldham v. Halley, 2 J. J. Marsh. (Ky.) 114 ; Edrington v. Harper, 3 J. J. Marsh. (Ky.) 354 ; Conway v. Alexander, 7 Cranch (U. S.), 241 ; Husheon v. Husheon, 71 Cal. 407 ; Gilchrist v. Beswick, 33 W. Va. 168 ; Pearson v. Seay, 35 Ala. 612 ; Freeman v. Wilson, 51 Miss. 329. VOL. I. — 9 130 NATURE AND REQUISITES OF THE CONTRACT. §115. If THE Transaction Shows that the Relation of Debtor and Creditor is Created, it will be Considered a Mortgage. — In determining the question whether a deed ab- sohite on its face is what it purports to be, or a mortgage, the fact that the parties, after the execution of the deed, still under- stood that the relation of creditor and debtor continues, in respect to the debt on which the deed is founded, must gener- ally be regarded as designed to show that the instrument was intended to be a mortgage.^ Still it is not enough that the relation of borrower and lender, or debtor and creditor, existed at the time the transaction was entered upon. Negotiations begun with a view to a loan or security for a debt, may fairly terminate in a sale of the property originally proposed for security. And if, without fraud, or unfair advantage taken, a sale is the real result, and not a form adopted as a cover or pretext, it should be sustained by the court. The chief inquiry is, generally, whether a debt was created by the transaction, or an existing debt, which formed or entered into the consideration, continued and kept alive afterward. If the purchaser, instead of taking the risk of the subject of the contract on himself, take a security for repayment of the prin- cipal, that will vitiate the transaction, and render it a mort- gage security. Any recognition of the debt as still subsisting, if cleary established, is equally efficacious ; as the receipt or demand of interest.^ Proof of the existence and continuance of the debt, for which the conveyance was made, if not decisive of the char- acter of the transaction as a mortgage, is most influential to that effect; j'^et the absence of such proof is far from being conclusive to the contrary.^ The burden of proof is upon the grantor in an action to redeem, to show that the relation of debtor and creditor existed between the grantee and grantor after the delivery of the deed.* iBudd V. Van Orden, 33 N. J. Eq. 143. ^ Eaton V. Green, 22 Pick. (Mass.) 526, 530. » Campbell v. Dearborn, 109 Mass. 130 ; Brown v. Dewey, 1 Sandf. Ch. (N.Y.) 56 ; Rice v. Rice, 4 Pick. (Mass.) 349 ; Flagg v. Mann, 14 Pick. (Mass.) 467, 478. * Helms. V. Chadbourne, 45 Wis. 60; McCormick v. Herndon, 67 Wis. 648. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 131 §116. A Pre-existing Indebtedness as a Consideration. — It is essential to a mortgage that there shall be a debt to be secured. It may be antecedent to or created contemporane- ously with the mortgage.^ Then the only inquiry necessary to be made is whether the relation of debtor and creditor re- mains and a debt still subsists between the parties. If it does, then the conveyance must be regarded as a security for the payment and be treated in all respects as a mortgage.^ In such cases the central fact to be found, is the existence of an indebtedness at the time of the transaction, or one that pre-existed, and a continuation of the relation of debtor and creditor. If these facts be found, the inference deducible from them, is that the deed was not made to transfer the title to the land described in it, but w^as made for the purpose of securing the debt which the grantor owed to the grantee.^ If there is a debt due from the grantor to the grantee, or a loan made, which the instrument secures, the transaction wall be deemed a mortgage, let it be disguised as it may. Xo evi- dence of indebtedness may be taken or preserved, and yet the debt may remain.'* For the sake of giving the transaction the appearance of a sale, all such evidence is usually avoided or concealed.^ If the transaction is based upon a pre-existing debt or loan of money, it must clearly appear that such debt was extin- guished, or it will be held that the new arrangement is a mere change of security." The question in such cases is. Is the old debt surrendered or cancelled at the time of the conveyance ? ^ If the deed or conveyance be accompanied by a condition or matter of defeasance expressed in the deed, or is contained in a separate instrument, or let the consideration for it be ^ Snavely v. Pickle, 29 Gratt. (Va.) 35. ^ Robinson v. Cropsey, 2 Edw. Ch. (N. Y.) 138 ; Slee v. IVIanhattan Co., 1 Paige (N. Y.), 56. ^Montgomery v. Spect, 55 Cal. 352. * Loving r. Milliken, 59 Tex. 423. *Gibbs V. Penny, 43 Tex. 560. * Puffier V. Womack, 30 Tex. 332. ^Holmes v. Grant, 8 Paige (N. Y.), 243. 132 NATURE AND REQUISITES OF THE CONTRACT. a pre-existing debt or a present advance of money, the only inquiry necessary to be made is whether the relation of debtor and creditor remains, and a debt still subsists between the parties. For if it does, then the conveyance must be regarded as a security for the payment and be treated in all respects as a mortgage.' So when the transaction grows out of a pre-existing debt or loan of money, it must clearly appear that such debt is extin- guished, or it will be held that the new arrangement is a mere change in the security.^ But if the debt forming the consideration for the convey- ance is extinguished at the time by express agreement of the parties, or the money advanced is not paid by way of loan, so as to constitute a debt and liability to repay it, but by the terms of the agreement the grantor has the privilege of refund- ing or not at his election, then it must be deemed purchase- money, and the transaction will be a sale on condition, which the grantor can defeat only by a re-purchase or performance of the condition on his part within the time limited for the purchase, and this may entitle himself to a re-conveyance of the property.^ The burden is upon the grantor to show that the convey- ance is not what it purports to be.* If a debt has been ex- tinguished the conveyance is not a mortgage.^ §117. Possession Remaining with Grantor is a Circum- stance Indicating a Mortgage. — It is generally conceded that the possession remaining with the grantor after the con- iSlee V. Manhattan Co., 1 Paige (N. Y.), 56. => Dougherty v. McColgan, 6 Gill & J. (Md.) 275. ^ Robinson v. Cropsey, 2 Edw. Ch. (N. Y.) 138. See, also, Poindexter v. McCannon, 1 Dev. Eq. (N. Car.) 377 ; McGee v. Catching, 33 Miss. 673. *Rice V. Dale, 107 111. 275 ; Baisch v. Oakeley, 68 Pa. St. 92; Matheney v. Sanford, 26 W. Va. 386. 5 Todd ?;. Campbell, 32 Pa. St. 250; Bigelow v. TopHff, 25 Vt. 273. See, also, McDonald v. Kellogg, 30 Kan. 170 ; Hoopes v. Bailey, 28 Miss. 328 ; Car- ter V. Williams, 23 La. Ann. 281 ; West v. Hendrix, 28 Ala. 226 ; Ennor v. Thompson, 46 111. 214 ; O'Neill v. Capelle, 62 Mo. 202 ; Matson v. Capelle, 62 Mo. 235. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 133 veyance is a circumstance indicating a mortgage.^ Neither will the transaction be held fraudulent, because the vendor remains in possession after the sale, when it is shown that this was under an agreement to pay rent.^ The possession remaining with the grantor is merely a circumstance indicating a mortgage.^ On the other hand, if the grantee takes possession and makes permanent improvements, it indicates an absolute sale/ § 118. Laches of the Grantor have Great Significance. — While an absolute conveyance may be proved by oral evidence as only a mortgage, yet the grantor must not sleep on his rights if he desires to redeem. The activity of equity powers cannot be successfully invoked when a party has slept on his rights, and influenced others to act on the confident belief that he has abandoned them.^ Thus, the grantor standing by and seeing parties buying the property and buildings on it, and waiting a number of years before asserting his rights to redeem under a deed absolute in form, which w^as in reality a mortgage, is guilty of such laches as to bar his recover3\*' A party who has negligently slept upon his rights, and induced others to act upon the belief that he had surrendered them, cannot invoke the powders of equit3^^ The law favors the vigilant. It does not permit one, after having a supposed injury, to lie by for years until the circum- stances connected with it have faded from the memory of the witnesses, or who have died or removed from the country.^ But, as to the legal effect of the delay in claiming that a 1 Skinner v. Miller, 5 Litt. (Ky.) 84; Hudson v. Isbell, 5 St. & P. (Ala.) 67 ; Cohvell v. Woods, 3 Watts (Pa.), 188 ; Wheeland v. Swartz, 1 Yeates (Pa.), 583 ; Cotterell r. Purchase, Cas. Temp. Talbot, 61 ; Lincoln v. Wright, 4 De Gex & J. 16 ; Strong v. Shea, 83 111. 575 ; Wright r. Bates, 13 Vt. .341. ^Danner Land and Lum. Co. v. Stonewall Ins. Co., 77 Ala. 184. * Huffier V. Womack, 30 Tex. 332. * Woodworth v. Carman, 43 Iowa, 504. *Schradski v. Albright, 93 Mo. 42. ® Anderson r. Frye, 18 111. 94; Rogers v. Saunders, 16 Me. 92; Patterson v. Martz, 8 Watts (Pa.), 374 ; Young v. Daniels, 2 Iowa, 126. ' Landrum r. Union Bank, 63 Mo. 48. ^Maher v. Farwell, 97 111. 56. 134 NATURE AND REQUISITES OF THE CONTRACT. deed absolute on its face to be a mortgage, there is a difference from an executory contract of purchase, which requires the vendee to be ever prompt, eager, and ready to perform, in order to obtain the aid of a court of equity to enforce specific performance. If a mortgage was intended, it stamps the deed wdth a legal effect that cannot be changed except by payment or release. The character of the deed being fixed by evidence as that of a mortgage, the mortgagor has the same time to make payment that any other debtor has.^ So where, by the terms of a mortgage, the mortgagee is to take and keep possession of the mortgaged i^roperty and apply the rents, issues, and profits to his debt, until it is fully paid from that source,, his possession will not become adverse, nor will the statute of limitations commence running against the mortgagor, until the debt secured by the mortgage is paid as specified." Where the bill to redeem was brought thirteen years after the conveyance, and seven years after the grantee disclaimed any right in the grantor to the property, no excuse appearing for such delay, the grantor is barred from redeeming the property.^ § 119. When tpie Evidence is not Satisfactory, the Transaction Will be Declared a Sale. — If the evidence is not clear and satisfactory, the presumption is that the instru- ment is what it purports to be.* Thus when the grantor presents no direct evidence of an alleged agreement by the grantee to loan money and take a deed for security, the evidence is not sufficiently clear and satisfactory, and the presumption is that the transaction was, in fact, an absolute conveyance just as it appears from the face of the deed to be, and is of considerable weight.^ So where a deed of trust is executed with the understanding 1 Odenl )augh v. Bradford, 67 Pa. St. 96 ; De France v. Be France, 34 Pa. St. 385. * Anding v. Davis, 38 Miss. 574. ^Maher v. Farwell, 97 111. 56. See, also, Badger r. Badger, 2 Wall. (U. S.) 87 ; Marsh r. Whitmore, 21 Wall. (U. S.) 178. * Wilson V. Parshall, 129 N. Y. 223 ; 2 Whar. Ev. 1032. 5 Albany & S. W. D. Co. v. Crawford, 11 Ore. 243. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 135 between the parties that the title is to be transferred forever from the grantor to the grantee and his heirs or grantees, such deed is not a mortgage/ In the case that the grantee did not intend to make a loan, and refused to deal except as a purchaser, and made no agree- ment to reconvey in case of repayment of the purchase-money, the conveyance is a sale, especially when the transaction took place fourteen years before action by grantor for redemption.^ § 120. The Grantor Who Seeks Equity Must Do Equity. — When the transaction has been established as a mortgage, it is not competent for the grantor to insist upon a foreclosure thereof until he pays the amount due. Equity requires, be- fore the grantor can have an absolute conveyance transformed into a mortgage and redemption, that he should be willing to pay the amount due.^ It is very clear that when the grantor brings his action, offering to redeem and praying that the premises may be re- conveyed to him, the court is authorized to declare that the deed, absolute in its terms, was intended as a mortgage, and to prescribe the terms of redemption and reconveyance. Such judgment is as binding upon the grantor in respect to the re- demption as upon the grantee in respect to the character of the instrument and reconveyance. It is one of the incidents of a mortgage that where the mortgagor seeks the aid of equity in effecting a redemption the court may prescribe the terms of the redemption.* To set aside a conveyance for which the grantor has received money, or to compel a reconveyance to himself, he must first pay back all the money he has received, with interest thereon, and do whatever else may be necessary to put the grantee in as good condition as he would be if the transaction had never been completed.^ 'McDonald v. Kellogg, 30 Kan. 170. ^De France v. De France, 34 Pa. St. 385, 393. 'White V. Lucas, 46 Iowa, 319. * Cowing V. Rogers, .34 Cal. 648. 'Lee V. Stone, 5 Gill & J. (Md.) 21. 136 NATURE AND REQUISITES OP THE CONTRACT. And it is generally held that the relief afforded by equity in declaring a conveyance of real estate, absolute in form, to be a mortgage, where it is shown by oral evidence that it was given as security for the payment of a debt, is given on purely equitable grounds, and in the absence of such equitable con- sideration the relief will be refused. Judge Wells says : " One who comes for relief into a court whose proceedings are intended to reach the conscience of the parties, must first have that standard applied to his own conduct in the trans- action out of which his grievance arises. If that condemns himself, he cannot insist upon applying it to the other party." ^ And when a party has made an absolute deed in order to pro- tect his property from his creditors, equity will not relieve him on his own application.^ So, too, when a party has resorted to an absolute deed with a separate defeasance for the purpose of covering up a con- tract of usurious interest, he is not entitled to the statutory penalties or forfeiture for usury, but must refund the whole amount of money borrowed, with legal interest. Upon the pay- ment of the principal, interest, and taxes, the grantor will be en- titled to a conveyance, but a court of equity will impose terms on him to do equity,^ and a subsequent purchaser must have notice of the nature of the transaction between the original parties to it, or the right of redemption will not be allowed.'' The grantor must do equity before he can redeem. Thus, a party took an assignment of a land contract as security, and without a demand of the assignor, who had succeeded to the rights of the vendee for the amount due him, demanded and received a deed of the land from the vendor, and then took possession of the premises and refused his assignor's offer to pay the amount secured by the assignment, claiming to be ab- solute owner of the property. The court allowed the assignor to redeem from the assignee on payment of amount of the ^ Hassam v. Barrett, 115 Mass. 256. 2 Arnold v. Mattison, 3 Rich. Eq. (S. Car.) 153. ^Heacock !-. Swartwout, 28 111. 291. * Maxfield v. Patchen, 29 111. 39. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE, 137 assignee's claim, including taxes paid on the property, less the rental value of the same during assignee's unlawful occupancy, and costs of the court/ On the other hand when the mortgagee in a suit to redeem sets up an unwarranted or unconscientious defense, and thereby makes costs and delay, he is chargeable with the costs of the suit.^ Each party must do equity. Thus a party borrowed an amount of money and transferred a note and mortgage. The assignment of the mortgage was absolute in form and recited a valuable consideration. The assignee transferred the note before it came due and assigned the mortgage to a third party as collateral security. It was held that on a bill in equity brought by the first assignor against his assignee and the third party to redeem the note and mortgage, that the recital of the consideration in the as- signment of the mortgage to the first assignee, was not alone sufficient to put the third party on inquiry, or to prove fraud on his part, and that the first assignor could redeem only on payment of the amount for which the third party held the note and mortgage as collateral security.^ And when the account has been stated by the court which is due the grantee, the grantor must pay this amount in order to have the grantee's interest reconveyed to him.* § 121. The Rights of Creditors op the Grantor. — The creditors can go into equity and show the nature of the gran- tor's sale. Thus, judgment creditors of the grantor will be permitted to redeem the premises in the hands of the heirs or personal representatives of the grantee, upon the payment of the amount justly due.'^ A judgment creditor having pur- chased the land conveyed by his debtor to another, may show 1 Meigfl )'. McFarlan, 72 Mich. 194. ^Turner r. Johnson, 95 Mo. 4.31 ; Fleming v. Harrison, 2 Bibb (Ky.), 172; Slee V. Manhattan Co., 1 Paige (N. Y.), 81. ^Brigga r. Rice, 130 Mass. .50. *Pond ;'. Eddy, 113 Mass. 149. *Van Buren v. Olmstead, 5 Paige (N. Y.), 9. 138 NATURE AND REQUISITES OF THE CONTRACT. that the absokite conveyance of the land made by the debtor was in fact a mortgage, and he is entitled to a conveyance of it upon paying any balance due upon the mortgage.^ So a creditor, having a deed, absolute in terms, to secure a debt, with the intention of putting it in the form of a mort- gage, conveyed it back to his grantor, and simultaneously took a mortgage. It was held that he did not lose his lien as against a junior judgment creditor of the grantor.^ A creditor of a grantor may show that his debtor's deed is, in fact, a mortgage, and may enforce a judgment against the property to the extent of any surplus, after the mortgage debt is paid.^ A creditor, at execution sale, can obtain no higher title than his debtor had to the property. So when the property is levied on b}'' a creditor of the grantee, the grantor can redeem by paying the mortgage debt.* § 122. In General, the Legal Effect of the Instrument IS A Question for the Court. — At law, in most jurisdictions, parol evidence is not admissible to show that an absolute deed on its face is only a mortgage.^ But in many States parol evi- dence is admissible at law.*^ It is the duty of the court to construe the legal effect of a written instrument offered in evidence which is ambiguous. As a general rule this construc- tion should be based upon the terms of the instrument itself.'^ To convert a deed absolute on its face into a mortgage by parol evidence, the evidence must be clear, precise, indubitable, 1 Jud.se V. Reese, 24 N. J. Eq. 387. 2 Christie v. Hale, 46 111. 117 ; Curtis v. Root, 20 111.521. ^ Allen V. Kemp, 29 Iowa, 452. * Leech v. Hillsman, 8 Lea (Tenn.), 747. 5 McLean v. Ellis, 79 Tex. 398 ; Stinehfield v. Milliken, 71 Me. 567 ; Reading V. Weston, 8 Conn. 117 ; Hogel v. Lindell, 10 Mo. 483 ; Farley v. Goocher, 11 Iowa, 570 ; but in Iowa parol evidence is admissible at law. See McAn- nulty V. Seick, 59 Iowa, 586 ; Webb v. Rice, 6 Hill (N. Y.), 219 ; Bragg v. Massie, 38 Ala. 89 ; Jones v. Blake, 33 Minn. 362 ; Moore v. Wade, 8 Kan. 380. «Tillson V. Moulton, 23 111. 648; Jackson v. Lodge, 36 Cal. 28; Kent v. Agard, 24 Wis. 378 ; Pancake v. Cauffinan, 114 Pa. St. 113 ; Ruffier v.Womack, 30 Tex. 332. 'Alstin V. Cundiflf, 52 Tex. 453, 461. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 139 and sufficient to satisfy the mind of the chancellor, otherwise it is error to submit it to the jury. Judge Green says, speaking for the court : " Sitting as judges in chancery, we are not satisfied with the testimony in support of this claim. To our minds it is shocking, both to the moral and the judicial sense, to permit a recovery upon such a state of facts. We think the learned court below should have given a binding instruction to the jury to find a verdict for the defendant." ^ And it may be laid down as a general rule in law that the court must construe the instruments in the first place, and Iut struct the jury as to their effect, and then to charge them what is necessary to be proved in order to show the conveyance to be a mortgage. The charge, or instructions, as a whole, should be full, clear, and concise, and distinctly present the issues made by the pleadings and evidence.^ If the relation of debtor and creditor exists, with its recip- rocal rights, and continues between the contracting parties, or if such relation is created, by a loan or advance, and if the agreement, whether in the deed or in a separate instrument concurrently executed, is such that the debtor, by merely pay- ing his debt, becomes entitled to insist upon a reconveyance, or otherwise to defeat the estate conveyed, the conveyance will be regarded as a security for such continuing or newly-incurred debt, and hence a mortgage ; ^ and a deed and an agreement in writing, executed contemporaneously therewith, having these characteristics, constitute a mortgage by construction of law.^ And parol evidence cannot be received for the purpose of showing that the parties intended that a transaction evi- denced by writings of that description, should constitute a sale.'^ In a late case, the question came up in regard to impeach- ment of some of the witnesses for the grantor. Several wit- ' Pancake v. Cauffman, 114 Pa. St. 113 ; Null v. Fries, 110 Pa. St. 521. "^ Miller v. Yturria, 69 Tex. 549. 'Cox V. Ratcliffe, 105 Ind. 374; Cornell v. Hall, 22 Mich. 377; Peugh v. Davis, 96 U. S. 332. *Voss V. Eller, 109 Ind. 260. * Proctor V. Cole, 66 Ind. 576. 140 NATURE AND REQUISITES OF THE CONTRACT. nesses for the grantee were permitted, over grantor's objection, to testify as to the reputation of two of the grantor's witnesses for truth and veracity, from their knowledge of what that repu- tation was some four years before tlie trial. The court held that the weight of authority is that there is no inflexible rule confining the reputation for truth and veracity, which may properly be given in evidence to impeach a witness as to his re]3utation at or very near the time of the trial at which he testifies ; but that, as respects this matter of time, it is for the court to receive or reject the proposed impeaching testimony, in the exercise of sound discretion.^ It is the duty of the court to pass upon the admissibility of evidence, and it is none the less so where, in order to make such determination, the court is obliged to examine and pass upon questions of fact.^ It is the general rule that it is error to submit these preliminary questions of fact to the jury.^ In a suit in equity, the intention of the parties to the instru- ment, outside of the instrument itself, becomes a question of fact to be decided by the chancellor upon extrinsic evidence.* If the defeasance be executed simultaneously with the deed, it is a conclusion of law that they constitute together a mortgage.^ § 123. A Question for the Jury Under Proper Instruc- tions FROM the Court. — In those jurisdictions where parol evidence is admitted at law as well as in equity, if parol evi- ^ Buse V. Page, 32 Minn. 111. See, also, Teese r. Huntingdon, 23 How. (U. S.) 2 ; Snow v. Grace, 29 Ark. 131 ; Rathbun v. Ross, 46 Barb. (N. Y.) 127 ; Kelly V. State, Gl Ala. 19 ; Sleeper v. Van Middlesworth, 4 Den. (N. Y.) 431. But see Chance v. Indianapolis, etc., Co., 32 Ind. 472 ; Rawles v. State, 56 Ind. 433 ; Mitchell v. Commonwealth, 78 Ky. 219. ^Robinson v. Ferry, 11 Conn. 460; Carrico v. McGee, 1 Dana (Ky.), 6; Carter v. Bennett, 6 Fla. 214. ^Bartlett v. Smith, 11 Mees. & W. 483; RatlifF v. Huntly, 5 Ired. L. (N. Car.) 545 ; Thomason v. Odum, 31 Ala. 108 ; Stowe v. Querner, L. R. 5 Exch. 155; Hartv. Heilner, 3 Rawle (Pa.), 407. But see 1 Greenl. Ev., sect. 49; Esan V. Larkin, Arm. M. & O., Irish Exch. 403 ; Bartlett v. Hoyt, 33 N. H. 151, 165 ; Scott r. Coxe, 20 Ala. 294. * Scott V. Henry, 13 Ark. 119; Bishop r. Williams, 18 111. 101; Parish v. Gates, 29 Ala. 254 ; West v. Hendrix, 28 Ala. 226. ^ Wilson V. Shoenberger, 31 Pa. St. 295. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 141 dence must be resorted to in order to explain these terms or the intention of the parties, then the question of construction ceases to be one of law simply, and becomes one of mixed law and fact, to be determined by the jury under appropriate in- structions from the court.^ Thus, when the true intention of the parties is not apparent upon the face of the instrument itself, and it is a question whether the transaction is a conditional sale or a mortgage, it is to be decided by the jury, under the charge of the court, from all the facts and circumstances of the particular case.^ And when the parol evidence is not clear, precise, indubitable, and sufficient to satisfy the mind of the court, it must not be submitted to the jury.^ Thus, at the time when a deed was given, absolute upon its face, conveying property as a homestead, it was agreed that if the vendee was afterward released from a replevy bond of the vendor on which he was security he would convey back the land ; it was held that the sufficiency of such parol evidence to establish such agreement was a question for the jury. But its legal effect as constituting an attempted mortgage of the home- stead should be given in charge by the court.* In many cases the question will arise in actions at law, in which cases the real intent of the parties to the instrument will be a question of fact for the jury.^ In those jurisdictions where the legal and equitable remedies are blended, it apj)ears that this should be regarded merely as a rule of evidence, and not as a rule of procedure upon the form of the action." This question of the intention of the parties whether a pre- existing debt was to be cancelled, or to secure its payment, is a 1 Alstin V. Cundiff, 52 Tex. 453, 461. "Ruffier V. Womack, 30 Tex. 340 ; Hudson v. Wilkinson, 45 Tex. 444. ^Pancake v. Cauffman, 114 Pa. St. 113. * Ullman v. Jasper, 70 Tex. 442. ^Bemis v. Phelps, 41 Vt. 1 ; Cook v. Fire Ins. Co., 67 Cal. 369; Wood r. Matthews, 73 Mo. 477 ; Wilson v. Shoenberger, 31 Pa. St. 295 ; McCoy v. Las- siter, 95 N. Car. 88. ^ Quick V. Turner, 26 Mo. App. 29. See, also. Home v. Puckett, 22 Tex. 201 ; Simpson v. McKay, 12 Ired. L. (N. Car.) 143. 142 NATURE AND REQUISITES OF THE CONTRACT. question of fact for a jury, depending upon the negotiations had at the time and tlie subsequent acts of the parties/ If tlie alleged defeasance be executed subsequently to the deed, it is a question of fact for the jury, where the action is in law whether the transaction was intended as a sale or merely as a security for money loaned.^ § 124. Instructions which Enunciate the Law. — When an exception is taken to instructions, the assignment must point out wherein the instruction is erroneous ; if the assign- ment of error is too general, the Supreme Court will not con- sider it. Thus, uj)on the inspection of the record it appeared that the special instructions asked by the defendant contained six paragraphs, relating, at least, to two distinct defenses, and the court held that this assignment was too general to be en- titled to any consideration.^ The instruction must be based upon the evidence, and an abstract proposition of law to characterize such instruction is not erroneous. Thus, the court, among other things, instructed the jury that a mortgage of land is to secure the payment of money owed by the mortgagor to the mortgagee ; that if, when the grantor made the deed to the grantee, it was understood between the parties that the grantor was under no obligation or promise, either verbal or written, to pay the grantee any- thing, but the grantee gave him the option to repurchase the land if he chose, then the transaction was not a mortgage, and the jury must regard the grantee as the owner of the land. The first part of this instruction, which was said to be particu- larly misleading, is correct as an abstract proposition, and was manifestly introduced merely to characterize the last part. To charge the jury that to show by parol that a deed absolute in form is a mortgage, the evidence must be clear and convinc- ing, is not error.* » Cook V. Fire Ins. Co., 67 Cal. 369. ^Wilson V. Shoenberger, 31 Pa. St. 295. 'Howard v. Kopperl (Tex.), 5 S. W. Rep. 627. See, also, Railroad Co. v. Leak, 64 Tex. 655. * McCormick v. Herndon, 67 Wis. 648. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 143 Upon the question of notice, the court charged that there are two kinds of notice, and if a party has either he is not an innocent purchaser. One kind of notice is actual, the other constructive. Notice is actual when a party knows that some person has an adverse title to the land he is purchasing. When a deed is recorded in the proper office in the county in which the land is situated, the record is constructive notice to all persons that the land is claimed by the person named as vendee in the record ; but the record of the deed in another county than that in which the land is situated is not construc- tive notice of an adverse claim. Then, if from the evidence you believe that the purchaser from the grantee bought the land in good faith, and paid a valuable consideration therefor, without notice of the claim of the original grantor, and could not have known of such claim by the use of ordinary dili- gence, then you will find for the purchaser from the grantee. But, on the contrary, if you believe the purchaser, at the time of his purchase from the grantee, knew of the original grantor's claim, or by the use of ordinary diligence could have known of it, then you will find for the original grantor ; this instruc- tion is correct. The court says if there is error in the charge at all, it is in favor of the purchaser in this : that the court did not inform the jury that the purchaser from the grantee might be charged with constructive notice upon information of such facts and circumstances as should prompt a reasonable man to make in- quiry about the title he was buying. The charge, considered as an entirety, as it should be, is a reasonably fair exposition of the law applicable to the facts of the case.' In general, the instruction must be full, clear, and concise, and distinctly present the issues made by the pleading and the evidence.^ §125. Instructions which are Erroneous. — An instruc- tion that there was no evidence that the grantee or his heirs > Howard v. Kopperl (Tex.), 5 S. W. Rep. 627, 633. * Miller v. Yturria, 69 Tex. 549. 144 NATURE AND REQUISITES OP THE CONTRACT. had ever claimed that the deed was an absolute sale, or that it was anything else than a mortgage, should not be given, be- cause it would imply that the grantee or his heirs had ad- mitted that the deed was in fact a mortgage.^ And the following instruction is erroneous : " The instrument executed by defendant and his wife to plaintiff being a deed of conveyance of the lot described in the plaintiff 's petition, it will be so regarded by you unless the preponderance of evidence clearly shows that the same was intended by the parties, at the time of the execution, to operate as a mortgage, and, unless you are so satisfied from the evidence that it was intended by the parties to said deed, you will find for plaintiff." If the contract which was executed at the date of the deed did not clearly show whether it was a mortgage or not, it was suffi- cient for defendant to show that it was intended as such by a preponderance of evidence. The court says, per Judge Gaines, the use of the word " clearly " was calculated to induce the jury to believe that more than that was requisite ; that the error is more pronounced in the latter part of the instruc- tion, which in effect tells them to find for plaintiff unless they are clearly satisfied by a preponderance of evidence that a mortgage was intended.^ The following instruction is erroneous which charges the jury that if they " believe from the evidence that there was a pre-existing debt due by Henry Miller and this defendant to plaintiffs, or to each one of them respectively, and that the in- strument in writing executed by defendant and her husband and the plaintiffs, on the 9th day of March, 1880, was for the purpose of securing said indebtedness to plaintiffs, and that defendant had a right to defeat said sale by payment of a sum or sums of money, agreed upon between plaintiffs and defend- ant and her husband, then said instrument constituted but a mortgage and you will find for the defendant." This charge is calculated to mislead the jury. " It may be, that if we use the word defeat in its technical sense, a convey- ' McCormick v. Herndon, 67 Wis. 648. ^Prather v. Wilkina (Tex.), 4 S. W. Rep. 252. EVIDENCE TO ESTABLISH CHARACTER OF CONVEYANCE. 145 ance which may be defeated by the payment of a sum of money is but a mortgage." But if so without some further instruction, the jury would doubtless have understood this in- struction to require them to find for the defendant, if they found that within a fixed time, the defendant had the right to repay the consideration and hold the property, or to use other words, if they found the transaction a conditional sale.^ An absolute sale may be shown to be a mortgage, provided the proof is clear and certain ; ^ in Miller v. Yturria,^ the court says : " We think this rule applies also to an instrument which clearly shows upon its face a conditional sale. But the pro- priety of giving this rule in a charge to the jury is not so well established. In Prather v. Wilkins,^ the court was held to have erred in instructing the jury that it must have been clearly shown that the conveyance in question in that case was in- tended as a mortgage in order to find it such ; but that decis- ion is placed upon the ground that the instrument was not set forth in the record, and hence this court did not know whether it appeared upon its face an absolute deed or not. The ex- pression * clear and convincing proof ' is a very strong one ; and if the evidence had left a proper determination of the case less certain we might hold it reversible error." ^ To work a reversal on account of an improper instruction, the evidence should be such as to manifest clearly that the jury may have been misled by it. 1 Miller v. Yturria, 69 Tex. 549. ^ Moreland v. Barnhart, 44 Tex. 275 ; Pierce v. Fort, 60 Tex. 464. 3 69 Tex. 549. HS.W.Rep. 252. 5 Miller v. Yturria, 69 Tex, 549. VOL. I, — 10 CHAPTER V. basis for the introduction of parol evidence. Article 1. Classification of the Legal Rules. § 126. In General. g 128. The General Rule for Obtain- § 127. This Subject Properly Belongs ing Eelief. to Equity. ^ 129. Classification of Views, § 126. In General. — The basis for the introduction of parol evidence is not the same as laid down by the decisions of the various courts. In order to solve the question statutory pro- visions control in some of the States. In many of the jurisdic- tions parol evidence can only be admitted in courts of equity, while others admit parol evidence at law. In the early prac- tice courts of equity had exclusive jurisdiction, and based the admission of parol evidence on the ground of fraud, accident, or mistake. § 127. This Subject Properly Belongs to Equity. — To show that a deed absolute on its face is only a mortgage, by the introduction of parol evidence is a proper exercise of the powers of courts of equity, and it is held that courts of law have no jurisdiction.^ But this rule has been greatly modified by some of the courts, and in some of the States the jurisdic- tions of courts of law and of equity have been blended. § 128. The General Rule for Obtaining Relief. — Whether courts of law or of equity have jurisdiction or whether the question is controlled by statute, before a party can have parol evidence admitted, he must have equitable grounds for such relief. If he has perpetrated a fraud, he has no equitable grounds for relief, and the court will afford him no remedy.^ 1 Foley V. Kirk, 33 N. J. Eq. 170; Stinchfield v. Milliken, 71 Me. 567. ^ Arnold v. Mattison, 3 Rich. Eq. (S. Car.) 153 ; Baldwin v. Cawthome, 19 Ves. 166. 146 BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 147 It is a general and binding rule that he who asks equity must do equity ; for " one who comes for relief into a court whose proceedings are intended to reach the conscience of the parties must first have the standard applied to his own conduct in the transactions out of which his grievance arises. If that condemns himself, he cannot insist upon applying it to the other party." ^ §129. Classification op Views. — In order to settle this question of the admission of parol evidence, some of the States have enacted law^s which control. But the early basis for the admission of parol evidence, and so held now by many courts, was in case of fraud, accident, or mistake, which come under equity jurisdiction. Again, others hold that it is fraud even to insist that a deed absolute on its face, when in fact it was intended as a mortgage. Others hold that equity will look upon the parties and decree that in such cases that a trust exists in favor of the grantor which can be enforced on equitable grounds in favor of the grantee. A large number of the decisions hold that in such transac- tions fraud is inherent ; that the instrument is one of oppres- sion and wrong, and constitutes a quasi fraud, which the courts of equity will settle. Again, in those jurisdictions where legal and equitable remedies are blended, some of the courts appear to hold that this question should be regarded merely as a rule of evidence, and not as a rule of procedure depending upon the form of the action. Article 2. Statutory Provisions aval Decisions. ? 130. In General. § 134. New Hampshire. § 131. California. § 135. North Dakota. gl32. Colorado. . §136. Pennsylvania. U33. Georgia. ' |137. South Dakota. § 130. In General. — In order to settle this question of the introduction of parol evidence, some of the States have enacted ^ Hassam v. Barrett, 115 Mass. 266, opinion by Judge Wells. 148 NATURE AND REQUISITES OF THE CONTRACT. laws, providing for the admission of parol evidence to prove a deed, absolute on its face, to be only a security for money loaned, and, hence, only a mortgage. Under these statutory provisions, the question is settled, and the basis for the introduction of parol evidence does not need any discussion. § 131. California. — The statute declares that every transfer of an interest in real estate, other than in trust, made only as a security for the performance of another act, is to be deemed a mortgage deed ; and the fact that the transfer was made sub- ject to a defeasance may be proved, though it does not appear by the terms of the instrument.^ Whether a deed absolute in form be a mortgage or not is a mixed question of law and fact, to be determined from all the evidence, written and parol; and in determining it all the facts and circumstances attending the transaction should be considered. If it were given as a security for a loan of money, a court of equity will treat it as a mortgage ; and w^hether it was so given or not is the test by which its character must be judged.^ Such parol evidence is admissible at law as well as in equity, and such evidence is not restricted to cases of fraud, accident, or mistake.^ Fraud in the use of such deed is a question for the equity court, as much so as fraud in the execution of it.^ § 132. Colorado. — It has been enacted in Colorado that a deed may be proved by oral testimony to be in effect a mort- gage. The statute provides that a mortgage of real property shall not be deemed a conveyance, whatever its terms, so as to enable the owner of the mortgage to recover possession of the ' Civil Code, sects. 2924, 2925. " Farmer v. Grose, 42 Cal. 169 ; Montgomery v. Spect, 55 Cal. 352 ; Husheon V. Husheon, 71 Cal. 407 ; Locke v. Moultdn, 30 Pac. Eep. 957 ; Ross v. Brusie, 30 Pac. Rep. 811. ^Jackson v. Lodge, 36 Cal. 28; Cunningham v. Hawkins, 27 Cal. 603. * Pierce v. Robinson, 13 Cal. 116, overruling Lee v. Evans, 8 Cal. 424, and Low V. Henry, 9 Cal. 538, which declare fraud, accident, or mistake the only objects of equity jurisdiction in this matter. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 149 real property without foreclosure and sale, and the fact of a deed being a mortgage in effect may be proved by oral testi- mon}'; but this section does not apply to trust deeds with power of sale.' But while oral proof may be admissible to prove such a deed a mortgage, yet the proof must be clear and certain be- yond a reasonable doubt.^ Thus, the plaintiff, in January, 1883, sold a half interest in certain real estate. In May, 1883, he became embarrassed and conveyed by deed his remaining half interest in the real estate, and, by bill of sale, all his interest in a partnership business to the grantee, and received therefrom the sum of $975. The court, by Judge Elliott, says : " From an examination of the testimony we are satisfied that the deed and bill of sale exe- cuted by plaintiff to defendant in May, 1883, were subject to another writing executed by defendant contemporaneously therewith, whereby defendant bound himself to reconvey to plaintiff upon certain conditions ; so plaintiff's deed and bill of sale cannot be said to have been absolute conveyances at the time of their execution. . . . The writing executed by defend- ant having been lost, secondary evidence of its contents was admitted by the referee." This the Supreme Court sustained, stating that parol evidence may be admitted, but the proof must be clear, certain, and unequivocal beyond a reasonable doubt.^ In regard to fraud, the rule is that a deed absolute on its face, but intended as a mortgage, is not fraudulent and void as to creditors. Such conveyances are an indication of fraud merely as against creditors, but not conclusive fraud, and may be removed by evidence of an honest intent.* If the grantor succeeds in proving liis claim in such a case, it would be much easier for the creditors to subject the prop- erty to the payment of their debts, because then they would ' Civil Code Proc, sect. 20.3. nVhitsett V. Kershow, 4 Colo. 419. 'Townsend v. Petersen, 12 Colo. 491. * Rosa I'. Duggan, 5 Colo. 85. 150 NATURE AND REQUISITES OF THE CONTRACT. not be compelled to prove that the grantee held the property in trust for the grantor/ And where there is a substantial conflict in the evidence, a mere preponderance is not sufficient to establish an absolute deed as a mortgage, but it must be shown that it was exe- cuted, delivered, accepted, and intended as a mortgage by clear, certain, unequivocal, and trustworthy evidence.^ § 133. Georgia. — In this State the statute provides that an absolute deed, accompanied with possession of the property, shall not be proved, at the instance of the parties, by parol evidence, to be a mortgage only, unless fraud in its procure- ment is the issue to be tried.^ Under this statute a grantor is precluded from introducing parol evidence to prove a deed absolute on its face to be a mortgage, unless fraud in its procurement is charged. Thus grantors sought to recover land in possession of grantees which the grantors alleged had been set apart to them as a home- stead. They offered to prove that the deed was given by them as security for a debt which had been paid before suit was brought. The declaration or complaint did not allege fraud in procuring the deed. It was held that the grantors as parties to the deed would be denied the right to offer the proof under the code, and were therefore defeated in their action.* But tax-books showing the return of other lands for taxa- tion by the party holding an absolute deed from the opposite party to the premises in dispute, such return not including these premises, are admissible in evidence in a proper case to throw light upon the question whether the deed was taken for permanent ownership or only as security for a debt. And a written contract for the payment of money by a given day may be varied by a subsequent parol contract changing the medium of payment, in whole or in part, and if payment be 1 Lathrop v. Pollard, 6 Colo. 432. 2 Perot V. Cooper (Colo.), 28 Pac. Rep. 391. ^CivilCode, sect. 1969. < Mitchell V. Fullington, 83 Ga. 301. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 151 actually made and accepted accordingly, the written contract will be treated in equity as fully performed/ The section of the code " which authorizes deeds to be made with bond for titles back as security for money, declares such conveyances shall be held by the courts as absolute convey- ances and not mortgages. This is for the benefit of the cred- itor, to make his security better, and the act requires the courts to so hold. But if the deed be tainted with usury it fails as a conveyance of title. The illegal and wrongful conduct of a creditor, which destroys his security, will not authorize a court of equity to change the security into a mortgage and thus to help one who is thus guilty of fraud to make deed absolute a mortgage. Such a transaction cannot be foreclosed as an equit- able mortgage.^ A deed absolute on its face may be shown by parol evidence to be a mortgage in a litigation between general creditors of the grantor and his widow claiming her dower rights.* Under such a deed the grantee can recover possession by ejectment, although a formal mortgage does not give him that right.* When the deed is given for security and the object has been obtained and the obligation paid, these facts having been established by competent evidence, then the grantee will be compelled to reconvey the property to the grantor." When the question at issue whether a deed was made as an absolute conveyance of property or simply as a security for money advanced to the maker, evidence of the value of the property at the time the deed was made is pertinent and material.^ § 134. New Hampshire. — In this State the statute declares that no conveyance in writing of any lands shall be defeated, nor ' Jones V. Grantham, 80 Ga. 472 ; opinion by Chief Justice Bleckley. ''Sect. 1969. 'Broach v. Smith, 75 Ga. 159 ; overruling Bullard v. Long, 68 Ga. 821. ♦Carter v. Hallahan, 61 Ga. 314. *Thaxton v. Roberts, 66 Ga. 704. ^Biggers v. Bird, 55 Ga. 650. 'Rodgers v. Moore (Ga.), 13 S. E. Rep. 962. 152 NATURE AND REQUISITES OF THE CONTRACT. any estate encumbered by any agreement, unless it is inserted in the condition of the conveyance, and made part thereof, stating the sum of money secured, or other thing to be performed.^ If the condition described the thing to be done with reason- able certainly, it is sufficient. That may sometimes be the case, when the precise thing to be done cannot be known but by reference to private papers in the custody of the parties. The omission of the sum described in a note, the date, and the name of one of the signers, is not fatal, if the note is so de- scribed as to be identified.^ A deed containing a proviso that " if the grantor should comply with the condition of a certain bond, executed by him to the grantee at the same time, then the deed to be void," is a valid mortgage, notwithstanding that the sum to be paid, or the matters to be performed, are not particularly set forth in the deed itself.^ Under this statute where a party loaned a sum of money, taking an absolute deed of real estate as security, and giving at the same time a bond to reconvey on the payment of the amount, with interest, within a certain time, it was held that the transaction did not constitute a mortgage, that the agree- ment operated as a secret trust that the grantee should hold the land, subject to a right in the grantor to redeem and have a reconveyance, and that the deed therefore was void as against the creditors of the grantor.* And an absolute conveyance, made for the purpose of securing of a debt, with an under- standing between the parties that the land should be recon- veyed upon payment of the debt, is void as against creditors.* If the conveyance is intended only to secure the debt, that intent must be in some writing, made at the time,^ and in some writing to be put upon the record, and to operate as a notice/ 1 Rev. Stat., ch. 131, sect. 2. 2 Boody V. Davis, 20 N. H. 140. 'Bassett v. Bassett, 10 N. H. 64. * TiflPt V. Walker, 10 N. H. 150. 6 Smith V. Lowell, 6 N. H. 67 ; Winkley v. Hill, 9 N. H. 31. e Smith v. Lowell, 6 N. H. 67. 'Tifit V. Walker, 10 N. H. 150. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE, 153 It is held that a condition in tlie mortgage to indemnify the mortgagee against loss by reason of his having indorsed for the mortgagor certain notes " now payable and at the Bank of Newburg, Vermont," and notes " now payable and at the Bank of St. Johnsbury, Vermont," was sufficiently certain to warrant the admission of parol evidence to show what notes indorsed by the mortgagee were intended to be secured by the mortgage.^ It is not necessary, where a note or obligation is offered in evidence in connection with a mortgage that all the particulars of it should be specified in the condition in order to identify it as the note intended to be and actually secured by the mortgage. A general agreement with the description is sufficient ; and parol evidence may be introduced to further identify it.^ One of the indemnifying clauses in the condition of two mort- gages given by a party, provided that the grantee should be held harmless from all liabilities where he was bound by the grantor, and the other provided that the grantee should be held harmless from all losses, cost, and expense from all liabilities he might be under by reason of signing notes, bonds, receipts, and other papers with the grantor. It was held that these conditions were sufficient to include a liability incurred by signing as surety for the grantor a note, and loss from the payment of the same before the mortgages were made, although the particular note was not described in the condition of the mortgages ; and that the note might be identified, by extrin- sic evidence, as one for the payment of which the mortgages were intended as security.^ So, again, two notes were described in a mortgage as being for $150 each. One note produced in evidence was for $150, and the other for $200 ; but in all other respects they corre- sponded with those described in the mortgage. It was held ^ Benton I'. Sumner, 57 N. H. 117 ; New Hampshire Bank v. Willard, 10 N. H. 210. ''Melvin v. Fellows, 33 N. H. 401, "Barker v. Barker, 62 N, H. 366. 154 NATURE AND REQUISITES OF THE CONTRACT. that parol evidence was admissible to show that those two notes were the ones which the parties in good faith intended to secure by the mortgage, and upon its so appearing such a mortgage would be a valid instrument to secure both notes/ The Act of 1829 was not changed in the revision.^ § 135. North Dakota. — The statute declares that every conveyance of an interest in land not in trust, made as secu- rity for the performance of another act shall be deemed a mortgage ; and the fact that the transfer was made subject to a defeasance may be proved by parol evidence, except as against a subsequent purchaser or incumbrancer for value and without notice, though the defeasance does not appear in the instru- ment.^ § 136. Pennsylvania. — This question has been set at rest by an enactmeni which provides that no defeasance shall have the effect of reducing an absolute deed to a mortgage unless it be made in writing, signed, sealed, acknowledged, and de- livered by the grantee, and recorded within sixty days from the execution of the same.* This excludes parol evidence, ex- cept to prove those mortgages made before this statute took effect. Hence, a deed, absolute on its face, executed prior to this act may be converted into a mortgage by parol testimony, yet the evidence must be clear, explicit, and unequivocal. It must show an agreement, in the nature of a defeasance, con- temporaneous with the execution of the deed: evidence of subsequent admissions alone is insufficient.^ If, however, the consideration has been paid, the mere fact that the grantee executed articles of agreement giving the grantor the option 1 Cushman v. Luther, 53 N. H. 563. i^Kingsley r. Holbrook, 45 N. H. 321 ; Benton v. Sumner, 57 N. H. 117. 3 Civil Code of 1877, sects. 1724, 1726. *Pub. Laws of 1881, p. 84 ; Act of June 8, 1881. 5 Fisher v. Witham, 132 Pa. St. 488 ; Todd v. Campbell, 32 Pa. St. 250 ; Plumer v. Guthrie, 76 Pa. St. 441 ; De France v. De France, 34 Pa. St. 385 ; Rhines v. Baird, 41 Pa. St. 256 ; Nicolls v. McDonald, 101 Pa. St. 514 ; Oden- baugh V. Bradford, 67 Pa. St. 96 ; McClurkan v. Thompson, 69 Pa. St. 305 ; Berger v. Dankel, 100 Pa. St. 113 ; Harper's Appeal, 64 Pa. St. 315. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 155 to repurchase the property within a certain time, will not con- stitute the transaction a mortgage.^ If land be conveyed in consideration of a pre-existing debt due from the grantor to the grantee, and it is the understand- ing of the parties that the debt shall survive, the deed is but a mortgage. This understanding may be proved by parol, but the debt must survive. That the written evidence of it remains in the grantee's hands is not enough if the liability be gone.^ Before the Act of 1881 to convert such a deed into a mort- gage by parol evidence, such evidence must be clear, explicit, and unequivocal, and the j^arol defeasance must be shown to be contemporaneous with the deed. The evidence may be direct, or it may be made up of facts and circumstances clearly inconsistent with the deed being an absolute conveyance.^ Since the Act of June 8, 1881, a written defeasance signed by the grantee and unacknowdedged and unrecorded, though contemporaneous with the execution and delivery of the deed absolute on its face, will not be admitted to convert such deed into a mortgage.* § 137. South Dakota. — The statute of South Dakota is the same as that of North Dakota, not having been changed since the admission of the Territory as two States. The statute de- clares that every transfer of an interest in real estate not in trust, made as a security for the performance of another act, is to be deemed a mortgage ; and the fact that the transfer was made subject to defeasance may be proved by parol evidence, except as against a subsequent purchaser or incumbrancer for value and in good faith, though the defeasance does not appear by the terms of the instrument.^ iNull V. Fries, 110 Pa. St. 521. ^Todd V. Campbell, 82 Pa. St. 250. 'Pearson v. Sharp, 115 Pa. St. 254. *Sankey v. Hawley, 118 Pa. St. 30. ^ Civil Code of 1877, sects. 1724, 1726. 156 NATURE AND REQUISITES OF THE CONTRACT. Article 3. Equity Arising from the Real Character of the Trans U38. In General. §154. Minnesota. 039. English View. § 155. Mississippi. U40. Doctrine of the United States § 156. Montana. Supreme Court. § 157. Nevada. n4i. United States Circuit Court. §158. New Jersey U42. Alabama. §159. New Mexico Terri U43. Arkansas. §160. New York. ?144. Florida. §161. Ohio. U45. Illinois. §162. Oregon n46. Indiana. §163. South Carolina. §147. Iowa. §164. Tennessee. §148. Kansas. § 165. Utah Territory. §149. Louisiana. §166. Vermont. §150. Maine. §167. Virginia. §151. Maryland. §168. Washington. §152. Massachusetts. § 169. West Virginia. §153. Michigan. §170. Wisconsin. § 138. In General. — Many of the decisions at the present time hold that the introduction of parol evidence to prove a deed, absolute on its face, to be a mortgage, is a proper subject for the jurisdiction of equity ; that an equity arises paramount to the instrument itself, which allows the admission of parol evidence to prove the real nature of the transaction and the intention of the parties, when fraud, accident, or mistake is not alleged. This is the general rule, though it is variously stated, and often somewhat modified. § 139. English View. — Collateral evidence is admissible to show the relationship of the mortgagor and the mortgagee ; yet such evidence must be sufficient to overcome the presump- tion that the deed of conveyance truly states the transaction.^ Whenever it appears that the conveyance was intended to be a mortgage by the payment of interest, or other circumstances, it will be so decreed.^ And when a mortgage has been drawn in two deeds, and the mortgagee has omitted to execute one of ^ Barton v. Bank, 15 App. Cas. 379. "^ Cripps V. Jee, 4 Bro. C. C. 472 ; Sevier v. Greenway, 19 Ves. 413. BASIS FOR THE IXTRODUCTION OF PAROL EVIDENCE. 157 them, which contained the defeasance, the mortgagor will be entitled to show the mistake by parol evidence ; so, when a covenant for redemption has been omitted by fraud or mistake, the mortgagor will be allowed in equity to read evidence to show the omission/ In equity when the defeasance has been omitted by fraud or mistake, the deed will be construed as a mortgage.^ A verbal defeasance will also be upheld.^ § 140. Doctrine of the United States Supreme Court. — It is the doctrine of this court, that when it is alleged and proved that a loan on security was really intended, and the grantee sets up the loan as a payment of purchase-money, and the conveyance as a sale, both fraud and a vice in the consid- eration are sufficiently averred and proved to require a court of equity to hold the transaction to be a mortgage.* Such suit being in equity, oral evidence will be admitted or rejected upon the principles of general equity jurisprudence, and the court will be governed by its own views of those principles.^ The general rule of this court is that a deed of lands, abso- lute in form, when executed as security for a loan of money, will in equity be treated as a mortgage ; and evidence, written or oral, tending to show the real character of the transaction is admissible. The court looks beyond the terms of the instru- ment to the real transaction. As the equity upon which the court acts in such cases arises from the real character of the transaction, any evidence, written or oral, tending to show this is admissible.^ Thus, it may be shown that a deed was made to defraud creditors, or to give a preference, or to secure a loan, or for any ' Joynes v. Statham, 3 Atk. 389. ' Card V. Jaffray, 2 Sch. & Lef. 374 ; England v. Codrington, 1 Eden, 169 ; Maxwell v. Mountacute, Prec. Ch. 526. ^Manlove v. Ball, 2 Vern. 84. * Russell V. Southard, 12 How. (U. S.) 139. *Robinsonv. Campbell, 3 A\Tieat. (U. S.) 212; United States r. Rowland, 4 Wheat. (U. S.) 108 ; Boyle v. Zacharie, 6 Pet. (U. S.) 658 ; Swift r.Tj-son, 16 Pet. (U. S.) 1 ; Foxcroft r. Mallett, 4 How. (U. S.) 379. * Peugh V. Davis, 96 U. S. 332. 158 NATURE AND REQUISITES OF THE CONTllACT. other object not apparent on its face. The object of parties in such cases will be considered by a court of equity, as it consti- tutes a ground for the exercise of its jurisdiction, which will always be asserted to prevent fraud or oppression, and to pro- mote justice.* And so long as an instrument is one of security, the borrower has in a court of equity a right to redeem the property upon payment of the loan.^ Whether an absolute deed with agreement to reconvey is, in fact, a mortgage is to be determined by the accom- panying circumstances which explain the object of the agree-, ment.^ § 141. United States Circuit Courts. — The views of these courts accord with those of the United States Supreme Court, that equity, to determine whether a written instrument is in effect a mortgage, hears parol evidence, not to contradict or vary the terms of the instrument, but to raise an equity supe- rior to it and give effect according to the true intention of the parties.^ But to convert a deed absolute on its face into a mortgage by parol testimony, such testimony must be clear and specific, of a character such as will leave in the mind of the chancellor no hesitation or doubt.^ It is the settled rule in the Federal courts that oral evidence is admissible to show that a deed absolute on its face was in- tended for a mortgage.^ Thus a bill was filed to have a deed absolute on its face declared to be a mortgage by force of a defeasance which the bill alleged was by parol. The grantee denied tliat the conveyance was intended as a mortgage, and set up the statute of frauds. The grantor relied by the bill solely on parol agreement for his right of redemption. It was held that parol evidence is admissible to show that an absolute 1 Hughes V. Edwards, 9 Wheat. (U. S.) 489 ; Eussell v. Southard, 12 How. (U. S.) 139. "^ Peugh V. Davis, 96 U. S. 332. ^Horbach v. Hill, 112 U. S. 144. * Pioneer Gold Min. Co. v. Baker, 23 Fed. Rep. 258, Cir. Ct. Dist. Cal. ^Satterfleld v. Malone, 35 Fed. Rep. 445, Cir. Ct. W. Dist. Pa. «Amory v. Lawrence, 3 Cliff. C. C. 523. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 159 deed was intended as a mortgage, and that the defeasance had been omitted or destroyed by fraud or mistake.^ So a memorandum in writing was given in such a transac- tion, but the memorandum disproved the allegation that the conveyance was a mortgage. Parol evidence was admitted to control that memorandum and to prove that it did not show the actual transaction, and a decree was made declaring the conveyance to be a mortgage by force of the parol evidence only. This is the general doctrine of the Federal courts.^ § 142. Alabama. — In this State parol evidence is admissible not only upon the ground of fraud, mistake, or accident, but upon the ground of oppression and undue advantage or influ- ence.^ So in ascertaining whetlier an absolute deed is intended as a mortgage or conditional sale, parol evidence of the inten- tion of the parties at the time of the execution of the deed is received ; * but for the court of equity to declare a deed to be a mortgage, the proof must be clear and convincing. Loose decla- rations of trust, especially after great lapse of time, will not be allowed to overturn, or affect the written contract of the parties.^ It is a settled doctrine that the debtor has, so long as the conveyance is intended for security, the equity of redemption, which cannot be waived or released by a contemporaneous agreement, expressed in the mortgage or otherwise, yet the mortgagor may, by subsequent agreement, release and transfer the equity of redemption to the mortgagee. Such release will be sustained in equity, if supported by a sufficient considera- tion, and there is an absence of fraud, oppression, and undue advantage.® 1 Taylor v. Luther, 2 Sumner, C. C. 228 ; Wyman v. Babcock, 2 Curtis, C. C. 386 ; ienkins v. Eldredge, 3 Story, C. C. 293. nVynian v. Babcock, 2 Curtis, C. C. 386. 3 McMillan v. Jewett, 85 Ala. 476; English v. Lane, 1 Port. 328; Bishop v. Bishop, 13 Ala. 475 ; Locke v. Palmer, 26 Ala. 312 ; Parish v. Gates, 29 Ala. 254 ; Crews V. Threadgill, 35 Ala. 3.34. * Hudson V. Isbell, 5 St. & P. 67 ; English v. Lane, 1 Port. 328 ; Turnipseed V. Cunningham, 16 Ala. 501. * Freeman v. Baldwin, 13 Ala. 246; Bryan v. Cowart, 21 Ala. 92. «Stoutz V. Rouse, 84 Ala. 309. 160 NATURE AND REQUISITES OF THE CONTRACT. Thus a deed absolute in form, which neither expressly nor impliedly reserves any interest in the grantor, does not convey an absolute title to the grantee, when the grantor's right to redeem was created by parol agreement, when the deed was first made. A parol agreement concerning land may be dis- charged by parol, and such discharge will constitute a valid defense to a bill to redeem. When the evidence fails to show any fraud, undue influence, or oppression, and the weight of evidence is that the property was estimated at a fair value, and an indebtedness satisfied and extinguished by the transfer of the real estate, the transaction will be considered an absolute sale.^ § 143. Arkansas, — In this State, wherever at the time of the sale a vendor is indebted to the grantee and continues to be indebted after the sale, with a right to call for a reconveyance upon payment of the debt, a deed absolute on its face will be construed by a court of equity as a mortgage.^ And written or oral evidence is admissible to show the real character of the transaction.^ But in the absence of express fraud and imposition the proof must be clear and decisive.^ Judge Smith says that wherever at the time of the sale the vendor is indebted to the purchaser and so continues after the sale, with a right to call for a reconveyance upon payment of the debt, a deed absolute upon its face will be construed in a court of equity as a mortgage, and evidence, written or oral, is admissible to show the real character of the transaction, but in the absence of fraud and imposition the proof must be clear and decisive.® Parol evidence is admissible to show the intention of the parties, and the fact that the transaction was in effect a mort- 1 McMillan v. Jewett, 85 Ala. 476. '^ Scott z'. Henry, 13 Ark. 112; Farris v. King, 27 Ark. 404; Eogerg v. Vaughan, 31 Ark. 62. ' Porter v. Clements, 3 Ark. 364 ; Johnson v. Clark, 5 Ark. 321 ; Blakemore V. Byrnside, 7 Ark. 505. nvilliams ?;. Cheatham, 19 Ark. 278; Trieber v. Andrews, 31 Ark. 163; Jones V. Jones, 23 Ark. 212. ^ Harman v. May, 40 Ark. 146. i BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 161 gage} However, there are decisions which hold that the basis of the admission of parol evidence is fraud or mistake.^ § 144. Florida. — Parol evidence is admissible in equity to show that an absolute deed was intended as a mortgage. The court looks beyond the terms of the instrument to the real transaction, and any evidence tending to show this is admissi- ble. Equity will inquire into and carry out this object, and to prevent fraud and imposition, and to promote justice will permit the introduction of either written or oral evidence.^ Parol evidence is admissible to connect papers which together con- stitute a deed and defeasance or mortgage, and to show that an instrument bearing a subsequent date to the deed was either executed at the same time, or that its terms and substance were in fact agreed upon at the same time, and though subsequently reduced to writing, constituted a part of the same transaction with the deed.* Parol evidence is admissible in equity to show that a deed absolute upon its face, was intended as a mortgage, and the restriction of the evidence to cases of fraud, accident, or mis- take in the creation of the instrument is unsound in principle and unsupported by authority. The equity upon which the courts act arises from the real character of the transaction, so it is of no consequence in wdiat manner this character is established, whether by deed or other writing, or by parol. Whether the instrument, it not being apparent on its face, is to be regarded as a mortgage depends upon the circumstances under which it was made and the relations subsisting between the parties. Evidence of these circumstances and relations is admitted, not for the purpose of contradicting or varying the deed but to establish an equity superior to its terms.'^ ' Anthony v. Anthony, 23 Ark. 479. " Blakemore v. Byrnside, 7 Ark. 505 ; Jordan v. Fenno, 13 Ark. 593. But the later cases do not accord with this doctrine of fraud or mistake, but de- clare parol evidence is admissible to show the real character of the trans- action : Harman v. May, 40 Ark. 146. 'National Bank v. Ashmead, 23 Fla. 379 ; opinion by Justice Raney. * Franklin v. Ayer, 22 Fla. 654. * Lindsay v. Matthews, 17 Fla. 575. VOL. I. — 11 162 NATURE AND REQUISITES OF THE CONTRACT. § 145. Illinois. — The statute of this State declares that every deed conveying real estate, which shall appear to have been intended only as a security in the nature of a mortgage, though it be an absolute conveyance in terms, shall be consid- ered as a mortgage.^ Oral evidence is admissible in equity to show that a deed absolute in form was intended as a mortgage ; ^ but the evi- dence must be strong and convincing.^ Justice Magruder says that a deed, absolute on its face, may be shown by parol to be a mortgage. The law will, however, presume, in the absence of proof to the contrary, that such a deed is what it purports to be — an absolute conveyance. The party who claims an absolute deed to be a mortgage must sustain his claim by proof sufficient to overcome this presump- tion of the law. But before a deed, absolute in form, will be held to be a mortgage, the evidence must be clear, satisfactory, and convincing. It must be made to appear clearly that such a conveyance was intended to be a mortgage at the time of its execution. The question is one of intention to be ascertained from all the circumstances.* The evidence must be clear that the deed was intended, at the time of its execution, to be a mortgage.^ The evidence must be strong and convinc- ing.*^ The proof must be clear that the contract and intent of the parties were that the instrument should be a mortgage.^ Evidence of fraud, or of undue advantage or oppression tends 1 Eev. Stat., ch. 95, sect. 12. 2 Wright V. Gay, 101 111. 233. ^Hartnettr. Ball, 22 111. 43; Hancock v. Harper, 86 111. 445; Bartling v. Brasuhn, 102 111. 441. *Helm V. Boyd, 124 111. 370 ; Sharp v. Smitherman, 85 111. 153 ; Bartling v. Brasuhn, 102 111. 441 ; Bentley v. O'Bryan, 111 111. 53 ; Workman v. Greening, 115 111. 477. 5 Sharp r. Smitherman, 85 111. 153. 6 Hartnett v. Ball, 22 111. 43 ; Hancock v. Harper, 86 111. 445 ; Bartling v. Brasuhn, 102 111. 441. ^ Clark V. Finlon, 90 111. 245 ; Dwen v. Blake, 44 111. 136 ; Price r. Karnes, 59 ni. 277 ; Remington v. Campbell, 60 111. 516 ; Magnusson v. Johnson, 73 111. 156 ; Bailey v. Bailey, 115 111. 551. BASIS FOE, THE INTRODUCTION OF PAROL EVIDENCE. 163 to show that an absolute conveyance should be regard as a mortgage.^ The cases do not recognize that equity will only take juris- diction under the head of fraud, accident, or mistake. The rule seems to be an independent head of equity. " Still it must have its foundation in this, that where the transaction is shown to have been meant as a security for a loan, the deed will have the character of a mortgage, without other 2:)roof of fraud than is implied in showing that a conveyance, taken for the mutual benefit of both parties, has been appropriated solely to the use of the grantor." ^ All circumstances which illustrate the purpose and intent of the parties, including their declarations at the time of the execution of the instrument, may be given in evidence.^ If the proof is not clear, satisfactory, and unequivocal, the deed will not be construed as a mortgage. Thus, the testi- mony of the grantee was positive and unequivocal that the deed was intended to be an absolute conveyance and not a mortgage, and that the transaction between him and the grantor was a purchase and sale of the lots and not a loan of money. The grantor did not claim and never did claim an equity of redemption in the land since the execution of the deed. Much of the evidence adduced by the grantor was equivocal in its character, and led to no certain or satisfactory conclusion. The court declared that all the evidence taken together, viewing it in the light most favorable to the grantor, left the mind in serious doubt as to what the real transaction was. " It thus falls entirely short of the measure of proof re- quired by the decisions of this court in order to hold a deed which on its face is an absolute conveyance, to be a mortgage," hence, the deed was declared to be an absolute conveyance ac- cording to its terms.* 1 Brown v. Gaffney, 28 111. 149. ^liuckman v. Alwood, 71 111. 155. 'Darst V. Murphy, 119 111. 343; Workman v. Greening, 115 111. 477; Bailey v. Bailey, 115 111. 5G1 ; Clark v. Finlon, 90 111. 246. * Strong V. Strong, 126 111. 301. 164 NATURE AND REQUISITES OF THE CONTRACT. § 146. Indiana. — A deed absolute on its face may be shown to be a mortgage by parol evidence. The real nature of the transaction may be inquired into, and what purports to be an absolute deed may be shown to be in legal effect a mortgage. A court of equity will have regard to the real nature of the transaction, and although a deed absolute in form, if in fact it was received as a security for the repayment of money, it will be treated as a mortgage, and evidence, written or oral, will be received to show the facts.^ Parol evidence can be received without showing fraud, acci- dent, or mistake.^ The proof that a deed is a mortgage in fact must be clear and decisive.^ That parol evidence is admissible to show that a deed, abso- lute on its face, was intended to be a mortgage only, and was executed as a security for the payment of money, or the per- formance of some act, is no longer an open question in Indiana."* § 147. Iowa. — A deed absolute on its face may be con- verted into a mortgage by parol testimony, where there was a contemporaneous verbal agreement that it was a mortgage, but the evidence should be clear, satisfactory, and conclusive and not made up of loose and random conversation.^ The settled rule is that evidence to establish a deed, absolute on its face, to be a mortgage, or that the real estate described therein belongs in fact to some other person than the grantee, must be clear, satisfactory, and conclusive.^ * Cox V. Ratcliffe, 105 Ind. 374. And see Beatty v. Brummett, 94 Ind. 76 ; Heath v. Williams, 30 Ind. 495 ; Parker v. Hubble, 75 Ind. 580 ; Creighton v. Hoppis, 99 Ind. 369; Smith v. Parks, 22 Ind. 59; Crane v. Buchanan, 29 Ind. 570. ^ Beatty v. Brummett, 94 Ind. 76. ' Voss V. Eller, 109 Ind. 260 ; Lucas v. Hendrix, 92 Ind. 54 ; Fox v. Fraser, 92 Ind. 265 ; Herron v. Herron, 91 Ind. 278. * Davis V. Stonestreet, 4 Ind. 101 ; Butcher v. Stultz, 60 Ind. 170 ; Wheeler V. Ruston, 19 Ind. 334 ; Hanlon v. Doherty, 109 Ind. 37 ; Turpie v. Lowe, 114 Ind. 37. ^Corbit V. Smith, 7 Iowa, 60. ^ Ensminger v. Ensminger, 75 Iowa, 89 ; Kibby v. Harsh, 61 Iowa, 196 ; BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 165 111 an early case the court decided that the determination of the grantee to convert a mortgage into an absolute sale, which was intended by the parties as a security for a loan, was a fraud which came under the jurisdiction of equity, and there- fore parol evidence was admissible to show the intention of the parties and the nature of the transaction/ But the present time the doctrine is in accord with the great majority of de- cisions, allowing the admission of parol evidence to convert an absolute sale into a mortgage, providing the evidence is clear, satisfactory, and conclusive.^ § 148. Kansas. — Parol evidence is admissible in equity to de- clare a deed absolute on its face to be a mortgage. The intention of the parties may be shown to create a parol defeasance. The evidence is admitted to show the facts in the case. If given for the purpose of securing a debt, a deed will be declared a mortgage.^ But where a deed of trust is executed with the understanding between the parties that the title is to be transferred from the grantor to the grantee and his heirs, then it is not a mortgage. When the deed is executed with the understanding between the parties that it is a mere security for a debt, and that when the debt is paid the title shall be again placed in the grantor, such deed of trust is a mere mortgage, and such understanding may be shown by parol evidence.* The court will treat such a deed a mortgage when given as security, not only upon the grantor's application, but also upon the application of his creditors.^ A court of equity, looking back of the form to the substance of the transaction, will con- strue the instrument as a mortgage when it is given as a secu- rity, and decree a reconveyance upon equitable grounds.^ Knight V. McCord, 33 Iowa, 429 ; Monroe v. Graves, 23 Iowa, 597 ; Nelson v. Worrall, 20 Iowa, 469. ^Roberts v. McMahan, 4 Greene (Iowa), 34. ^ Ensminger ^». Ensminger, 75 Iowa, 89. ^ Moore v. Wade, 8 Kan. 381 ; Glynn v. Building Association, 22 Kan. 746; Bennett v. Wolverton, 24 Kan. 284. * McDonald v. Kellogg, 30 Kan. 170. » Bennett v. Wolverton, 24 Kan. 284. 8 Bennett v. Wolverton, 24 Kan. 284. 166 NATURE AND REQUISITES OF THE CONTRACT. To establish this fact by the clear preponderance of the evidence, the proof must be clear of all reasonable doubt, and such proof may be by parol evidence.^ § 149. Louisiana. — A debtor may convey his land to his creditor in the form of a sale, in order to secure the creditor, where the value of the property is not in excess of the debt due, reserving to himself the right to redeem within a certain period. In one sense a writing or contract which is not, in reality what it purports to be is a simulation ; but if the pur- pose of the contract be lawful, and the consideration be suffi- cient to support it, though the design be not actually that which its terms import, it is not a fraudulent simulation, nor is it necessarily without legal effect. The real ownership of the property sold may be proved.^ The conveyance of property in the form of a sale does not vest the ownership in the apparent buyer if the deed w^as really intended by both parties to be a mortgage. The answers of one of the parties to interrogatories on facts and articles pro- pounded by the other, are equivalent to counter-letter and have the same force and effect, and are unquestionably admissible in evidence.^ Parties have the right to contradict recitals by an appeal to the conscience of the opposing party by means of interrogatories on facts and articles. And answers to such interrogatories con- fessing the falsity of such recitals are not parol evidence, and have all the effect of a counter-letter.* The grantor to convert a sale into a mortgage by evidence, propounds interrogatories on facts and articles to the grantee, the answers to which are equivalent to a counter-letter. Judge Manning says : " Strenuous opposition was made to the reception of any tes- timony other than a counter-letter to contradict or vary the act of sale. There was no counter-letter, but the answers of the 1 Winston v. Burnell, 44 Kan. 367. * Parmer v. Mangham, 31 La. Ann. 348. ^Crozier v. Ragan, 38 La. Ann. 154. * Newman v. Shelly, 36 La. Ann. 100. BASIS FOE, THE INTRODUCTION OF PAROL EVIDENCE. 167 defendant to the interrogatories on facts and articles have all the effect of a counter-letter. They are the contradiction of one of the parties to the act of sale of the recitals therein made, and the confirmation by him of tlie truth of the allegations of the other party as to the real nature and character of the act, and are as much admissible in evidence as a counter-letter." ^ "When the instrument is free from any patent or latent am- biguity, parol evidence cannot be received to vary or contra- dict it. Courts of equity, however, have established a special branch of jurisdiction under which, when it is made clearly to appear that, through fraud or error, the written instrument has been made to express a different purpose from that which the parties had agreed on and intended to embody therein, such mistake may be corrected, and the writing may be made to express the real intention of the parties.^ § 150. Maine. — The general rule is that the effect of a deed cannot be controlled by oral evidence, but there is this exception, recently established, in equity : where the oral proof is clear and convincing, a deed absolute on its face may be construed a mortgage.^ The court holds it to be a sound policy as well as principle to declare that, to take an absolute conveyance as a mortgage without any defeasance, is in equity a fraud ; that experience shows that endless frauds and oppressions would be perpetrated under such modes, if equity could not grant relief. It is tak- ing an agreement, in one sense, exceeding and differing from the true agreement. Instead of setting it wholly aside, equity is worked out by adapting it to the purpose originally in- * Crozier v. Ragan, 38 La. Ann. 154, 155. A ".counter-letter " is equivalent to a common-law " defeasance." It must also be noticed the answers of one of the parties to interrogatories on facta and articles propounded by the other, are equivalent to a counter-letter and have the same effect and force ; and are unquestionably admissible in evi- dence, and are not parol evidence. ^ Ker V. Evershed, 41 La. Ann. 15. 'Knapp r. Bailey, 79 Me. 195 ; Jameson v. Emerson, 82 Me. 359. 168 NATURE AND REQUISITES OF THE CONTRACT. tended. Equity allows reparation to be made by admitting a verbal defeasance to be proved.' In Rowell v. Jewett/ this exceptional doctrine was first allowed to have operation in this State. Hence, the efifect of many of the older cases in this State has been swept away by the new principle in the legal system, and now the intention of the parties at the time of the execution of the deed may be shown by parol evidence in the courts of equity.^ The mere contemporaneous oral agreement or understand- ing alone of the parties to a deed, is not admissible to vary the express terms of the instrument which in equity as well as in law is the exponent of their meaning, unless some overruling equity, in addition to such understanding is shown, from which it can be implied that a defeasance was contemplated.* Judge Virgin, in Reed v. Reed,^ says : " While at law, to con- stitute a mortgage, the deed must contain the condition, or, in case of an absolute deed, there must be a separate instrument of defeasance, of as high a nature as the deed given by the grantee to the grantor, as a part of the transaction, it is the uniform doctrine of the English court of chancery, as well as of the Federal courts and of the highest court of well-nigh all of the States having full equity jurisdiction, that where a con- veyance is made by a deed absolute in form, the transaction may, in equity, be shown by a written instrument not under seal, or by oral evidence alone, to have been intended as a security for a pre-existing debt, or for a contemporaneous loan. . . . This principle was recognized by this court long before the legislation conferred upon it sufficient jurisdiction to so declare it." ^ ^Stinchfield v. Milliken, 71 Me. 567 ; Stat. 1874, ch. 175. 2 69 Me. 293. ' Lewis r. Small, 71 Me. 552 ; Reed v. Reed, 75 Me. 264 ; Knapp v. Bailey, 79 Me. 195. * Reed v. Reed, 75 Me. 264. 6 75 Me. 264. 8 Woodman v. Woodman, 3 Me. 350 ; Fales v. Reynolds, 14 Me. 89 ; Thom- aston Bank v. Stimpson, 21 Me. 195 ; Whitney v. Batchelder, 32 Me. 313, 315 ; Howe V. Russell, 36 Me. 115 ; Richardson r. Woodbury, 43 Me. 206. Judge Virgin says in Reed v. Reed, 75 Me. 264, the dictum of a majority of BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 169 § 151. Maryland. — No matter how absolute the conveyance may be on its face, the transaction will be regarded as a mort- gage and will be treated as such when the bill of sale, though absolute in form, is really intended as a security for money loaned.^ It is the established doctrine that the Maryland courts of equity will look beyond the mere form and terms of the in- strument to the real transaction. Whenever the real transac- tion is shown to be one of security and not of sale, the court will treat the matter accordingly. In all such cases the equity arises from the real character of the transaction and, therefore, any evidence, whether written or oral, tending to show that the transaction was really one of security, is held to-be admissible. This is allowed not for the purpose of contradicting the terms of the deed or instrument, but for raising an equit}^ paramount to the mere form of the instrument. " Such proof," says Judge Alvey, " is allowed upon the same principle that extrinsic proof is admitted to establish a resulting trust as against an absolute deed, or to show that the deed was made to give an undue preference, or that the consideration upon which it was made was in its nature illegal. The jurisdiction of the court attaches to prevent fraud or oppression and to promote sub- stantial justice as between the parties." ^ But the testimony to convert a deed 'into a mortgage must be so clear and explicit as to leave scarcely a doubt on the sub- ject.^ An absolute deed of conveyance, executed with all the for- malities required by law, and placed upon the public records, is a declaration and notice to all the world of its verity, and the court in the case of Richardson v. Woodbury, 43 Me. 206, holding that when a deed absolute in tenns is jriven to secure a debt due to the grantee, a resulting trust arises by implication of law, is not supported by any reliable authority or well-grounded reason and it has never been followed. » Artz V. Grove, 21 Md. 456, 474. '^ Booth V. Robinson, 55 INId. 419, 451. The learned judge cites Thomborough V. Baker, and Howard v. Harris, 3 L. Cas. Eq. (third edition), pp. 625, 626 ; Russell V. Southard, 12 How. (U. S.) 139 ; Peugh v. Davis, 96 U. S. 332, 336. ^Faringer v. Ramsay, 2 Md. 365. 170 NATURE AND REQUISITES OP THE CONTRACT. before a court undertakes to change its character and declare it a mortgage, it should be entirely satisfied that the deed was really intended as a security and nothing more/ §152. Massachusetts. — Although a deed is given which is absolute in form, yet the grantor may prove by parol testimony that it was understood and agreed by both parties to be given as security for a debt, and upon such proof a court of equity will treat the deed a mortgage. A court of equity will treat the transaction according to its real nature.^ Before the enactment^ of the statute conferring upon the court jurisdiction in equity " in all cases of fraud and of con- veyances or transfers of real estate in the nature of mortgages," the jurisdiction of the court was confined in this regard, to cases of a defeasance contained in the deed or in some other instrument under seal.* Before the statute was enacted parol evidence was admitted where there was a deed and a provision for a reconveyance to show the real nature of the transaction.^ The courts held before the statute, that their jurisdiction of foreclosure and redemption of mortgages to be limited to cases of a defeasance contained in the deed or some other instrument under seal.*^ Judge Wells says that upon the whole, parol evidence may be admitted without violation of the statute of frauds or of any principle of law or evidence, " and if properly guarded in administration may prove a sound and salutary principle of 1 Cochrane v. Price (Md.), 8 All. Rep. 361. See, also, Gaither v. Clarke, 67 Md. 18 ; Farrell v. Bean, 10 Md. 217 ; Thompson v. Banks, 2 Md. Ch. 430 ; Watkins v. Stockett, 6 H. & J. 435 ; Baugher v. Merryman, 32 Md. 185 ; Dousherty v. McColgan, 6 Gill & J. 275. 2 CuUen V. Carey, 146 Mags. 50. 3Gen. Stat., ch. 113, sect. 2. * Eaton V. Green, 22 Pick. 526 ; Coffin v. Loring, 9 Allen, 154. ^ Flagg V. Mann, 14 Pick. 467 ; Carey v. Rawson, 8 Mass. 159 ; Erskine v. Townsend, 2 Mass. 493. « Erskine v. Townsend, 2 Mass. 493 ; Killeran v. Brown, 4 Mass. 443 ; Taylor v. Weld, 5 Mass. 109 ; Carey v. Rawson, 8 Mass. 159 ; Parks v. Hall, 2 Pick. 206, 211 ; Rice v. Rice, 4 Pick. 349 ; Flagg v. Mann, 14 Pick. 467, 478 ; Eaton V. Green, 22 Pick. 526. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 171 equit}' jurisprudence." It is admitted to establish the fact of an inherent fault in the transaction or its consideration, which affords ground for avoiding the effect of the wTitings by re- stricting their operations or defeating them altogether. " This is a general principle of evidence well established and recog- nized at law and in equity." ^ § 153. INIiCHiGAN. — The doctrine that a deed absolute on its face may be shown to be a mortgage is well established.^ Wherever the controversy allows a party to control by parol evidence the operation of an instrument which is made and held out as an absolute conveyance, and to show the transac- tion to be only a mortgage, the proof must be clear and con- vincing, and will not be satisfactory where the evidence is a mere general declaration of a party setting up the claim.^ That a conveyance was intended as a security may be shown to be a mortgage.* The doctrine of the Michigan courts is that parol evidence may be admitted to prove a deed absolute on its face a mort- gage when the error occurred by accident, mistake, or through such misconduct of the creditor as will amount to a fraud. For the grantee to claim a deed absolute on its face as an ab- solute conveyance when it was intended for a mortgage, is a species of fraud, as it is an oppression of the debtor or gran- tor. " The agreement for the defeasance, whether written or unwritten, is no more than one of the conditions upon which the deed was given, and therefore constitutes a part of the con- sideration for the conveyance, and I have never been able to discover why it was not competent to show it by parol in any case, either at law or in equity, where it was competent to show the actual consideration for the conveyance." It is true where the deed does not contain the defeasance 'Campbell v. Dearborn, 109 Mass. 130. "Swetland v. Swetland, 3 Mich. 482 ; Fuller r. Parrish, 3 Mich. 214 ; Emer- son V. Atwater, 7 Mich. 22 ; Barber v. Milner, 43 ^lich. 248 ; Johnson v. Van Velsor, 43 Mich. 208 ; McMillan v. Bissell, 03 Mich. 66. 'Johnson v. Van Velsor, 43 Mich. 208, 214. * Barber v. Milner, 43 Mich. 248. 172 NATURE AND REQUISITES OF THE CONTRACT. the presumption arises that the conveyance is absolute, and in making proof that a defeasance was intended by the parties, and was in fact a part of the consideration upon which the conveyance was made, this presumption must be removed by testimony before tlie debtor can use the evidence showing his right to defeat the absokite character of the conveyance, and no more than this, I apprehend, is meant by the courts when they say clear, irrefragable, and most convincing proofs are required to show a deed absolute upon its face was in- tended as a mortgage. It comes finally to a question of what was the under- standing and the intention of the parties at the time the in- strument was made, and this, like any other fact, depends for its support upon what was said and done by the parties at the time, together with all the other circumstances bearing upon the question. Positive evidence is not required to be made of the inten- tion and agreement of the parties if it does not exist, but the proof must be made by the best testimony attainable, and if such testimony is not sufficient to satisfy the conscience of the court that the defeasance was made or intended to be made, or if the court, after canvassing the testimony carefully, has serious doubts as to what it does show upon the subject, the deed itself must control.' § 154. Minnesota. — A deed absolute on its face, given as security for a debt, is a mortgage, and the character of the tran- saction in equity may be' shown by parol evidence of the cir- cumstances under which the deed was made, and the relation subsisting between the parties.^ And when it is sought to have an actual conveyance decreed to be a mortgage, it is only necessary to show that the deed was given to secure the pay- ment of money.* If the purpose is an honest one, and the instrument is really 1 McMillan v. Bissell, 63 Mich. 66 ; opinion by Judge Sherwood. '^ Phffinix V. Gardner, 13 Minn. 430 ; Halton v. Meighen, 15 Minn. 69 ; Weide v. Gehl, 21 Minn. 440 ; Marshall v. Thompson, 39 Minn. 137. ' Belote V. Morrison, 8 Minn, 94. BASIS FOR THE IXTRODUCTION OF PAROL EVIDENCE. 173 intended for security, whether for present or future, actual or contingent Uability, the real nature of the transaction may be shown in equity, because its real character must be determined by the actual facts, and not by words merely. Parol evidence is therefore admitted, not to contradict the terms of the writing, but to show the grantor's equities in the case, or, as it is some- times said, to establish an equity superior to the terms of the deed, and because it would be a fraudulent act, which a court of equity would not permit, for the holder of the deed to use it con- trary to the terms and understanding upon which he received it. As the equity upon which the court acts arises from the real character of the transaction, parol evidence may be admitted.^ § 155. Mississippi. — It was settled in this State that an abso- lute deed will be held valid in equity and effectual as a mortgage, if it clearly appears that it was designed as a security for money, and such may be shown to be the intention and effect of a deed, by a contemporaneous or subsequent writing, or by agreement resting in parol.^ And parol evidence is admissible to show that a deed, absolute on its face, is in reality a mort- gage ; and this rule is not altered by the code ^ providing that declaration of trust shall be made and manifested in writing or will. The courts proceed on the principle that, if the real agreement was that the transaction should be a mortgage, it is a fraud to insist on the conveyance as absolute. However, if the deed is absolute on its face, a mere parol agreement to repurchase cannot be enforced, under the statute of frauds.^ In order to give effect to the absolute deed as a mortgage, extrinsic evidence may be resorted to in order to show the real nature of the transaction and the intention of the parties.* 1 Madigan v. Mead, 31 Minn. 94, 97. In courts of law, parol evidence in such cases, is not admitted on any grounds : McClane v. AVhite, 5 Minn. 178 ; Belato v. Morrison, 8 Minn. 87, 94. * Prewett v. Dobbs, 13 Sm. & M. 440 ; Anding v. Davis, 38 Miss. 594 ; Yasser V. Yasser, 23 Miss. 378 ; Littlewort v. Davis, 50 Miss. 403. 'Code of 1871, sect. 2896 ; Code of 1857, p. 359, art. 5. * Klein v. McNamara, 54 Miss. 90. 5 Freeman v. Wilson, 51 Miss. 333 ; Littlewort r. Davis, 50 Miss. 403 ; Klein V. McNamara, 54 Miss. 90. 174 NATURE AND REQUISITES OF THE CONTRACT. In 1880 the legislature enacted a law prohibiting parol evidence to prove an absolute conveyance to be a mortgage ; ^ but this section of the code is applicable only where the vendor parts with the possession of the property conveyed. Whether this statute could be invoked to protect and cover up a fraud, was not passed on by the court.^ Parol evidence is received to explain the true character of the transaction. The conduct of , the parties at the time and subsequently, and all the attending circumstances, may be considered, and when it is shown that the transaction was in the nature of a security, it will be decreed a mortgage.^ §156. Montana. — Parol evidence will be received to show that a deed absolute on its face is a mortgage. Where there is a deed and contract to recovery, and oral evidence has been introduced tending to show that the transaction was one of security, and leaving upon the mind a well-founded doubt as to the nature of the transaction, then courts of equity incline to construe the transaction as a mortgage. But where there is a deed alone, and it is sought to show a parol defeasance, then the evidence must be clear and convincing. If the writings themselves are silent, parol evidence may be resorted to in order that the court may arrive at the intent of the parties ; and in this connection the value of the property, the existence of a note, the fact that a loan had been applied for — the indicia of intent — become material aid to the court. Where no words appear characteristic of security, prima facie the transaction is one of sale. It is then incumbent upon the grantor to produce some evidence tending to show that a mort- gage in fact was intended.* § 157. Nevada. — In this State the doctrine upon which parol evidence is received to show a conveyance absolute in form to be a mortgage or security for a loan, is that such evidence is 1 Code of 1880, sect. 1299. 2 Heirmann v. Stricklin, 60 Miss. 234. ' Freeman v. Wilson, 51 Miss. 333. *Gassert v. Bogk, 7 Mont. 585. BASIS FOR THE INTRODUCTION OP PAROL EVIDENCE. 175 received not to contradict the instrument, but to prove an equity superior to it. Judge Whitman says that an absolute conveyance, whether real or personal property, can in equity be shown to be a mortgage, or to have been given only as security, by parol proof; that it was obtained or is vitiated by fraud, mistake, or undue influence ; or that the consideration upon which it depends is a loan. Parol proof upon these points is admissible.^ So a bill of sale may be shown to be a mortgage by parol evidence.^ The proof necessary to show a deed absolute on its face to be a mortgage should be clear, satisfactory, and convincing. A bare preponderance of evidence is not sufficient to defeat the natural effect of an instrument deliberately and freely executed. The presumption is that persons intend that which is the neces- sary and natural effect of an instrument voluntarily executed. To overcome such presumption, the proof must be so cogent, weighty, and convincing as to leave no doubt upon the mind.^ § 158. New Jersey. — In equity any means of proof may be used to show that a deed absolute on its face was intended as a security for a loan. The declaration of the parties, the rela- tion existing between them, the value of the property com- pared with the money paid, the understanding that the sums advanced should be paid, and the payment of the interest meanwhile on the amount may be taken into consideration by the court. " The distinction between parol evidence to vary a written instrument and parol evidence shov/ing facts which control its operation, is employed to reconcile the allowance of such proofs with the statute of frauds and the general rule of common law." Deeds absolute on their face have been frequently decreed to be mortgages by this court, and the grantors allowed to redeem.* Equity will give effect to a deed according to the intention of the parties, and accordingly, a deed absolute on its face ^Saunders v. Stewart, 7 Nev. 200 ; Cookes v. Culbertson, 9 Nev. 199. ''Carlyon r. Lannan, 4 Nev. 156, 159. 'Bingham v. Thompson, 4 Xcv. 224, 233 ; Pierce v. Traver, 13 Nev. 526. * Sweet V. Parker, 22 N. J. Eq. 453. 176 NATURE AND REQUISITES OF THE CONTRACT. may, where such was the intention of the parties, be declared to be a mortgage, but its character must be determined by the mind of the parties at tlie time of its execution. If, at the time of its dehvery, they intended it to be an absolute conveyance, no subsequent change of intention can make it a mortgage/ If both parties understood that the relation of debtor and creditor still subsisted in respect to the loan, this fact alone is decisive as to the character of the deed which must be declared a mortgage.^ Parol evidence is admissible in equity to establish the true nature and effect of the instrument by showing the intention of the parties at the time of its execution and delivery. If it was a security for a loan, the transaction will be de- clared a mortgage. The intention and object for making the instrument may be shown.^ Oral evidence is inadmissible to vary or alter a mortgage and an answer which sets up that the mortgage sued on is not due, because the mortgagee agreed orally that interest should not become due until demanded at the office of the mortgagor, and that no such demand had been made before suit, presents no defense and must be stricken out.* § 159. New Mexico Territory. — In this Territory an abso- lute deed on its face may be shown by parol evidence to be a mortgage. If it was the intention of the parties to the instru- ment at the time of its execution and delivery that the deed was given as a security for money loaned, parol evidence will be admitted to establish this fact.^ § 160. New York. — A deed absolute upon its face may in equity be shown by parol or other extrinsic evidence, to have been intended as a mortgage, and fraud or mistake in the prep- aration or as to form of the instrument, is not an essential ^ Frink v. Adams, 36 N. J. Eq. 485. '^ Judge V. Reese, 24 N. J. Eq. 387. 'Budd V. Van Orden, 33 N. J. Eq. 143 ; Vandegrift v. Herbert, 18 N. J. Eq. 466 ; Crane v. Decamp, 21 N. J. Eq. 414 ; Youle v. Richards, Sax. Ch. 534. * Van Ness v. Robbins, 47 N. J. Eq. 329. ^ King V. Warrington, 2 N. Mex. 318. BASIS FOE, THE INTRODUCTION OF PAROL EVIDENCE. 177 element iu an action for relief and to give effect to the " inten- tion of the parties." ^ This rule does not conflict with that other rule which forbids that a deed or other written instrument shall be contradicted or varied by parol evidence. The instrument is equally valid whether intended as an absolute conveyance or a mortgage. Effect is only given to it according to the intent of the parties, and courts of equity will always look through the forms of a transaction and give effect to it, so as to carry out the sub- stantial intent of the parties.' The burden of establishing an oral defeasance to such a deed is an onerous one, resting on whoever alleges it, and its exist- ence, and also its precise terms must be established by clear and conclusive evidence ; otherwise the strong presumption that the deed expresses the entire contract between the parties to it is not overcome. A conveyance of land in fee so executed, acknowledged, and recorded is of too great solenniity and of too much importance to be set aside or converted into a mere security upon loose or uncertain testimony, and it w^ill not be unless the existence of the alleged oral defeasance is established beyond a reasonable doubt.^ Parol evidence is admissible although no fraud or mistake in making the deed is alleged or proved.* In some of the earlier cases parol evidence was admitted solely upon the ground of fraud or mistake,'^ which doctrine has not been followed. § 161. Ohio. — If the transaction resolves itself into a secur- ity, whatever may be its form, and whatever name the parties 1 Strong V. Stewart, 4 Johns. Ch. 167 ; Clark v. Henry, 2 Cow. 324 ; Murray V. Walker, 31 N. Y. 399. ■^ Horn r. Keteltas, 46 N. Y. 609 ; Despard v. Walbridge, 15 N. Y. 374 ; Ful- lerton v. McCurdy, 55 N. Y. 637. * Ensign v. Ensign, 120 N. Y. 655 ; opinion by Chief Justice Follett ; Shat- tuck r. Bascom, 55 Hun, 14 ; Erwin v. Curtis, 43 Hun, 292. * Brown v. Clifford, 7 Lans. 46 ; Loomis v. Loomis, 60 Barb. 22 ; Fiedler v. Darrin, 50 N. Y. 437 ; Odell v. Montross, 68 N. Y. 499 ; Carr v. Carr, 52 N. Y. 251 ; Van Dusen v. Worrell, 4 Abb. App. Dec. 473. * Swart V. Service, 21 Wend. 36 ; Patchin v. Pierce, 12 Wend. 61. ' VOL. I. — 12 178 NATURE AND REQUISITES OF THE CONTRACT. may choose to give it, it is in equity a mortgage. Parol evidence will be admitted to prove a deed, absolute on its face, to be a mortgage, in order to protect the grantor against the rapacity of the creditor, and to do full justice between the par- ties/ To determine whether a deed, absolute in form, is in equity a mortgage requires that the real intention of the parties to the transaction be ascertained, and parol evidence may be received and considered, as tending to show the intention of the par- ties and the true character of the transaction.^ While in equity such a deed will be construed to be a mort- gage for the purpose of preventing imposition and injustice, yet at law it is simply what, on its face, it purports to be, an absolute sale in fee simple.^ Courts of equity will scrutinize such transactions, and will not allow the grantor to take any undue advantage ; he will not be allowed to use his position as creditor to oppress or to drive an unconscionable bargain. He may, however, show that the equity of redemption had been released by a parol agreement.* § 162. Oregon. — To determine whether a deed, absolute on its face, was intended for a mortgage necessarily requires evidence of the situation of the parties, of the price paid in connection with the value of the property, the conduct of the parties be- fore and after, and all the surrounding facts and circumstances so far as they are adapted to explain the real character of the transaction. It is in equity of no consequence in what manner this char- acter is established, whether by deed or other writing, or by parol. Evidence of all the circumstances connected with the execution of the instrument are proved not for the purpose of contradicting or varying the deed but to establish an equity superior to its terms. As a consequence of this doctrine each ^ Cotterell v. Lon^, 20 Ohio, 464. "Slutz V. Desenberg, 28 Ohio St. 371, 378; Wilson v. Giddings, 28 Ohio St. 554 ; IVIarshall v. Stewart, 17 Ohio, 356 ; Stover v. Bounds, 1 Ohio St. 107. * Kemper v. Campbell, 44 Ohio St. 210. *Shaw V. Walbridge, 33 Ohio St. 1. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 179 case must be scrutinized and judged by its own surrounding facts and circumstances/ Such parol evidence must be clear and satisfactory and suf- ficient to overcome the presumption that the instrument is what it purports to be.^ If a party were to claim in such a case that the deed was an absolute conveyance when in fact it was only intended as a security for the payment of a debt, the pretense would undoubtedly be an indicium of fraud. And a court of equity will scrutinize very closely the affair and re- quire very satisfactory proof that it was not for a fraudulent purpose ; but ordinarily a security taken in that way would not create discredit as to its fairness.'' It is not necessary to show fraud or mistake in the execution of the deed to admit oral evidence to prove the real character of the transaction.^ § 163. South Carolina. — A deed absolute on its face will be declared to be a mortgage, when the facts and circumstances are of such a character as to lead clearly to the conclusion that such was the intention of the party, as shown by the face of the writings, or as disclosed by extrinsic evidence.^ Parol evidence is admissible to convert a deed absolute on its face into a defeasible instrument, when the omission to reduce the defeasance to writing was caused by fraud or mistake,^ and in other cases when the evidence is clear and convincing.'^ And where a deed absolute is shown by parol testimony to have been intended for a mortgage, all the conditions may be proved in like manner.*' The evidence must be clear to make the deed a mort- gage ; and if it is not shown that it was accompanied with 'Stephens v. Allen, 11 Ore. 188. * Albany & S. W. D. Co. v. Crawford, 11 Ore. 243. » Haseltine r. Espey, 13 Ore. 301. * Harford r. Harned, 6 Ore. 362. * Hodge V. Weeks, 31 S. Car. 276. 6 Arnold v. Mattison, 3 Rich. Eq. 153. ^Nesbitt V. Cavender, 27 S. Car. 1. « Walker v. Walker, 17 S. Car. 329. See, also, Carter v. Evans, 17 S. Car. 458. 180 NATURE AND REQUISITES OF THE CONTRACT. a verbal agreement to reconvey by decisive evidence, the trans- action is not a mortgage/ § 164. Tennessee. — A deed absolute on its face in equity may be shown to be only a mortgage or security for money, as between the parties to the same, and the rights of these parties will be always declared by the court on this basis, when clearly and satisfactorily made out.^ The evidence must be clear and decisive to overcome the presumption that the instrument is what it purports to be.^ Parol evidence is admitted to show the intention of the parties and the real character of the transaction.* It is well settled in this State that an absolute deed for land, executed solely to secure a debt to the grantee, will be treated in equity as a mortgage.^ A creditor of a party to whom land is conveyed by deed ab- solute on its face, but which in fact was only a mortgage to secure the grantee from liability as a surety of the grantor, can- not obtain a valid title to the land by execution levied and sale made on judgment against the grantee, as against the claim of the grantor, who has paid the mortgage debt, and thereby en- titled himself to a reconveyance.*' §165. Utah Territory. — The statute provides that the statute of frauds relating to agreements for the conveyance of real estate shall not be construed to prevent any trust from arising or being extinguished by implication of law.^ Under this statute parol evidence is admissible to show that an ab- » Hodge V. Weeks, 31 S. Car. 276. See, also, Kaphan r. Evan, 16 S. Car. 352 ; Calvert v. Nickles, 26 S. Car. 304 ; McAteer v. McAteer, 31 S. Car. 313. ^ Ruggles V. Williams, 1 Head, 141 ; Jones v. Jones, 1 Head, 105 ; Turbe- ville V. Gibson, 5 Heisk. 565. 2 Haynes v. Swann, 6 Heisk. 560 ; Hickman v. Quinn, 6 Yerg. 96 ; Nickson r. Toney, 3 Head, 655. *Hinson v. Partee, 11 Humph. 587; Nichols v. Cabe, 3 Head, 92; Lane v. Dickerson, 10 Yerg. 373 ; Leech v. Hillsman, 8 Lea, 747. ^ Robinson v. Lincoln Sav. Bank, 85 Tenn. 363. * Leech v. Hillsman, 8 Lea, 747. 'Lawsof 1876, sect. 1011. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 181 solute conveyauce is a mortgage, by proving that the consid- eration on which it depends is a loan. An absolute convey- ance can only be shown to be a mortgage by proving that it was obtained, or is vitiated by fraud, mistake, or undue in- fluence, or that the consideration on which it depends is a loan, the whole transaction consequently defeasible.^ § 166. Vermont. — Upon the general principles of equity, parol evidence is admissible and proper to be considered as bearing upon the question whether the deed was an absolute conveyance or a mortgage.^ It is well settled that a court of chancery will treat an ab- solute deed of real estate, given to secure the payment of a debt, as a mortgage, as between the immediate parties, espe- cially if the grantor continues to remain in possession, though the defeasance rests wholly in parol. When there is an at- tempt to set up such an instrument as an absolute sale there is a fraudulent application or use made of it ; and this is a proper ground upon which chancery may proceed.^ The fact that the grantor remains in possession is always a strong circumstance tending to show that the deed w^as a mortgage.* If the grantor has remained in possession and the title has continued in the grantee, then, under the general rules of equity, parol evidence may be received to show the nature of the transaction.^ § 167. Virginia. — A conveyance of land, absolute on its face, may, in equity, be shown by extrinsic and parol evidence to be a mortgage as between the original parties and those deriving title under the grantee, who are not bona fide pur- chasers for value and without notice." > Wasatch Min. Co. v. Jennings, 5 Utah, 243, 385. ^ Hills V. Loomis, 42 Vt. 562. MVright V. Bates, 13 Vt. 341. *Hill V. Loomis, 42 Vt. 562 ; Rich v. Doane, 35 Vt. 125. * Crosby r. Leavitt, 50 Vt. 239 ; Morgan v. Walbridge, 56 Vt. 405. «Snavely v. Pickle, 29 Gratt. 27. 182 NATURE AND REQUISITES OF THE CONTRACT. But the proofs must be clear, cogent, and consistent, convinc- ing the mind that an absolute conveyance was not intended/ The fact that, though the grantor was to retain possession, there was no time appointed to pay the principal, nor any stipulation to pay interest, nor any note or security taken for the debt connected with the absolute form of the deed, may suffice to show that no mortgage was intended.^ Judge Lewis, P., speaking for the court, says : " It is well settled that a conveyance of land, absolute on its face, may be shown in equity by extrinsic and parol evidence to be, in reality, a mortgage as between the original parties and those deriving title under the grantee, who are not bona fide purchasers for value and without notice. But the pre- sumption, of course, always is that the deed is what on its face it purports to be, and to repel this presumption the evidence must be clear, unequivocal, and convincing." ^ Vague and inconsistent parol evidence is entitled to little weight in converting a deed absolute on its face into a mort- gage.^ Of course parol evidence is inadmissible to contradict, vary, or add to a written instrument. But parol evidence is always admissible to show the real nature and character of the con- sideration.^ And in case of equivocal written instruments the circumstances under which they were made or facts collateral thereto, may be admitted to show the intention of the parties.® The question is whether the parties intended to treat of a purchase, or to secure the repayment of money/ § 168. AVashington. — In this State a deed absolute on its face may be shown to be a mortgage by parol evidence. Parol 1 Edwards v. Wall, 79 Va. .S21. *Eansone v. Frayser, 10 Leigh, 621. » Edwards v. Wall, 79 Va. 321, 322 ; Phelps v. Seely, 22 Gratt. 573. ♦Phelps V. Seely, 22 Gratt. 573. * Summers v. Darne, 31 Gratt. 804. ® Crawford v. Jarrett, 2 Leigh, 630 ; French v. Williams, 82 Va. 462; Bruce V. Slemp, 82 Va. 352. ' Ross V. Norvell, 1 Wash. 14 ; Dabney v. Green, 4 Hen. & Munf. 101 ; Chapman v. Turner, 1 Call. 280 ; Pennington v. Hanby, 4 Munf. 140. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 183 evidence is admissible to show the real nature of the transac- tion and the intention of the parties at the time of the execu- tion and delivery of the instrument/ § 169. West Virginia. — Parol evidence to establish a deed absolute on its face to be a mortgage must be clear and strong, if it be unaided by proof of the situation and circumstances of the parties and their conduct prior to, at the time of, or after the execution of the deed. The following circumstances and facts have great weight in leading a court to the conclusion that a deed absolute on its face is merely a mortgage : First, that the grantor was hard pressed for money, and the grantee was a known money-lender ; second, that the actual execution of the deed was preceded by a negotiation for a loan of money by the grantor to the grantee ; third, that the parties did not apparently consider or contemplate the quantity or value of the land, when the deed was made ; fourth, that the price pro- fessedly given for the land was grossly inadequate ; fifth, that the possession of the land has remained with the grantor whether rent be nominally reserved or not, and if no rent is ever professedly reserved this last circumstance is entitled to very great weight, if unexplained.^ When a deed absolute on its face is converted into a mort- gage, if the parol evidence leaves the Cjuestion doubtful the conveyance will not be considered a mortgage.^ §170. Wisconsin. — The admissibility of parol evidence to prove an absolute conveyance to be a mortgage, has been recog- nized by the court so long that it has become a rule of prop- erty.* It was formerly held that the basis for the introduction of parol evidence was, that the attempt to use the deed to prove an absolute conveyance was a fraudulent use of it which equity ^ 'SUWer V. Ansenig, 2 Wash. T. 22. '^ Vangilder v. Hoffinan, 22 W. Ya. 1. See, also, Klinck v. Price, 4 W. Va. 4 ; I^wrence v. Dubois, 16 W. Ya. 443 ; Davis v. Demming, 12 W. Ya. 281 ; Matheney v. Sandford, 26 W. Ya. 386 ; Kerr v. Hill, 27 W. Ya. 576 ; Hoffinan V. Ryan, 21 W. Ya. 415. 'Gilchrist v. Beswick, .33 W. Ya. 168. * Wilcox V. Bates, 26 Wis. 465. 184 NATURE AND REQUISITES OF THE CONTRACT. interposes to detect and prevent, and for this purpose parol evidence is admissible, not to vary the deed, but to maintain the equity which attaches to the transaction inherently, and which the deed or contract of the parties does not create and cannot destroy.* The evidence must be clear and convincing. If the proofs are doubtful and unsatisfactory, and the mistake is not made entirely plain, equity will withhold relief upon the ground that the written paper ought to be treated as a full and cor- rect expression of the intent, until the contrary is shown be- yond a reasonable controversy.^ To convert a deed absolute into a mortgage, the evidence should be so clear as to leave no substantial doubt that the real intention of the parties was to execute a mortgage.^ Under the general jurisdiction of equity a deed absolute may be converted into a mortgage, provided the evidence is so clear that no substantial doubt remains in the mind, that the real intention of the parties was to execute a mortgage security.* This is the settled rule in equity and in law.^ Article 4. Doctrine of Fraud, Accident, Mistake, or Some Vice in the Con- sideration. § 171. In General. § 174. North Carolina. § 172. Connecticut. 1 175. Rhode Island. §173. Kentucky. §171. In General. — A few of the courts still hold to the old doctrine that parol evidence can only be introduced to prove a deed, absolute on its face, to be a mortgage, when fraud, accident, or mistake is alleged. The rule is not much changed, but is quite uniform with the * Rogan V. Walker, 1 Wis. 527. * Newton i\ HoUey, 6 Wis. 592 ; Lake ?'. Meacham, 13 Wis. 355; Fowler v. Adams, 13 Wis. 458 ; Harrison v. Juneau Bank, 17 Wis. 340. ^ Becker v. Howard, 75 Wis. 415. * McClellan r. Sanford, 26 Wis. 595, 607 ; Sable r. Maloney, 48 Wis. 331, 333 ; Schriber v. Le Clair, 66 Wis. 579, 599 ; McCormick v. Herndon, 67 Wis. 648. ^Kent V. Agard, 24 Wis. 378. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 185 courts thus holding. The language is somewhat modified, but means the same. The word " ignorance " is sometimes used. Thus, where the grantor is imposed on from his ignorance, parol evidence is admissible. But an imposition on the grantor through his ignorance is certainly a fraud. Other courts use the word " vice." But a vicious contract is certainly fraudulent. So the decisions enumerate the basis for the introduction of parol evidence, when the contract is illegal on account of fraud, accident, or mistake, or on account of the ignorance of the grantor, or when there is some vice in the contract. §172. Connecticut. — Parol evidence, according to the decis- ions, is admissible to show that an absolute deed was intended as a mortgage, and that a defeasance was omitted through fraud or mistake ; ^ hence, a deed absolute on its face will in chancery be held valid and effectual as a mortgage between the parties, if it was intended by them to be merely a security for a debt, although the defeasance was by an agreement vesting in parol.^ It is held that as between the grantor and the grantee, a court of equity will treat a deed, absolute on its face, as a mortgage, where it appears, exjDressly or by implication, that such was the intention of the parties. The reason for this is, that the court will give effect to the real contract between the parties, when the contract is legal, and is not contrary to the policy of the law. But when the transaction on its face does not purport to be a mortgage, and it expressly appears that the parties intended that it should not be a mortgage, the court cannot treat it as such any more than it can make a contract for the parties.^ Generally parol evidence is admissible to prove that a con- tract of mortgage has, by fraud, been converted into an abso- lute sale, and that what was really a loan has been transformed into a sale.* 'Reading v. Weston, 8 Conn. 117. ^Washburn v. Merrills, 1 Day, 1.39 ; Noble v. Comstock, 3 Conn. 295. ' Adams r. Adams, 51 Conn. 544. *Brainerd v. Brainerd, 15 Conn. 575; Jarvis r. Woodruff, 22 Conn. 548; •Mills V. Mills, 26 Conn. 213. 186 NATURE AND REQUISITES OP THE CONTRACT. In one case the judge seemed to think this question had not been decided in Connecticut/ but other later cases have declared that parol evidence may be admitted in case of fraud or mistake to show that a deed, absolute on its face, was a mortgage in fact.^ § 173. Kentucky. — Wherever the transaction is infected by usury or fraud and oppression, it is consistent with the best established rules of evidence to permit proof that its real character is different from what it imports to be on the face of the transaction. Where a conveyance is intended as a security for money, whether the intention appears from the deed or not, it is always considered in equity as a mortgage.^ Parol evidence is sufficient to show that a deed absolute upon its face is, in fact, a mortgage ; * and the courts, in fact, lean to this conclusion in doubtful cases.^ Many circumstances tend to show such a deed to be a mort- gage, and proof may be admitted as evidence of these circum- stances. Thus, when the grantor is in embarrassed circum- stances, and greatly distressed for w^ant of money, which is well known to the grantee ; when the conveyance grows out of an application by the grantor to the grantee to borrow money ; when the money advanced by the grantor is greatly inadequate to the price of the land at the time of the transaction, and when the transaction was treated as a loan by the parties, at the time of the execution of the deed," and whenever there is a fraud, mistake, or some vice in the consideration, parol evidence is admissible to convert a deed into a mortgage.^ § 174. North Carolina.— To convert a deed, absolute on its face, into a mortgage it must be alleged, and, of course, proved 1 Osgood V. Bank, 30 Conn. 27. ^ French v. Burns, 35 Conn. 359. 3 Skinner v. Miller, 5 Litt. 8-4. * Davis V. Eastham, 81 Ky. 116 ; Blanchard w. Kenton, 4 Bibb. 451 ; Murphy V. Trigg, 1 Mon. 72 ; Lindley v. Sharp, 7 Men. 248 ; Stapp v. Phelps, 7 Dana, 296 ; Cook v. Colyer, 2 B. Mon. 71. ^Seiler v. Northern Bank, 86 Ky. 128. 8 Skinner v. Miller, 5 Litt. 84. ^ Crutcher v. Muir, 13 S. W. Rep. 435. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 187 by parol or written evidence that the clause of redemption was omitted by reason of ignorance, mistake, fraud, or undue ad- vantage/ And when there is no pretense that the alleged clause of redemption, was omitted under any of these circum- stances the transaction will not be upheld as a mortgage.^ The courts of North Carolina have added to " fraud, acci- dent, or mistake " two other circumstances or reasons for de- claring a deed absolute on its face to be a mortgage, and these are, " ignorance and undue advantage." So where the grantee has perpetrated a fraud on the grantor, or there has been a mistake or accident, or where the grantor is ignorant or the grantee has taken undue advantage of him, then the deed will be declared a mortgage and the grantor allowed to redeem.^ There must be facts and circumstances shown which are in- consistent with the idea of an absolute conveyance and proof of fraud, undue advantage, ignorance, or mistake before a deed will be converted into a mortgage.^ § 175. Rhode Island. — A deed, absolute upon its face, will be valid and effectual as a mortgage as between the parties if it was intended by them to be merely a security for a debt. And this would be the case, though the defeasance was by an agreement resting in parol, for parol evidence is admissible to show that an absolute deed was intended as a mortgage, and that the defeasance had been omitted or destroyed by fraud or mistake.^ ^ Streator v. Jonea, 1 Murph. 449 ; Bonham v. Craig, 80 N. Car. 224. ^ Egerton v. Jones, 102 X. Car. 278. 'Green v. Sherrod, 105 N. Car. 197. See, also, Steel v. Black, .3 Jones Eq. 427 ; Sellers v. Stalcnp, 7 Ired. Eq. 13 ; Elliott v. Maxwell, 7 Ired. Eq. 246 ; Kelly r. Bryan, 6 Ired. Eq. 283. * Brothers v. Harrill, 2 Jones Eq. 209. * Taylor v. Luther, 2 Sum. C. C. 228. See, also, Nichols v. Reynolds, 1 R. I. 30. 188 nature and requisites of the contract. Article 5. A Trust Q^eated Between the Parties. § 176. In General. § 179. Nebraska, i 177. Delaware. ^ 180. Texas. § 178. Missouri. § 176. In General. — Still other courts hold that a deed, ab- solute on its face, may be declared to create a trust between the parties ; that a court of equity may establish a parol trust of lands against a grantee under an ordinary deed of bargain and sale. It is held by some of the courts that the grantee holds the real estate for the grantor, and parol evidence may be intro- duced to prove this resulting trust. Or that the denial of the trust by the grantee is a fraud of itself which will be the basis for the introduction of parol proof. In such cases the trust exists in parol and is established to prevent the fraudulent use of the deed and, therefore, it is not necessary to allege fraud, accident, mistake, or surprise, but the trust must be es- tablished by clear and distinct proof §177. Delaware. — A deed, absolute on its face, may be shown to be a mortgage when there is deception, undue in- fluence, or other fraudulent means employed to procure a deed. The intention of the parties can be shown by clear and con- vincing proof. Chancellor Saulsbury says : " There is no doubt but that, in equity, a conveyance, whatever form it may assume, will be treated as a mortgage whenever it appears to have been taken as a security for existing debt, or a contemporaneous loan, and the inclination of the court is in doubtful cases so to treat it, and allow the grantor to redeem." ^ In Delaware a court of equit}'- may establish a parol trust of lands against a grantee under an ordinary deed of bargain and sale, the terms of which neither declare nor exclude a trust ; and this, although no fraud or mistake in the frame or phrase- ology of the deed be alleged. Whether an absolute deed may, 1 Walker v. Farmers' Bank, 10 At. Rep. 94 ; 14 At. Rep. 819. BASIS FOR THE INTEODUCTIOX OF PAROL EVIDENCE. 189 upon parol evidence and without any allegation of fraud or mistake in the omission of a defeasance, be converted into a mortgage is a question not yet decided in Delaware. But there can be no doubt that the grantee of a legal estate may be charged with trust dehors the deed — that is, one not declared in it, but springing from some agreement or arrangement con- temporaneous with it, and of which the conveyance may, itself, be the consideration, and that, in the absence of any prohibitory statute, the agreement, or the circumstances which give birth to the trust, may be shown by parol evidence if deed of bargain and sale is conclusive, so far as to pass the legal estate, no more ; that the beneficial interest attends the legal estate, is always presumed and, prima facie, the legal estate passes clear of any trust ; but of this the deed is not conclusive.^ However, it is now generally held a deed absolute on its face may, in a court of equity, upon parol evidence of the real transaction, be enforced as a mortgage or security for money, if the circumstances make sufficient equity to have it so treated, and that, too, although it may not appear that a defeasance, intended to be inserted, was omitted through fraud or mis- take.^ But a mortgage in this State being but a security for the payment of a debt, creates no trust, and establishes no fiduciary relation.^ § 178. Missouri. — If the grantee deny the trust, equity on proof of the trust will treat such denial as a fraud, and will consequently hold the grantee as firmly bound by his verbal agreement, as though the parol defeasance was a writ- ten one fortified and hedged about with all the formal solemnity known to the law. Whenever the grantee repu- diates the trust, the way is paved for the introduction of parol evidence.* It is the settled rule that a conveyance, absolute in form, if 'Hall V. Livingston, 3 Del. Ch. 348, 375. ^Hall V. Livingston, 3 Del. Ch. 348, 374. 'Walker v. Farmers' Bank, 10 At. Rep. 94 ; 14 At. Rep. 819. *0'Neil V. Capelle, 62 Mo. 202. 190 NATURE AND REQUISITES OP THE CONTRACT. it be made clearly to appear that at the time of the execution it was agreed and intended only as a security for a debt, will be treated in equity as a mortgage.^ As the legal and equitable remedies are blended, this seems to be regarded merely as a rule of evidence, and not as a rule of procedure depending upon the form of the action.^ The intention of the parties may be shown by parol evi- dence on the ground that the denial of the trust character of the deed by the grantee is a fraud on his part, which gives a court of equity jurisdiction of the case, and thus enables it to hold to the verbal or implied defeasance as effectually as if this had been a formal written one.^ § 179. Nebraska. — The doctrine of the Nebraska courts is that the grantee, in a deed absolute on its face, which is, in fact, a mortgage, holds the real estate for the grantor, and parol evidence may be introduced to prove this resulting trust. The court says that it is competent to prove the trust established by parol testimony.* Judge Cobb, in delivering the opinion of the court, cites Babcock v. Wyman ^ as authority for the doctrine enunciated. This case does really coincide with the Nebraska court, and holds that parol evidence is admitted because the grantor holds the property in trust for the grantor, and that parol evidence may be introduced to prove this resulting trust. The doctrine of the Nebraska Supreme Court was that parol evidence may be introduced, that such proof does not contra- dict the writing or affect its validity. It varies the import so far as to show the true intention and object of the parties with- out a written defeasance, and establishes the trust purpose for which the deed was executed. When fraud, accident, mistake, ^ Schradski v. Albright, 93 Mo. 42. =* Quick V. Turner, 26 Mo. App. 29. It seems to be a rule of evidence under the practice act, which may be invoked even in an action which, under the old system, is an action at law : Wood r. Matthews, 73 Mo. 477. ^ Cobb V. Day, 106 Mo. 278 ; O'Neill v. Capelle, 62 Mo. 202. * Tower v. Fetz, 26 Neb. 706. 5 19 How. (U.S.) 289. BASIS FOR THE INTRODUCTION OF PAROL EVIDENCE. 191 or surprise is not alleged, the evidence must be clear, certain, and conclusive/ § 180. Texas. — Parol evidence is introduced to show that a deed, absolute on its face, was really executed and delivered upon certain trusts, not reduced to writing, which the grantee promised to perform. These trusts existing in parol are es- tablished to prevent the fraudulent use of the deed or written instrument,^ and it is not necessary to allege fraud, mistake, or surprise to afford a basis for the admission of parol evidence.^ The trust must be established by clear and distinct proof.* When from the inspection of the written contract it is not clear, whether it was the purpose of the parties to make a mortgage or a conditional sale, parol evidence may be received to determine the question. If apt words are used, clearly in- dicating an intention to make a mortgage, parol evidence will not be admitted to vary the contract.^ If the deed recites in terms that the sale is conditional, the burden of proof is upon one who seeks to have it construed as a mortgage, and to recover he must so establish it with clear- ness and certainty.^ In an action in trespass to try title, an instruction stating that the deed under whicli the other claims, though absolute on its face, was really intended as a mortgage, need not be based on clear and satisfactory evidence that such is the case, because to prove such " clearlv and satisfactorilv," is erroneous, in exacting: a higher degree of proof than the law requires in such cases/ ^ Schade v. Bessinger, 3 Neb. 140. Tower v. Fetz enunciates a stronger doctrine than heretofore accepted in this State as to a resultino: trust. But as it is the last decision it must be taken to be the established construction of such a deed; ^ Moreland v. Bamhart, 44 Tex. 275 ; Grooms v. Rust, 27 Tex. 2.S1. ^Mead v. Randolph, 8 Tex. 191. ♦Moreland v. Barnhart, 44 Tex. 275 ; Miller v. Yturria, 69 Tex. 549 ; Mark- ham V. Carothers, 47 Tex. 22 ; Chmey v. Dupree, 21 Tex. 218 ; Grooms v. Rust, 27 Tex. 2.31 ; Hughes v. Delaney, 44 Tex. 529 ; Dean v. Lyons, 47 Tex. 18 ; Pierce v. Fort, 60 Tex. 464. * Hubby V. Harris, 68 Tex. 91. "Miller v. Yturria, 69 Tex. 549. ^ * Wallace v. Berry (Tex.), 18 S. W. Rep. 595. CHAPTER VI. requisites and validity. Article 1. Classification of Mortgages. 1 181. Legal and Equitable. ^ 186. Trust Deeds in the Nature of §182. Legal Mortgages— Third Es- Mortgages. sential. 1 187. Effect in those States where §183. A Mortgage at Common a Mortgage is considered Law. merely a Security, and not a 1 184. Statutory Forms. Conveyance. § 185. Power-of-Sale Mortgages. § 188. Equitable Mortgages. § 181. Legal and Equitable. — Mortgages are divided into two classes — legal and equitable. This is the general classifi- cation. The legal mortgage is executed with all the formali- ties required by law. There are three essentials: 1. A mort- gagor, who must be a person capable of granting, conveying, or assigning the property mortgaged ; 2. A mortgagee, who must be a person capable of receiving a grant or assignment of the premises ; 3. The property mortgaged, which must be granted or assigned in that order and manner which the law requires. § 182, Legal Mortgages — Third Essential. — Two things are necessary to the validity of the third essential : First, a con- veyance of the property; second, a contemporaneous agree- ment that such conveyance shall be a security. The defea- sance, or agreement to reconvey, may be contained in the in- strument of conveyance, or in a separate deed, executed con- temporaneously with the deed.^ iRelley v. Leaehman (Idaho), 29 Pac. Rep. 840; 2 Devi, on Deeds, 1100, 1101 ; Shaw v. Erskine, 4.3 Me. 871 ; Walker v. Min. Co., 2 Colo. 89 ; Knowl- ton V. Walker, 13 Wis. 264 ; Sharkey v. Sharkey, 47 Mo. 543 ; Ewart r. Walling, 42 111. 453 ; Benton v. Nicoll, 24 Minn. 221 ; Brush v. Peterson, 54 Iowa, 243 ; Brinkman v. Jones, 44 Wis. 498 ; Archambau v. Green, 21 Minn, 520 ; Preschbaker v. Feaman, 82 111. 475. 192 REQUISITES AND VALIDITY. 193 There are three forms of legal mortgages : the common-law form, power-of-sale mortgage, and deeds of trust in the nature of a mortgage. § 183. A Mortgage at Common Law. — At common law a mortgage must be by deed and cannot be by parol or by instru- ment not under seal.^ The common-law form of a mortgage con- tains no stipulation for a sale of the premises in case of default in the payment of the money, and hence can only be foreclosed by entry and possession, or by an equitable suit to foreclose. No particular form is necessary to constitute a mortgage.^ The writing must clearly indicate the creation of a lien, designate the debt to be secured, and specifically point out the property covered.^ A mortgage in the form of an absolute deed and a defeasance back is not favorably regarded by some courts because the de- feasance may be lost and an absolute title set up.^ The defeasance must be of as high nature as the deed itself, hence a writing not under seal cannot at law operate as a de- feasance of an absolute deed.^ If the conveyance and the agreement to reconvey on payment of the sum loaned, are of even date the transaction will be a mortgage.^ A contract to mortgage, at law, is within the statute of frauds, and cannot be enforced, though the lender has paid over the money ^ § 184. Statutory Forms. — The common-law form of a mortgage is long and complex ; the terms are expressed in ' Hughes V. Morris, 2 De Gex, M. & G. 356 ; Brittain r. Rossiter, 11 Q. B. Div. 131 ; Maddison v. Alderson, L. R. 8 App. Gas. 479 ; Hebron ?'. Centre Harbor, 11 N. H. 571 ; Porter v. Muller, 53 Gal. 677. * Mason v. Moody, 26 Miss. 184 ; Burnside v. Terry, 45 Ga. 621 ; Woodworth V. Guzman, 1 Cal. 203 ; Harris v. Jones, 83 N. Car. 317. ' Nat. Bank Association v. Adams, 109 U. S. 211. * Baker v. Wind, 1 Ves. 161. ^ Kelleran v. Brown, 4 Mass. 443 ; Flagg v. Mann, 14 Kck. (Mass.) 467 ; Murphy V. Galley, 1 Allen (Mass.), 107 ; Warren v. Lovis, 53 Me. 463. *Ker V. pilmore, 6 Watts (Pa.), 405. ' Washington Brewerv- Co. v. Carey (Md.), 24 At. Rep. 151 ; Purcell v. Miner, 4 Wall. (U. S.) 513. VOL. I. — 13 194 NATURE AND REQUISITES OF THE CONTRACT. language verbose, technical, and archaic. In order to simplify the language and make it modern, many of the States have enacted statutes which reduce the mortgage to the shortest pos- sible forms, which have been declared as legal by the courts. Such forms have been adopted in Illinois,^ Indiana,^ lowa,^ Maryland,* Mississippi,^ Missouri,^ Tennessee,^ California,* North Dakota,^ and South Dakota.^*^ These mortgages, in statutory forms, are equivalent to one containing all covenants of title." The Illinois form may be taken as an illustration of a statutory mortgage, which is : The mortgagor, A. B., mortgages and warrants to C. D. to secure the payment of (here recite the nature and amount of indebtedness, showing when due and the rate of interest, and whether secured by note or otherwise) the following real estate (here insert description), situated in the county of , in the State of Illinois. Dated this day of 1 , ^ r^, -, A.D.,189 . }A-B. [Seal.] §185. Power-of-Sale Mortgages. — A power-of-sale mort- gage is one in which the parties agree that the mortgagee may, after a specified time, sell the property without going into a court of equity. The mortgagee must apply the proceeds of the sale, after defraying the expenses of the trust, to the pay- ^Annot. Stat., ch. 30, sect. 12. ^ 1 Eev. Stat. 364, sect. 15. 'Rev. Code, sect. 1970. *Codel860, p. 143. 5 Rev. Code, sect. 1236. «Rev. Stat., p. 721. ^ Code, sect. 2820. 8CivilCode, sect. 2948. "Codeof 1883, sect. 1736. J" Code of 1883, sect. 1736. " Botsford V. Wilson, 75 111. 132. Omission of the word " heirs " or omission of any other words used in limiting a fee at common law, is without significance either in deed or will, according to the Illinois law : West v. Fitz, 109 111. 425. REQUISITES AND VALIDITY. 195 merit of the mortgage debt, and if there be a surplus remain- ing, pay it to the mortgagor. This kind of conveyance was devised to facihtate the Hquidation of the indebtedness, and prevent the delay in going into equity to foreclose. This power of sale is now generally included in the mort- gages and deeds of trust in the nature of mortgages.^ Some courts hold that this power of sale is an incident to a power to mortgage ; that the authority to make a mortgage means that the mortgage may contain what mortgages in gen- eral contain, and, hence, they may contain a power of sale.^ But as this kind of mortgages will be treated hereafter in a chapter by themselves, it is not necessary to pursue the subject further at this stage of development of the doctrine. At first this mode of conveyancing was adopted to afford the creditor an easy, cheap, and speedy remedy, and enable him to avoid vexatious delay, expense, and inconvenience of a fore- closure in court and a sale under a decree. But it appears that this power has been abused, and the mortgagor unnecessarily inconvenienced and damaged, and now some of the States have enacted that such mortgages shall be foreclosed the same as those containing no power of sale. Thus the Illinois statute provides that no real estate shall be sold by virtue of any power of sale, contained in any mortgage, trust deed or other conveyance in the nature of a mortgage. Such mortgage must be foreclosed like other mortgages containing no power of sale — that is, in pursuance of a judgment or decree of a court of competent jurisdiction.^ And the Supreme Court of this State has declared that such statute was passed to prevent abuse and oppression against the mortgagor.^ ' Mitchell V. Bogan, 11 Rich. (S. Car.) 686 ; Kinsley v. Ames, 2 Met. (Mass.) 29 ; Hyman v. Devereux, 63 N. Car. 624 ; Lydston v. Powell, 101 IVIass. 77 ; Brisbane v. Stoufrhton, 17 Ohio, 482 ; Turner v. Johnson, 10 Ohio, 204 ; Loni:- with V. Butler, 8 111. 74. ' Wilson V. Troup, 7 Johns. Ch. (N. Y.) 25 ; In re Chawner's Will, L. R. 8 Eq- 569. See, also, Bridges v. Longman, 24 Beav. 27 ; Cruikshank v. Duffin, L. R. 13 Eq. 555. 'Revised St., ch. 95, sect. 17. * Ventres v. Cobb, 105 HI. 33. 196 NATURE AND REQUISITES OF THE CONTRACT. § 186. Trust Deeds in the Nature of Mortgages. — A deed of trust and a deed of trust in the nature of a mortgage, are two distinct instruments. A deed of trust absolute is un- conditional and indefeasible. A deed of trust in the nature of a mortgage is conditional and defeasible, and is, in legal effect, a mortgage.* " The attributes of a deed of trust for such purposes and a mortgage with power of sale are the same. Both are intended as securities, and in a legal sense are mortgages. In both the legal title passes from the grantor ; but in equity he is, before foreclosure, considered the actual owner in both, and as broadly in one as the other ; the grantor has the right to re- deem ; in other words, the equity of redemption can only be barred by a valid execution of the power." ^ The addition of a power of sale does not change the charac- ter of the instrument.^ It passes the legal title to the grantee just as a mortgage does, except where the statute intervenes and declares the natural effect of a conveyance.^ § 187. Effect in Those States where a Mortgage is Considered Merely a Security and not a Conveyance. — In those States where a deed of trust in the nature of a mort- gage is given, it is generally held to have the same effect as a mortgage, even where a mortgage, is considered a mere lien. The mere execution of a trust deed in such States conveys no title, for a deed of trust given to secure the payment of money is merely a mortgage.^ And because a mortgage is in the form > Hoffman v. Mackall, 5 Ohio St. 124 ; Woodruff r. Robb, 19 Ohio 212 ; De Wolf I'. Sprague Man. Co., 49 Conn. 283; Eaton v. Whiting, 3 Pick. (Mass.) 484 ; Austin v. Sprague Man. Co., 14 R. I. 464 ; Sargent v. Howe, 21 111. 148 ; Cliafee v. Nat. Bank, 71 Me. 514 ; NewTnan r. Samuels, 17 Iowa, 528 ; Hurley V. Estes, 6 Nebr. 386 ; Lawrence v. Farmers' L. & Trust Co., 13 N. Y. 200 ; Turner v. Watkina, 31 Ark. 429 ; Fox v. Frazer, 92 Ind. 265. * Turner v. Watkins, 31 Ark. 429, opinion by Chief Justice Walker. ' De Wolf V. Sprague Man. Co., 49 Conn. 283 ; Newman v. Samuels, 17 Iowa, 528 ; Eaton v. Whiting, 3 Pick. (Mass.) 484. ♦Turner?'. Watkins, 31 Ark. 429. * Lenox v. Reed, 12 Kan. 223, 227 ; Chick v. Willetts, 2 Kan. 385, 391. REQUISITES AXD VALIDITY, 197 of a deed of trust, does not change its character from a mere security for tlie payment of money, nor does it convey a legal title where a mortgage does not, nor do the restrictions therein contained prevent the mortgagor from availing himself of the safeguards thrown around the debtor to prevent a sacrifice of his property/ A deed of trust in legal effect is a mortgage, with the power of sale added, which does not change its essen- tial attributes.^ However, the doctrine of the Florida court is not entirely con- sonant with this rule. It holds that the conveying of certain lands to trustees to sell and convey the same by deeds of con- vej'^ance, and to devote the proceeds to the payment of liabilities of the company, is not a mortgage ; but such conveyance vests the legal title in the trustees, and they are the proper parties to protect the title of such lands as remain unconveyed by them.* In Wisconsin it is held that a deed of trust conditioned that if the grantor did not pay a debt due from him to a third party, then the trustee should advertise and sell the lands, pay the debt, and return the surplus money to the grantor, does not constitute a mortgrage. The trustee is the mere agent of both parties, and such a trust being prohibited by the statute, the legal title remains in the grantor. The test whether a convey- ance is a mortgage or a trust is to be determined by the ques- tion whether the trust is to be executed by the creditor or a third party ; if by the former, it is a mortgage ; if by the latter, a trust.* A deed of trust designed as security for money advanced, or to be advanced, for the benefit of another, creates a lien on the real property described therein, and is in legal effect a mortgage.^ §188. Equitable Mortgage. — This subject will be treated in a chapter by itself, so only a definition will be given in this place. Equitable mortgages are liens upon real estate of such a ^Webb r. Hoselton, 4 Nebr. 308, .318. '^Newman r. Samuels, 17 Iowa, 528 ; "WoodraflF v. Robb, 19 Ohio, 212. 'Routter v. Miller, 15 Fla. fi25, 027. *Mar\nn r. Titsworth, 10 Wis. 320. * Thompson r. Marshall (Ore.), 27 Pac. Rep. 957. 198 NATURE AND REQUISITES OF THE CONTRACT. nature that they are recognized in equity as securities for the payment of money, and are treated as mortgages. The following instruments are treated as equitable mort- gages, when the nature of the transaction indicates that a security is intended by the parties : Assignments of con- tracts of purchase, conveyances in consideration of the support and maintenance of the grantor, an agreement to give a mort- gage, not objectionable for want of consideration, the lien of the vendor under a written contract of reservation, absolute conveyances with defeasances vesting in parol, informal and defectively executed mortgages generally. Deeds and contracts which are informal as a common-law mortgage, intended as a security, in equity, are mortgages.^ That class of security which may be considered as essentially an equitable mortgage is that which arises by implication of law, in apparent conflict with the statute of frauds, without any written agreement of the parties.^ Article 2. TJie Date of the Mortgage. 1 189. As to the Date of the Mortgage. ? 190. The AdmissibiHty of Parol Evidence to Prove the Date. § 189. As TO THE Date op the Mortgage. — ^The presump- tion is ihsii, prima facie, all documents must be taken to have been made on the day they bear date. So a deed is presumed to have been executed and delivered on the day it is dated.^ . A deed is good, although not dated, or though it has a false date, or an impossible date, as February 30, provided the real day of its being dated, or delivered can be proved.* In ancient times, the date was commonly omitted.^ 1 Ketchum v. St. Louis, 101 V. S. P.Ofi ; Brown v. Brown, lOP. Ind. 23 ; Wayt V. Carwithon, 21 W. Ya. 51fi ; Hoile v. Bailey, 58 Wis. 434 ; Hall v. Mobile & Mont. R. R. Co., 58 Ala. 10, 22. ^Martindale on Convey., sect. 425. s Anderson r. AVeston, 6 Bing. (N. C.) 296 ; Ofley v. Hicks, 2 Cro. Jac. 264. *3B1. Com.304. 6 Gibson v. Poor, 21 N. H. 446 ; Lee v. Ins. Co., 6 Mass. 209. REQUISITES AND VALIDITY. 199 In the absence of proof to the contrary the presumption is that the mortgage was executed on the day of its date/ The date is supposed to be no part or substance of the deed, and may be contradicted,^ and if the date of the mortgage be latter than that of the acknowledgment, it may be shown that the date of the acknowledgment is erroneous, and tliat the mortgage was not acknowledged until after it was executed.^ A mortgage not dated, given to secure a note dated April 18, 1884, bearing interest on its face " from this date," and incorporated into the mortgage, is a part thereof and referred to therein as " bearing interest from this date," imports the date of its execution to be coincident with that of the note.* The date of the instrument may be contradicted, as not es- sential to its operation,^ though it is prima facie evidence of the time of its execution and delivery.*' It must be presumed to be delivered after its acknowledgment, or at least as early as the day of acknowledgment.'' § 190. The Admissibility of Parol Evidence to Prove THE Date. — The rule that parol evidence is not admissible to contradict or vary the terms of a written contract, is founded on the presumption that the whole engagement of the parties and the extent and manner of their undertaking were reduced to writing, and that, therefore, any oral testimony of a previous colloquium or of conversations or declarations at the time when it was completed, afterward, would tend to substitute a new 1 Parke v. Neeley, 90 Pa. St. 52. * Comings v. Wellman, 14 N. H. 292; Gibson v. Poor, 21 N. H. 446; Hoit V. Russell, 56 N. H. 559, 566. =• Hoit V. Russell, 56 N. H. 559. * Woolsey v. Jones, 84 Ala. 88. 5 Blake v. Fash, 44 111. 302. «Darst V. Bates, 51 111. 439 ; Billings v. Stark, 15 Fla. 297 ; Jayne v. Gregg, 42111.413; Ford ?;. Gregory, 10 B. Mon. (Ky.) 175; Ellsworth ' r. Railwo^d Co., 34 N. J. L. 93 ; County v. Bradshaw, 20 Iowa, 355 ; Sweetser v. Lowell, 33 Me. 446 ; Harris v. Norton, 16 Barb. (N. Y.) 264 ; McConnell v. Brown, Litt. (Ky.) Sel. Cas. 459 ; Shep. Touch. 58, 72. In connection with this point see Fontaine v. Savings Institution, 57 Mo. 552. ' Clark V. Akers, 16 Kan, 166 ; Loomis v. Pingree, 43 Me. 299. ' 200 NATURE AND REQUISITES OF THE CONTRACT. and different contract for the one which was really agreed upon, to the possible prejudice of one of the parties. But there are well-recognized exceptions to this general rule, and it has been settled by adjudications that parol evidence will be admitted to contradict or explain an instrument in some of its recitals or facts/ The date is only presumptive evidence of the time of de- livery, but the presumption may be rebutted by parol, and, when this has been done, the fact will be established.^ Thus, a party was permitted to j)rove that a deed was made and con- cluded on a day subsequent to that on which the deed itself stated on the face of it to have been made.^ So the recital in a mortgage called for a note of $236, and the note offered in evidence was for $256. Parol evidence was admitted to prove that the note produced was the one referred to in the mortgage.* As to time, the date of the mortgage is not to be conclusively taken to be the date or time of the execution, and parol evi- dence is admissible to show that, in point of fact, it was subse- quently executed and delivered.^ So an office copy of a mortgage containing a power of sale from the mortgagor to sell for conditions broken was offered in evidence ; the date of the instrument was subsequent to that of the acknowledgment. The magistrate before whom the deed was acknowledged was permitted to testify as to the true date of the acknowledgment.^ Where the proof shows that the deed was ante-dated, the date furnishes no indication of the time of its actual execu- tion.'' A mortgage on land in Delaware was given as additional ^ Pascault r. Cochran, 34 Fed. Rep. 358, opinion by Judge Wales. *Lamb v. Cannon, 38 N. J. L. 302; Porter v. Buckingham, 2 Har. (Del.) 197 ; Parmelee v. Simpson, 5 Wall. (U. S.) 81. ^ Hall V. Cazenove, 4 East. 477, opinion by Lord Ellenborough. *Hall V. Turell, 18 Pick. (Mass.) 455. * Parke v. Neeley, 90 Pa. St. 52. «Hoit V. Russell. 56 N. H. 550. ' Costigan v. Gould, 5 Denio (N. Y.), 290. REQUISITES AND VALIDITY, 201 security for purchase-price of land in Maryland, and dated July 28, 1871, and recited that the deed from the vendor and the purchase-money mortgage bore date and were deliv- ered on that day. It was held, on bill to foreclose the Dela- ware mortgage, that the recital as to date was not conclusive, and, it being shown that both mortgages and the deed were dehvered, all three simultaneously, August 5, 1871, parol evidence was admissible to show that the three instruments formed one transaction/ Article 3. Description of the Parties. 1 191. The Names of the Parties. ^ 194. Members of Partnerships as §192. The Description of the Grantee. Grantees. §193. Corporations. §191. The Names of the Parties. — The names of the grantor and grantee should appear in the mortgage. The ob- ject is to distinguish the parties from all other persons. If the parties, however, are distinguished so as to identify them, it is sufficient, though the true name be not used, or even no name at all.^ The description is sufficiently certain if the identity of the party can be worked out through a proper application of the maxim. Id cerium est quod certum reddi potest.^ The general rule as to deeds and mortgages is settled to be that where several persons sign such a conveyance, and the names of one or more of them fail to appear as grantors de- scribed in the body of the instrument, those not named are not bound, and it is not their deed.^ In order to convey by grant, the party possessing the right must be grantor and use apt words to convey to the grantee, ^Pascault V. Cochran, .34 Fed. Rep. 358, C. C. Dist. Del. 'Chase v. Palmer, 29 111. .306. '3 Wash Real Prop. 236, 237 ; Madden v. Floyd, 69 Ala. 221. * Harrison v. Simons, 55 Ala. 510 ; Peabody v. Hewett, 52 Me. 33, 50 ; Mad- den V. Floyd, 69 Ala. 221. But see Elliot v. Sleeper, 2 N. H. 525. 202 NATURE AND REQUISITES OF THE CONTRACT. Merely signing, sealing, and acknowledging an instrument in which another person is grantor is not sufficient.^ In making a mortgage the names of the grantor and grantee should be given, their place of residence, town or city, county and State. The occupation, place of residence, and matters of that character are often of great assistance in identifying the parties intended, or directing where they may be found in case an inquiry is to be made of them. The fact that a mortgage is signed " F. S. Banks," and the acknowledgment, " Frederick S. Banks," does not preclude the admission thereof in evidence as the deed of " Frederick S. Banks," in connection with testimony that the two signatures were made by the same person.^ § 192. The Description of the Grantee. — If the intended grantee in a deed or mortgage is not named, he should be ascertained by description so as to be distinguished from all others.^ The grantor must undoubtedly, in some way distinguish the grantee from the rest of the world ; but if upon the view of the whole instrument, he is pointed out, even if the name of baptism is not given at all, the grant will not fail.* It is not essential to the validity of a mortgage or trust deed that the mortgagee or beneficiary shall appear therein by name. It will be sufficient if he is so described or designated that he may be ascertained and distinguished.^ But where the evidence discloses that a person of the same name as the mortgagee named in the mortgage lived in the city where the loan was negotiated, but such person disclaimed any knowledge of or connection with the transaction, the payee 1 Agricultural Bank v. Rice, 4 How. (TJ. S.) 225. See, also, Chapman v. Crooks, 41 Mich. 595. ^ Hill V. Banks, 61 Conn. 25. ' Simmons V. Spratt, 20 Fla. 495; Thomas v. Marshfield, 10 Pick. (Mass.) 364. * Newton v. McKay, 29 Mich. 1. * Nat. Bank v. Schween, 127 111. 573 ; Lawrenceville Cement Co. v. Parker, 15 N. Y. Supp. 577. REQUISITES AND VALIDITY. 203 and mortgagee are fictitious and the mortgage void, though the grantor acted in good faith/ A mortgagee capable of holding real estate must be named in every mortgage, or so distinguished as to be ascertained.^ So an instrument in the form of a mortgage, but containing the name of no mortgagee, does not become effectual by its delivery to one who advances money upon the agreement that he shall hold the paper as security for his loan.^ Where the description in the instrument suits two persons, it is incumbent on the one claiming under the deed to show that he is the one intended.* The designation of " junior " or " second " is no part of the grantee's name, though it is a con- venient qualifying word to distinguish him.^ § 193. Corporations. — Where a corporation is a party to a deed or mortgage, a mistake in setting out its name will not vitiate the instrument if it is apparent on its face that the cor- poration was intended." A mortgage made in favor of " the trustees " of an unincorj^orated society is good, although the trustees be not named. If they are clearly distinguished from all others it is a sufficient designation.^ A mortgage to a corporation, by a name given as one that it was to assume in the future, is valid if the corporation was in existence at the time of the execution of the instrument.^ § 194. Members of Partnerships as Grantees. — It has been held that a deed made to a partnership in the company name, in which only the surnames of a part of the company are mentioned, they being well-known members, is not cor- 1 Shirley v. Burch, 16 Ore. 83. = Thomas v. Wyatt, 31 Mo. 188 ; 77 Am. Dec. 640 ; Kelly v. Bourne, 15 Ore. 476. 481. ' Chauncey v. Arnold, 24 N. Y. 330. * Grand Gulf Banking Co. r. Br\-an, 16 Miss. 234. ^Cobb V. Lucas, 15 Pick. (Mass.) 1 ; Kincaid r. Howe, 10 Mass. 203. « Society v. Varick, 13 Johns. (N. Y.) 38; Dousrlass v. Bank, 19 Ala. 659; Aultman v. Richardson, 7 Nebr. 1 ; Culpepper Society v. Digges, 6 Rand. (Va.) 165. ^ T^wrence v. Fletcher, 8 Met. (INIass.) 153, 163. , «City Bank v. McClellan, 21 Wis. 112. 204 NATURE AND REQUISITES OF THE CONTRACT. rect ; that such partners cannot take as grantees, but can and will hold in trust for themselves and their copartners.^ But this doctrine is not the better rule. Thus, a deed was made to " Gilmore & Ware," and the court held that a firm name is always held sufficient to designate the true name of all the person^ composing the firm ; that there did not seem to be any reason for holding that a partnership in making a purchase of real estate for the benefit of the firm, might not do so in the same manner that they made their other purchases ; that is, in the firm name.^ So a deed to " Murray, Ferris & Co.," and not to the partners by their individual names, is valid the same as a bond for the payment of money would be ; such is a latent ambiguity, which may be explained by parol.^ So it is generally held that a deed to a partnership by its firm name is not therefore void, but valid, and it may be shown by parol evidence who the partners are that compose the firm.* The general tendency of the authorities is to hold that the name of the partnership, is nothing more than a conventional mode of designating the persons composing the firm, and that such firm may transact all the partnership business in the firm name, and evidence is admissible to show who in fact constitute the firm at the time.^ ^ Beaman r. Whitney, 20 Me. 413. See, also, McCauley v. Fulton, 44 Cal. 355 ; Arthur v. "Weston, 22 Mo. 378. 2 Sherry v. Gilmore, 58 Wis. 324. ^Ferris r. Blackledije, 71 N. Car. 492. But the court paid that this mode of making a deed is a careless one, and might be insecure, but the deed was not void. *Kelley v. Bourne, 15 Ore. 476 ; Shaw v. Loud, 12 Mass. 447. ^Stroman r. Rottenbury, 4 Des. Eq. (S. Car.) 267 ; Lady Superior v. Mc- Namara, 3 Barb. Ch. (N. Y.) 380 ; Newton v. McKay, 29 Mich. 1 ; Staak v. Sigelkow, 12 Wis. 234, 242; Hogg v. Odom, Dudley (Ga.), 185 ; Morse v. Car- penter, 19 Vt. 613 ; Lindley on Partnership (4th ed.) 208 ; Carruthers v. Shed- don, 6 Taunt. 14 ; Maugham v. Sharpe, 17 Com. B. (N. S.) 443 ; Pristwick v. Foley, 43 L. J., Com. P. (N. S.) 190 ; Elphinstone's Inter, of Deeds, p. 126. But it is not held that a partnership may take the title to land in its firm name when such firm name does not contain the surname of one or more of the partners : Kelley v. Bourne, 15 Ore. 476, 484. requisites and validity. 205 Article 4. Description and Identification of the Property. 1 195. Requisites of Description. 1 198. Taking the Mortgaged Prop- 1 196. Description by Metes and erty from a Larger Tract. Bounds. 1 199. Valid Descriptions — lUustra- § 197. Identification of the Premises by tions. Reference to other Instru- §200. Invalid Descriptions — Illus- ments. trations. § 195. Requisites of Description. — The description of the property should be plain and full, leaving nothing to be sup- plied. But any descri^Dtion of lands, however general and indefinite, which is capable of being made practically certain by oral evidence, is sufficient.^ Where land is described by a general name or designation, the deed is not necessarily void for uncertainty. It is competent to show by extrinsic evidence what particular lands are embraced by the general description.^ A certain mortgage on real estate described the same as " the one-half interest " in a certain specified tract, excepting " about " a specified number of acres embraced in such tract, as described in a deed for the portion excepted, heretofore executed to the mortgagor on a certain date by a third person named ; it was held a sufficient description.'^ Extrinsic evidence will be admitted to make certain a faulty description thereby identifying the premises mortgaged.* In Connecticut it is necessary to give definite information so as to identify the property covered.^ A mortgage of all the lots the mortgagor then owned in a certain town, conveys all lots which can be identified as belong- ing to him, either by legal or equitable title.^ The following ' Ryerss v. Wheeler, 22 Wend. (N. Y.) 148 ; Woods v. Sawin, 4 Gray (Mass.), 322 ; Vaughn v. Schmalsle, 10 Mont. 186. * Tucker v. Field, 51 Miss. 191 ; :McGuire v. Stevens, 42 Miss. 731 ; Car- michael v. Foley, 1 How. (Miss.) 591. ^Wallace v. Furljer, 62 Ind. 103. * Coogan V. Burling Mills, 124 ]ilass. 390. *De Wolf V. Sprague Manuf. Co., 49 Conn. 282, 316; Herman v. Deming, 44 Conn. 124 ; North v. Belden, 13 Conn. 376, 380. * Starling v. Blair, 4 Bibb (Ky.), 288. See Mills r. Shepard, .30 Conn. 98; Crawford v. Bonner, 53 Tex. 194 ; Easter r. Severin, 64 Ind. 375. 206 NATURE AND REQUISITES OP THE CONTRACT. phrases in descriptions do not make the mortgage invalid by reason of their generality : " of all my estate," " of all my lands, wherever situated," or " of all my property." ^ Mortgages with such general descriptions cannot be made to embrace after-acc[uired lands.^ The description of the premises in the granting part of the mortgage must control when inconsistent with a provision con- tained in the condition.^ § 196. Description by Metes and Bounds. — The rule is well settled that in case of a discrepancy in area the lines of ascertained boundaries must control, unless there is such an averment or covenant of quantity as to show that the exact quantity was the thing granted.* When the boundaries of land conveyed are definitely given and the area is stated as so much, " more or less," the fact that the actual area is less than stated does not make the descrip- tion by boundaries uncertain.^ The mortgage is to be so construed as to give effect to the intention of the parties, if this can be ascertained from the in- strument. The conveyance is not to be restricted to the prem- ises described in a deed referred to for a particular description, if the instrument contains another clear and unequivocal de- scription embracing more land than is described in the deed referred to.^ If the description embraces more land than the deed referred to, although the premises are described as " the same estate," the mortgage is not restricted to such premises as are described in the deed, but it will embrace the land described by metes and bounds.*^ A mortgage contained a description of a part of lot ten, block ^Wilson V. Boyce, 92 U. S. 320 ; Usina v. Wilder, 58 Ga. 178. 2 Calhoun v. Railroad Co., 2 Flip, C. C. 442, 448. »Donnan r. Print. & Pub. Co., 70 Mo. 168. ♦3 Washb. on Real Prop. (3d ed.) 630. 5 Doyle V. Mellen, 15 R. I. 523. ^ Melvin v. Proprietors, 5 Met. (Mass.) 15 ; Hastings v. Hastings, 110 Mass, 280. '' Congregational Church v. Walker, 124 Mass. 69. REQUISITES AND VALIDITY. 207 thirty-seven, in a certain city. The metes and bounds given made 45 feet and six inches on D Street by 163 feet and seven inches in depth. It also included other ground described as " also 14 feet and six inches off the south side of lot eleven in said square 37 of the city named before, being in all 60 feet front on D Street by 163 feet and six inches in depth." Lot eleven was, in fact, 196 feet deep. It was held that the words in italics are not words of description cjualifying the preceding words, but words expressing quantity merely, and that the strip of ground off the south side of lot eleven, 14 feet and six inches wide by 196 feet deep passed by the mortgage and sale.^ And where a mortgage describing land as adjoining the land of certain persons, and recites that it contains 223 acres, more or less, and alleges by mistake that it was purchased by the mortgagor from the heirs of M., but it appeared that the mortgagor had bought 50 acres from the heirs of M., and the boundaries given in the mortgage included the 50 acres as well as the other lands of the mortgagor, it was held the description by boundaries would control, and the 50 acres were included in the mortgage.^ Where parties cannot reasonably have intended to locate a certain canal on the south when it was actually on the east, the true easterly boundaries of the mortgaged land should be regarded as the canal. Hence the fact that a quantity of land stated in a deed of trust falls short in actual measurement by taking a certain canal as the eastern boundary instead of a certain turnpike, is immaterial, since words indicating quan- tity must yield to description by boundary.^ § 197. Identification of the Premises by Reference to Other Instruments. — A description may be sufficient by reference to other instruments.* The boundaries in a deed did not include a lot which had been part of a farm, and which, with the remainder of the farm, exactly made up the area of 46 acres, given in the deed. Reference to another deed by ^ McGuire v. Bissell, 1 19 Ind. 345. ^ Steele v. Williams (Ky.), 15 S. W. Rep. 49. ' Hunter v. Hume (Va.), 13 S. E. Rep. 305. * Wallace v. Furber, 62 Ind. 103. 208 NATURE AND REQUISITES OF THE CONTRACT! way of identification showed that the two were partition deeds, and that, if the area of 46 acres was not maintained, a small lot of trifling value was left undivided. This made it evident that the thing granted was the whole area. It was mentioned first in the description, and was necessary to a complete divis- ion of the land. It was held, therefore, that the description by area must control.^ And where the mortgaged premises were described as con- taining 100 acres of land, another tract of nine acres, the title to which was derived from another source, cannot be claimed as covered by such mortgage, although the description in the mortgage concluded with a general reference to a deed which conveyed both tracts.^ A deed described the lots as bounded by certain un- opened streets, and contained the following additional clause : " Together, as respects each of the said lots of ground above granted and released, with its full proportion of the soil of the street or streets " on which it is situated. The grantee executed a mortgage on the lots describing them, as in the deed, but omitting the clause as to the soil of the streets. It was held that the mortgage conveyed the same interest that the grantee took under the deed.' When the name of the town, county, and State are omitted, in describing the premises, this omission may be rendered nugatory, when the mortgage refers to a deed which has an accurate description.* Where the documents of title are referred to as accompany- ing the mortgage, a description of the land in the mortgage need not be made or set out.^ § 198. Taking the Mortgaged Property from a Larger Tract. — Where the description in the mortgage of a parcel * "Waterman v. Andrews, 14 R. I. 589. ^ Holmes v. Abrahams, 31 N. J. Eq. 415. 3 Patterson v. Harlan, 124 Pa. St. 67. * Robinson v. Brennan, 115 Mass. 582 ; Boon v. Pierpont, 32 N. J. Eq. 217 ; Slater v. Breese, 36 Mich. 77 ; Harding v. Strong, 42 111. 148. * Rodriguez v. Haynes, 76 Tex. 225. REQUISITES AND VALIDITY. 209 of a tract of larger extent does not locate it, the mortgagee be- comes a tenant in common pro rata in the whole tract. Thus, a party took a mortgage of an unascertained 200 acres of a 900-acre tract of land, and it was held that he acquired title to an undivided two-ninths of the entire tract.^ This principle is illustrated by Mr. Washburn. He says : " Where A. granted one acre of woodland lying in common with his other woodland, it was held to be such an aliquot part of his woodland in common, as one acre would be to the whole woodland owned by the grantor. And upon a similar principle, wdiere a deed of a given quantity of land, parcel of a larger tract, does not locate it by its description the purchaser becomes a tenant in common pro rata in the whole parcel," ^ So a mortgage of 50 acres of land by description, of a larger amount, or the next and adjoining 50 acres that is unincumbered, provided the first is not free from liens, is valid and the description is sufficient for either tract.^ §199. Valid Descriptions — Illustrations. — Illustrations will be of great importance and are given that the interpreta- tions may be studied and applied. Thus, the following description is sufficient : The descriptive words were " a tract of land lying in G. County, North Carolina, adjoining the land of L. and B., situated on the east side of the road leading from J. Church to L.'s, it being a portion of their part of the original G. R. P. tract and containing 50 acres." * So a written agreement by a debtor to transfer to his creditor " a lot of land near F., north of the Fair grounds, containing 30 acres, more or less," to be sold in payment of the debt, the excess, if any, to be returned to the debtor, is not void for ' Brown v. Maury, 85 Tenn. 358. Opinion by Snodgrass, J. Judges Tur- ney and Caldwell did not concur in so much of this opinion as held the de- scription sufficient. Compare Cochran r. Utt, 42 Ind. 267. "^ 1 "Wash. Real Prop. (4th ed.) p. 654, and cases cited. ' Lee V. Woodworth, 2 Green Eq. (X. J.) 36. The mortgage will not be de- feated though the whole larger tract be incumbered, but if part be free from incumbrance, the first 50 acres of such nearest to that first described will be covered by the mortgage. , * Edwards v. Bowden, 103 N. Car. 50. VOL. I. — 14 210 NATURE AND REQUISITES OF THE CONTRACT. uncertainty, it appearing that the debtor owned but one such lot in that vicinity, but may be aided by parol evidence ; and the creditor need not have been placed in actual possession/ And where a mortgage executed to the State for the use of the Congressional school fund appears upon its face to have been executed by residents of a certain county of that State, it will be presumed that the land described by section, township, and range is located within the same State, and a more specific description is not necessary.^ A mortgage which describes the lots conveyed on a certain street and extending back to another named street, the descrip- tion being accurate except as to the block which should be " No. 7," passes title to the numbered lots in the latter block.^ When clauses are added to a description that do not aid in the identification, they may be rejected as surplusage. Thus, when a mortgage describes the land as all of a certain lot described on a plat of the town by a particular number, the words " whereon is situated a two-story building," and which follow the description by number, may be rejected as surplus- age.* If the property is described with such certainty as to identify it, an error in the number of the range or the omission of it, will not make the mortgage void.^ A mistake in the number of the lot may be explained when the boundaries are fixed and certain.^ A defective description may be rendered certain by a refer- ence to the land of adjacent owners.^ The description will cover no other property, when the prop- erty is particularly described as "located at and near the mouth of Alder Gulch, in section ten." This description will 1 O'Neal V. Seixas, 85 Ala. 80. *Mann v. State, 116 Ind. 385. 3 Cake V. Cake, 127 Pa. St. 400. ♦ Gerald V. Gerald, 31 S. Car. 171. 5 White V. Hermann, 51 111. 243. And see Kile v. Yellowhead, 80 111. 208; Thomhill v. Burthe, 29 La. Ann. 639 ; Sickmon v. Wood, 69 111. 329. 6 Cooper v. Bigly, 13 Mich. 463. See, also, Cake v. Cake, 127 Pa. St. 400. 7 Ells V. Sims, 2 La. Ann. 251. REQUISITES AND VALIDITY, 211 not embrace property of the mortgagor located in other sections of the township/ A description by a known meridian will prevail over that by a county.^ Wlien a description in a mortgage makes two east and west lines, to run at nearly right angles to a certain section line, it merely implies that the east and the W' est line of the section do not run due north and south, and the mortgage is not void.^ An act of mortgage declaring the object mortgaged to be the mortgagor's entire interest in a parish named, giving the num- ber of acres, and mentioning the river near which it lies, and by which it is bounded wdth reference to certain titles of the mortgagor to be found in the recorder's office for the parish is a sufficient description/ So a description of land as " 320 acres of land known as M. Place, where the said H. lived last year, and where T. now lives," is not void for uncertainty, and parol evidence may be received to show w^hat lands were so know^n/ So is the description sufficient which places the premises in *' township forty (41)," executed and acknowledged, though the parties afterward correct the description so as to read " town- ship forty-one (41)." ' Where a mortgage show\s that the parties resided in the State, a description of land according to the United States govern- ment survey and legal subdivision will be sufficient, though it does not state the county and State where the land is situated, which will be presumed to be in the State mentioned/ Where a mortgage specifically describes land, together with all the lands, mines, and minerals of every kind belonging to the mortgagor in a designated county, it covers all mineral ' Largey v. Sedman, 3 ^Mont. 472. *Sickmon r. AVood, 69 111. 320. ^Teetfhorn v. Hull, 30 Wis. 162. * Nat. Bank r. Barrow, 21 La. Ann. 396. ^Tranuin v. Wilkinson, 81 Ala. 408. «Ca«lcr V. Byers, 129 111. 657. ' Smith V. Green, 41 Fed. Rep. 455. See, also, Mann v. State, 116 Ind. 385 ; Staples V. May, 87 Cal. 178. 212 NATURE AND REQUISITES OP THE CONTRACT. lands in that county shown by proper evidence dehors the mortgage which belonged to the mortgagor at the time of its execution/ In like manner parol evidence may be admitted to correct an error in copying the description. Thus the handwriting of the mortgage was scarcely legible, and in re- cording the land, it was described as the N. W. I of the S. W. I. But the only land the mortgagor owned was the N. W. I of the S. E. I, and the scrivener was allowed to testify, and gave evidence that he copied the description from the mort- gagor's deed, and that the mortgage before him read N. W. ^ of the S. E. ^. This was held sufficient evidence to justify the finding that the mortgage was so written.^ An indebtedness was to be secured " on about 908 acres of land in H., headright in M. county." The mortgage to be se- cured on 500 acres of said laud, beginning at the west boundary and extending east sufficiently far to embrace 500 acres. Held, that this was a sufficient description.^ A description began with the phrase, "beginning on a Spanish oak," and then gave the courses and distances as well as monuments, stating that the described area contained 242|- acres. It then excepted all of the described land lying west of a certain stream and 7| acres of the east, which excepted parts "were sold off by H. Y.," leaving 142J acres remaining in the tract, all on the east side of the stream. Parol evidence was admitted to identify the property.* A description of a mortgaged property as " un vaste terrain d Ven coignure des rues Orleans et Bourbon" will be sufficient.^ And in general, a mortgage will not be declared void for un- certainty in the description of the mortgaged land, if the land can be located with reasonable certainty. If two phrases cannot be reconciled, that which would defeat the mortgage should be rejected.^ 1 Staples V. May, 87 Cal. 178. * Shoemaker r. Smith, 80 Iowa, 655. ^ Westmoreland v. Carson, 7G Tex. 619. * County V. McDowell, 99 Mo. 632. * Roberts v. Bauer, 35 La. Ann. 453. « People V. Storms, 97 N. Y. 364. REQUISITES AND VALIDITY. 213 Thus, the mortgage of " all lands owned by " the mortgagor is good, for it can be made certain.^ And it is a rule of construction that, if there are two de- scriptions in a deed, and they do not coincide, the grantee may elect to accept that which is most favorable to him." A mortgage which specifically describes a tract of land in which there is a vein or lode of metal on which some mining has been done, with all the mines, minerals, mining rights, privileges, and appurtenances belonging or appertaining to the same, does not cover an undeveloped portion of the lode con- tained in the land adjoining the tract described, and in which also is the situs of the lode.^ A mortgage described real estate as " the undivided I of lots 1-2-3 block 25 in the original town of M , including the undivided ^ of all buildings and machinery therein, and all fixtures, and the undivided ^ of all stock, assets, and material of the firm of F. & Co., being said G.'s interest in the property of such firm, or that may hereafter be acquired," situated in a certain county and State ; it was held sufficient as to the personal property.* But when the owner of a plantation sells a half interest, mules, wagons, carts, and agricultural imple- ments on the place at the time for its service, and improvements are covered by a specific mortgage for the purchase-money, but where the vendor and vendee enter into a planting part- nership, the specific mortgage does not cover the mules put on the place by the firm.^ A mortgage of " all the real estate " the mortgagor owns in a certain town " of whatsoever name or nature " includes the mortgagor's right as tenant in common of undivided land in such towns.^ § 200. Invalid Descriptions — Illustrations. — Many de- fective descriptions may be made effectual by parol evidence 1 Leslie v. Merrick, 99 Ind. 180. * Sharp V. Thompson, 100 111. 447. 'Staples V. May, 87 Cal. 178. *Cook V. Shorthill (Iowa), 48 N. W. Rep. 84. *Townsend v. Payne, 42 La. Ann. 909. «Drew V. Carroll, 154 Mass. 181. 214 NATURE AND REQUISITES OF THE CONTRACT. and reformed. But when a description is so indefinite that the estate conveyed cannot be identified, the mortgage must fail. Thus, a mortgage is void for uncertainty when it describes prop- erty as being parts of certain legal sections, without designating what township or range the sections are in. There being differ- ent townships in the county embracing the same numbered sec- tions and parts thereto, the description is void for uncertainty.^ As a general rule, if the description in a conveyance be so defective that it cannot be known what estate is conveyed, the conveyance is void.^ Accordingly, a mortgage with a description of the premises as " all the west half of the northwest quarter of section 8, town 6, range 7," without stating in what county or State the land is situated, or at what particular land office it was subject to entry, is void for uncertainty.^ So, in Arkansas, the following description is void for uncer- tainty : " The following described land, situated in Yell County, Arkansas, to wit : A portion of the northeast quarter of section 22, in township 6, range 20, containing twenty acres." The court held this to be fatal because there were no expressions in the instrument nor reference to other documents, natural ob- jects, artificial monuments, or adjoining lands by which, with the aid of extrinsic evidence, the particular land meant to be conveyed could be identified.* So a description of land in a mortgage as " 261 acres of land off of lots numbered 5, 27, and 28, in the ninth district of R. County," is void for uncertainty.^ And when it is apparent on the face of the instrument, in connection with the plat referred to therein, that the particular lot conveyed cannot be identified, the mortgage is void for un- certainty, for want of a sufficient and certain description of the premises.^ iBoyd V. Ellis, 11 Iowa, 97, 101. * Bosworth V. Farenholz, 3 Iowa, 85 ; Worthington v. Hylyer, 4 Mass. 196, 204. ^ Cochran v. Utt, 42 Ind. 267. Compare Brown v. Maury, 85 Tenn. 358. * Freed v. Brown, 41 Ark. 495. 5 Atkins V. Paul, 67 Ga. 97. 6 Stead V. Grosfield, 67 Mich. 289. REQUISITES AND VALIDITY. 215 In general, if, taking the instrument as a whole, the subject of the mortgage cannot be ascertained, the mortgage cannot be upheld/ Article 5. Clause of Defeasance and Recitals. 1 201. The Condition. and the Mortgage Contains 1 202. Recitals as to the Indebtedness. no Promise to Pay. 1 203. Notes and Mortgage. § 206. Recitals as to the Time of Pay- § 204. When no Note or Bond is Given. ment of the Debt. 1 205. When no Note or Bond is Given § 207. Stipulation as to the Rate of Interest. § 201. The Condition. — In ordinary mortgages the haben- dum is followed by a clause of defeasance which provides that if the mortgagor pays, the estate granted shall cease," or " then this deed shall be void." ^ Any equivalent clause is sufficient.^ Nothing is better settled than that a conveyance of land, with an agreement, condition, or stipulation incorporated therein, that the same shall become null and void, or cease and determine, or become of no effect, or that the estate so con- veyed shall be reconveyed when the money is paid, or other equivalent expressions, is a mortgage. The form of the defea- sance is immaterial, if the intention clearly appears from the language employed. Any stipulation or agreement that plainly indicates the intention to return or reconvey the property upon payment of the sum named, makes the instrument a mortgage.^ , If the deed does not include the clause that this deed shall be null and void, or an equivalent expression, after the satisfaction of the deed or obligation, then the deed becomes inoperative as a mortgage,^ unless it appears from the whole instrument that it was intended as a security ; if it is irregular on its face ' Campbell r. Johnson, 44 Mo. 247 ; Boardman v. Reed, 6 Pet. (U. S.) 328 ; Wofford ?'. McKinna, 23 Tex. 44 ; 1 Wood on Conv. 206 ; Martindale on Conv., sect. 87. * Hclfenstein'a Estate, 135 Pa. St. 293 ; 26 Week. N. Cas. 194. ' Freeman's Bank r. Yose, 23 Me. 98 ; Adams r. Stevens, 49 Me. 362. * Cowles r. Marble, 37 Mich. 158 ; Adams v. Stevens, 49 Me. 362. *Pearce v. Wilson, 111 Pa. St. 14, 21 ; Reitenbaugh v. Ludwick, 31 Pa. St. 131 ; Kelly v. Thompson, 7 Watts (Pa.), 401. * Freeman's Bank v. Vose, 23 Me. 98 ; Adams v. StevenSv49 Me. 362. 216 NATUKE AND REQUISITES OF THE CONTRACT. but describes the notes and states the usual condition upon non-payment, it will be construed as a mortgage.^ Although the proviso is inartificial and imperfectly expressed, yet, if the intention of the parties is shown to have been the making of a mortgage, which intention is shown upon the face of the instrument, it will be construed as a mortgage.^ Neither is it requisite that the condition shall be so completely certain as to preclude the necessity of extrinsic evidence.^ But a stipulation that the conveyance is to be void upon payment of the sum due is one of the essential elements of a mortgage/ But this defeasance clause is not always inserted. If the intention be to give a security, the transaction will be con- strued as a mortgage. Thus, a deed conveyed land to be held and retained as security until certain notes or obligations were satisfied, after which the land was to be reconveyed. It was held that this transaction was, in effect, a mortgage.^ § 202. Recitals as to the Indebtedness. — A mortgage, though without covenants or bond to pay, implies a loan ; and every loan implies a debt,® Mortgages may be given without mentioning any bond, note, or other obligation. A contract for the payment of a debt is not merged in the security created by the mortgage,'' The validity of a deed of mortgage stands upon the genu- ineness of the debt described in the condition thereof, and need not exist in the form of a promissory note. The form in which the indebtedness appears is not material.^ A statement 1 Snyder v. Bunnell, 64 Ind. 403. '^ Steele-. Steel, 4 Allen (Mass.), 417; Lanfair v. Lanfair, 18 Pick. (Mass.) 299 ; Skinner v. Cox, 4 Dev. L. (N. Car.) 59. ^Monell V. Smith, 5 Cow. (N. Y.) 441 ; Robinson v. Williams, 22 N. Y. 380 ; Stonjjliton V. Pasco, 5 Conn. 442 ; Merrills v. Swift, 18 Conn. 257 ; Kramer v. Bank, 15 Ohio, 253 ; Youngs v. Wilson, 27 N. Y. 351, *Goddard v. Coe, 55 Me. 385. SHelfenstein's Estate, 135 Pa. St. 293 ; 26 Week. N. Cas. 194. "King V. King, 3 P. Wm. 358 ; Howel v. Price, 1 P, Wm, 291 ; Cope v. Cope, 2 Salk. 449. ^ Yates V. Aston, 4 Adol. & Ellis (N. S.), 182. « Lund V. Lund, 1 N, H. 39 ; Weeks v. Eaton, 15 N. H. 145 ; Hodgdon v. Shan- non, 44 N, H, 572, I REQUISITES AND VALIDITY. 217 that there is a personal obligation on the part of the mortgagor to pay the amount of the debt is not necessary.^ A mortgage to secure past indebtedness due and owing from the mortgagor to the mortgagee contains a sufficient description of the indebtedness.^ So a mortgage given to secure existing debts of the mortgagor to the mortgagee is vahd without speci- fying the debts or their amounts.^ Neither is it necessary that all of the particulars of the note secured be set forth in the con- dition of the mortgage. Substantial correctness, such as may prevent mistake or uncertainty as to the debt intended to be secured, is all that is required.* In Connecticut, the rule was that the record of the mortgage must show, with as much certainty as the nature of the case will admit of, " the true state of the incumbrance." ^ In Mer- rills V. Swift " the court was equally divided upon the question whether a mortgage, to secure several notes and a book account to the amount of $1,500, or thereabouts, was valid. The courts of Connecticut have not modified their former decisions, though in reference to certain deeds under examina- tion, it was said : " Although our early decisions would hold them void, for vagueness, our decisions for the last ten or fifteen years have gone further, and established the law to sustain mortgages quite as indefinite and vague as the present." '^ But the late decisions do not indicate this liberality, for in Bramhall v. Flood,* the mortgage describes the debt secured as a note of $1,000. No such note had ever been given, but the mortgagor was indebted for goods to the amount of $471.26, and the > Hickox V. Lowe, 10 Cal. 197. "" Machette v. Wanless, 1 Colo. 225. 'Mich. Ins. Co. v. Brown, 11 Mich. 265. * Webb V. Stone, 24 N. H. 282 ; Melvin v. Fellows, 33 N. H. 401 ; Robertson v. Stark, 15 N. H. 109 ; Page v. Ordway, 40 N. H. 253 ; Ricketson v. Richardson, 19 Cal. 330 ; Booth v. Barnum, 9 Conn. 286; Sheafe v. Gerry, 18 N. H. 245 ; Gilman v. Moody, 43 N. H. 239 ; Gill v. Pinney, 12 Ohio St. 38. * Pettibone v. Griswold, 4 Conn. 158. «18 Conn. 257. ^ Utley V. Smith, 24 Conn. 290. '41 Conn.. 68. 218 NATURE AND REQUISITES OF THE CONTRACT. latter had agreed to furnish additional goods to the extent of $1,000, and the mortgagor made the mortgage as security for tiie whole. The mortgage was held void against subsequent attaching creditor. The doctrine of this case accords with the earlier decisions of Connecticut courts. Of course the interest of the mortgagor demands that the incumbrance be stated correctly with a view of his future deal- ings. The inconvenience which may occasionally arise to third persons from uncertainty of description of the debt, is more sufFerable than the gross injustice which would frequently be inflicted by a stringent rule as to certainty.^ The mortgage should set forth the amount of the debt to be secured, and recite that it is witnessed b}^ a note, a stated account, or other evidence of debt, but the neglect to do this does not invalidate the mortgage security. In general, if the mortgage contains a general description, sufficient to embrace the liability intended to be secured, it is effectual.^ All written deeds and contracts, with sufficient explicitness to identify them, are to be regarded as so far constituting a part of such deeds and contracts as to be read with them, in order to determine their terms and conditions. So when a note secured by a mortgage is referred to by its date, the name of the maker, the day of its maturity, the rate of interest pro- vided for, and the time it becomes payable, it is a sufficient de- scription to identify the note and authorize it to be read in order to determine the terms of the mortgage.^ And a mortgage which states the indebtedness secured thereby as a certain gross amount, is sufficiently specific, where such indebtedness is in fact upon secured promis- 1 Hurd V. Eobinson, 11 Ohio St. 232, 239. * Curtis V. Flinn, 4G Ark. 70 ; Carnall v. Duval, 22 Ark. 136 ; Jarratt v. Mc- Daniel, 32 Ark. 598 ; Page v. Ordway, 40 N. H. 253 ; Lashbrooks v. Hatheway, 52 Mich. 124. * Fetea v. O'Laughhn, 62 Iowa, 532. See, also, Kellogg v. Frazier, 40 Iowa, 502 ; Clark v. Hyman, 55 Iowa, 14 ; Bourne v. Littlefield, 29 Me. 302 ; Ricket- son V. Richardson, 19 Cal. 330 ; Gill v. Pinney, 12 Ohio St. 38 ; Tousley v. Tousley, 5 Ohio St. 78 ; Hurd v. Robinson, 11 Ohio St. 232 ; Babcock v. Lisk, 57 111. 327 ; Booth v. Barnum, 9 Conn. 286 ; Stoughton v. Pasco, 5 Conn. 442 ; 13 Am. Dec. 72. REQUISITES AND VALIDITY. 219 sory notes, which, with secured interest, aggregate the amount stated/ But a mortgage which purports to be made to secure two notes, one for $700, dated July 13, 1828, and one for $500, dated January 31, 1835, is insufficient when the evidence shows that the mortgagee never had such notes, but that he held three notes of the mortgagor, one for $800, one for $1,000, on which $500 had been paid, and one of $700, none of them bearing dates, as stated in the mortgage.^ Where a mortgage describes the indebtedness secured by it as a note for $1,500, the time and manner of payment to be as therein appears, the description is sufficient.^ So where a mortgage recites that it was given to secure the payment of $300 on the 9th day of May, 1883, $400 on the 9th day of May, 1885, and $100 on the 9th day of May, 1884, with interest, etc., but the consideration was said to be $300, and but one note was there named, the mortgage was held a valid security for all three notes.* So a note may control and cure the defective description of the debt in the mort- gage.** In general that part of a contract describing the subject- matter to which it relates need not be certain in itself, and does not require that degree of certainty that is required in defining the thing to be done by each of the contracting parties. " One object of the condition of a mortgage is to point out the debt intended to be secured thereby. It of itself imposes no obliga- tion upon either of the parties. It is descriptive in its character, and is like the descriptive part of a deed or other instrument of conveyance, describing the property conveyed. It need only point out the thing conveyed with reasonable certainty. It is not required that the description shall be certain and pre- cise in every particular." ^ ' Clark V. Hyman, 55 Iowa, 14. * Jewett V. Preston, 27 Me. 400. ' Kinj? ?'. Kilbride, 58 Conn. 109. * Shoemaker v. Smith, 80 Iowa, 655. * Cleaven(>;er v. Beath, 53 Ind. 172. ^Winchell v. Coney, 54 Conn. 24, 30 ; opinion by Carpenter, J. 220 NATURE AND REQUISITES OF THE CONTRACT. § 203. Notes and Mortgages. — When the note or notes and mortgage are made at the same time, in relation to the same subject, they are a part of one transaction and constitute one transaction, and must be construed together as if they were parts of one transaction.^ They explain each other so far as the indebtedness is concerned. The mortgage points directly to the note in most cases, and the amount of the note is the amount of the indebtedness in the mortgage.^ The mortgage and notes constitute but one transaction, virtually one instrument, where the mortgage sufficiently identifies the note. And to comprehend the full meaning of the transaction the note as well as the mortgage must be examined. Thus, notes for a large amount were payable in five years from date, " with interest annually at six per cent.," but were described in the mortgage as " bearing interest at six per cent, per annum." It was held that the notes expressed the real contract between the parties as to the time of payment of in- terest, and controlled the description of them in the mortgage ; that the description of them in the mortgage as " bearing in- terest at six per cent, per annum " was sufficient to put a pur- chaser of the property on inquiry as to the time of payment of interest expressed in the notes ; that the mortgage and notes taken together made the former a security for the payment of annual interest.^ So a trust deed was given, which did not purport to describe the interest which was to become due on the note, but it clearly showed that it bore interest at some rate and payable at some time or times, and this was sufficient to put a subsequent purchaser on inquiry as to what the rate of interest and the time or times of payment were. The deed, in effect, declared that its purpose was to secure the payment of such interest as has been reserved by the note ; the amount, and date, and time of payment of which are mentioned. The ^ Muzzy V. Knight, 8 Kan. 456 ; Meyer v. Graeber, 19 Kan. 165. "Somersworth Sav. Bank v. Roberts, 38 N. H. 22 ; Grafts v. Crafts, 13 Gray (Mass.), 360. ^ Winchell v. CJoney, 54 Conn. 24. REQUISITES AND VALIDITY. 221 mere omission to describe in the deed what that interest was to be was not a defect which could not be remedied.^ A note was described in a deed of release as -payable May 21, 1834, when in fact it was payable April 21. It was held that parol evidence was admissible to identify the note.^ Where a note was given, payable in five years from date, with interest at ten per cent., and the mortgage recited that the in- terest should be " payable annually," it was decided that the interest was at ten per cent, and payable annually.^ It is not necessary that all the particulars of the note secured should be set forth in the condition of the mortgage. It is enough if it appears with reasonable certainty to be the note intended."* Stipulations in the mortgage may control an action on the note. Thus, a promissory note and mortgage to secure the payment of the same were executed at the same time, and the mortgage contained the following stipulation : " But it is agreed a general execution shall not issue therein." It was held that the mortgagee could not recover a general judgment on the note, but must resort to the property.^ § 204. When no Note or Bond is Given. — If a mortgage under seal expressly declares and recites an indebtedness, this is sufficient evidence of the indebtedness ; no law requires any note or bond or the like in addition to the mortgage.® Every mortgage, even with no covenant or bond to pay the money, implies a loan, and every loan implies a debt.^ So when a mortgage is given, the want of a covenant for repayment of the mortgage money is no bar to redemption.* 1 Richards v. Holmes, 18 How. (U. S.) 143. ^Pierce v. Parker, 4 Met. (Mass.) 80. See, also, Johns v. Church, 12 Pick. (Mass.) 557 ; Hall v. Tufts, 18 Pick. (Miss.) 455 ; Jackson ?'. Bowen, 7 Cow. (N. Y.) 13 ; Molvin v. Fellows, 33 N. H. 401 ; Prescott v. Hayes, 43 N. H. 593 ; Bourne v. Littlefield, 29 Me. 302. ' Muzzy V. Kni9. ='Carrico 7-. Bank, .33 Md. 235. *Brydon r. Campbell, 40 Md. 331; Carpenter v. Dexter, 8 Wall. (U. S.) 532; Stronir v. Smith, 3 INIcLean C. C. 302; Graves ?'. Graves, 6 Gray (iNIass.), 391 ; Blood V. Blood, 23 Pick. (Mass.) 80 ; Todd v. Outlaw, 79 N. Car. 235. * Simpson v. Mundee, 3 Kan. 181 ; Reed v. Kemp, 16111. 445. * Miisgrove ?'. Bonser, 5 Ore. 313 ; Bass v. Estill, 50 Miss. 300. ^Roane r. Baker, 120 111. 308 ; Robinson v. Robinson, 116 111. 250. 8 Adam v. IMengel (Pa.), 8 Atl. Rep. 606. 232 NATURE AND REQUISITES OF THE CONTRACT. against a subsequent purchaser having knowledge of it as re- corded, though not of its proper acknowledgment, where he parts with no value and incurs no liability.^ A mortgage was acknowledged before a deputy clerk, and the principal clerk, in writing out the certificate, failed to set forth the facts and include the indorsement by the dei^uty. It was held that the mistake might be corrected under the act of May 10, 1884, relative to the accruing of such defects, although the act was passed subsequent to the bringing of the suit, and the lien under the mortgage was good.^ When a certificate of acknowledgment of a mortgage bears the same date as the note it will be presumed that the note and mortgage were executed and delivered at that time ; and the mere fact that an earlier date appears at the commence- ment of the mortgage is immaterial and constitutes no vari- ance.^ The certificate of acknowledgment is, at least, presumptive evidence that the note and mortgage were executed and deliv- ered at the time of execution.* The certificate should follow the form given by the statute, though it need not be in the exact words ; ^ but words of equivalent import should be used." The certificate will be ujiheld whenever substance is found, and courts will not suff'er conveyances or proof of them to be defeated by technical or unsubstantial objections. In constru- ing them resort may be had to the deed or instrument to which they are appended.'^ ' Hutchinson v. Ainsworth, 73 Cal. 452. •■^Edmunds v. Leavell (Ky.), 3 S. W. Rep. 134. ^Protz V. Schantz, 70 Wis. 497. * Smith V. Allis, 52 Wis. 337; Pereau v. Frederick, 17 Nebr. 117. * Allen V. Lenoir, 53 Miss. 321; Keeling v. Hoyt, 31 Nebr. 453; Alvis v. Morrison, 63 III. 181 ; Duval v. Covenhoven, 4 Wend. (N. Y.) 561 ; Meriam V. Harsen, 2 Barb. (N. Y.) Ch. 232. « Johnson r. Badger, etc., Co., 13 Nev. 351 ; Vance v. Schuyler, 111. 160 ; Davar V. Card well, 27 Ind. 478 ; Dickerson v. Davis, 12 Iowa, 353 ; Pickett v. Doe, 5 Sm. & M. (Miss.) 470; Alexander v. Merry, 9 Mo. 514 ; Monroe v. Arledge, 23 Tex. 478 ; Carpenter v. Dexter, 8 Wall. (IT. S.) 513 ; Hartshorn v. Dawson. 79 111. 108 ; Talbot V. Simpson, Pet. C. C. 188 ; Hawkins v. Pugh (Ky.), 16 S. W. Rep. 277. ' Wells V. Atkinson, 24 Minn. 161. REQUISITES AND VALIDITY. 233 If the acknowledgment be by an agent, the certificate should show that the deed was that of the principal made in behalf of him by the agent, and this must be shown with reasonable clearness.^ In the case of a corporation, the deed may be acknowledged by any officer thereof lawfully authorized to do so.^ And when no statutory provisions control, then the officer affixing the corporate seal is the proper person to make the acknowledgment.^ Surplusage in a certificate will not render it invalid, provided the rest of the certificate is in form/ And the uncorroborated evidence of the mortgagor that the mort- gage was not acknowledged in the manner recited in the cer- tificate of acknowledgment, is not sufficient to overcome the recitals.^ Stating that the mortgagor " personally appeared before me and acknowledged the same," but omitting " personally known " to the officer, is not so defective as to render the mortgage in- admissible as evidence.'^ The wife's statement that she was not examined separate and apart from her husband cannot be admitted to overthrow such a statement in the certificate/ Although an alien is ineligible as a notary public, yet, if he has been duly commissioned as such, he is a de facto notary, and has authority to acknowledge deeds ; and such acknowl- edgment involves no federal question/ If the officer certifies that he knows the person to be the one who executed the mortgage, a variance in spelling the name of such party appearing in the certificate will be presumed to be a clerical error merely, and will not vitiate the acknowledg- ment/ 'McDaniels v. Flower Brook Manuf. Co., 22 Vt. 274; McAdam v. Block, 6 Mont. 601 ; Coombe's Case, 9 Co. 76 b ; Elwell v. Shaw, 16 Mass. 42. '^Merrill v. Montgomery, 25 Mich. 73. 3 Kelly V. Calhoun, 95 U. S. 710. *Orr V. Blackwell (Ala.), 8 South. Rep. 418. 5Pof=it V. Bank, 138 111. 559 ; Fitzgerald v. Fitzgerald, 100 111. 385. 'Wilson V. Quigley (Mo.), 17 S. W. Rep. 891. ^ Gray v. Shelby (Tex.), 18 S. W. Rep. 809. • * Wilson V. Kimmel (Mo.), 19 S. W. Rep. 24. ' Rodes V. St. Anthony, etc., Co. (Minn.), 52 N. W. Rep. 27 ; Rogers v. Manley, 46 Minn. 403. 234 NATURE AND REQUISITES OF THE CONTRACT. § 213. Release op Homestead Right. — Under the law exempting the homestead of families, the statutory provisions must be strictly followed. Thus, a married woman cannot release her homestead in the estate of her husband by her sep- arate deed, duly acknowledged. The clear and unequivocal terms of the statute must be followed, which prescribes the only way in which the homestead right can be conveyed.^ A valid deed releasing the homestead right can only be executed by the joint consent of the husband and wife when that relation exists.^ Hence, separate deeds, executed by husband and wife are invalid to convey the homestead right.^ Thus, when a wife tries to ratify her husband's acknowledgment for her in a mortgage, made without her consent, mortgaging the homestead by a separate instrument, her act is void.^ But it has been held that when a wife's signature and assent to the conveyance of the homestead have been defectively acknowl- edged and certified, she may make a new acknowledgment with intent to cure the defect; and such acknowledgment when properly made and certified will relate back, rights of third parties not intervening, to the date of the original delivery of the conveyance.^ Under the constitution of Texas,^ and the revised statutes,^ which provide that no lien can be created upon a homestead, except for the purchase-money, " or for work and materials used in the constructing improvements thereon," a trust deed upon the homestead to secure money borrowed for the purpose of erecting a building thereon creates no lien.^ And when the ^ Succession of Montgomery (La.), 10 South. Rep. 772 ; Dickerson v. McLean, 57 N. H. 31 ; Hoge v. Hollister, 2 Tenn. Ch. 606. ' Ott V. Sprague, 27 Kan. 620 ; Chambers v. Cox, 23 Kan. 393. ^ Poole V. Gerrard, 6 Cal. 71 ; Cook v. McChristian, 4 Cal. 23 ; Moore i). Tit- man, 33 111. 630 ; Kitchell v. Burgman, 21 111. 45 ; Connor v. McMurray, 2 Allen (Mass.), 202; Greenough v. Turner, 11 Gray (Mass.), 332 ; Armstrong v. Ross, 20 N. J. Eq. 109. ^ Howell V. McCorie, 36 Kan. 636. 5 Cahall V. Citizen's Mut. Associa'n, 61 Ala. 233. See, also, Smith v. Pearce, 85 Ala. 264 ; Motes v. Carter, 73 Ala. 553. « Art. 16, sect. 50. 'Art. 3174. «Ellerman v. Wurz (Tex.), 14 S. W. Rep. 333. REQUISITES AND VALIDITY. 235 wife has the right to release her homestead riglit, no equitable lien can be created upon a homestead by a verbal promise to give a mortgage thereon to secure a debt/ § 214. Dower. — In order that a mortgage be valid against the dower right of the wife, she must release it according to the statutory provisions. If the wife is not entitled to dower, her release is unnecessary. Thus, a conveyance to a husband who, as part of the same transaction, executes a deed of trust to secure the unpaid purchase-money, does not give the hus- band such a seisin of the land as will entitle his wife to dower as against the mortgagee in the deed of trust.^ If a wife joins in a conveyance of the land, which convey- ance is set aside as fraudulent, then she will be entitled to her dower right.^ She is entitled to dower against all persons ex- cept the mortgagee, and to dower in the surplus.* But if she joins her husband in a mortgage and subsequently in an absolute deed of the land, and the mortgage is foreclosed, but she is not made a party to the proceedings, the subsequent absolute conveyance will bar her of the right of redemption for her dower interest, as by the conveyance it was released.^ § 215. Acknowledgment of a Married AVoman. — The power to sell the homestead in a prescribed manner generally includes the power to mortgage it ; for a mortgage may be considered as a conditional sale.^ The words " without undue influence or compulsion of her husband " in the certificate of a married woman, in their com- mon acceptation, are equivalent to the expression of " her own ' King V. Welbom, 83 Mich. 195. ^IIurf?t V. Dulaney, 87 Ya. 444. ^ Wilkinson r. Paddock, 125 X. Y. 748. See, also, Walker v. Rand, 131 111. 27 ; Lake v. Noland, 81 Mich. 112. * Burrall v. Bender, 61 Mich. 608 ; Bun-all r. Clark, 61 Mich. 624. * Grant v. Jackson, 5 Del. Ch. 404. See, also, Mandel v. McClave, 46 Ohio St. 407. 'Sampson v. Williamson, 6 Tex. 102 ; Dunker v. Chedic, 4 Nev. 378 ; John- son V. Fay, 16 Gray (Mass.), 144 ; Boyd v. Cudderback, 31 111. 113 ; Jordan v. Peak, 38 Tex. 439. 236 NATURE AND REQUISITES OF THE CONTRACT. free will without undue influence or compulsion of her hus- band," and the certificate is valid/ So a married woman's certificate of acknowledgment of a conveyance of real estate, as shown by the magistrate's certifi- cate, which agrees in substance, though not in words, with that prescribed by the statutes, is sufficient.^ If the acknowledgment shows that she has voluntarily exe- cuted the conveyance it is sufficient, though the certificate is not in the exact form of the statute.^ But where the husband has not joined in the execution of a wife's separate estate in New Jersey, a court of equity will charge the debt upon her separate estate generally. The giv- ing of the mortgage shows the intention to charge her separate estate with the debt.* If the certificate shows that a married woman was examined separate and apart from her husband, and voluntarily released her dower and homestead rights under the provision of a statute, it cannot be impeached b}^ evidence that there was no private examination, and that she did not acknowledge the deed as her act and deed, or that the contents of the deed were not made known to her, or that she did not release her homestead right. To impeach the certificate, fraud must be alleged and proved.^ § 216. Qualifications of the Officer Taking the Ac- knowledgment. — The officer should be duly appointed and iTubbs V. Gatewood, 26 Ark. 128. ^Owen V. Norris, 5 Blackf. (Ind.) 479. 3 Stevens v. Doe, 6 Blackf. (Ind.) 475. * Armstrong v. Ross, 20 N. J. Eq. 109. See, also, Insurance Co. v. Nelson, 103 U. S. 544. 5 Coleman v. Smith, 55 Ala. 36R ; Miller v. Marx, 55 Ala. 322; Lefebvre v. Dutruit, 51 Wis. 326 ; Williams v. Pouns, 48 Tex. 141 ; M'Neely v. Rucker, 6 Blackf. (Ind.) 391 ; McPherson v. Sanborn, 88 111. 150 ; Crane v. Crane, 81 111. 165 ; Lowell v. Wren, 80 111. 238 ; Blackman v. Hawks, 89 111.512 ; Oppen- heimer v. Wright, 106 Pa. St. 569 ; Singer Manf. Co. v. Rook, 84 Pa. St. 442 ; Heeter v. Glasgow, 79 Pa. St. 79 ; Ridgely v. Howard, 3 Har. & McH. (Md.) 321 ; Johnson v. Van Velsor, 43 Mich. 208 ; Baldwin v. Snowden, 11 Ohio St. 203 ; Johnston v. Wallace, 53 Miss. 331 ; Moore v. Fuller, 6 Ore. 272 ; Mon- roe r. Poorraan, 62 111. 523 ; Kerr v. Russell, 69 111. 666 ; Russell v. Baptist Theolog. Union, 73 111. 337 ; Hartley v. Frosh, 6 Tex. 208 ; Jamison v. Jami- son, 3 Whart. (Pa.) 457 ; Insurance Co. v. Nelson, 103 U. S. 544. REQUISITES AND VALIDITY. 237 qualified. The acts of an officer de facto are valid where they concern the public or the rights of third parties who have no interest in the acts done, and the acts of such officer cannot be incjuired into in any proceedings to which he is not a party. Thus, an officer who is doing business in a county, and act- ing as a magistrate, claiming authority under his commission which is still in life, has color of title when he thus acts, when such acts are not expressly declared void by statute, though the performance of such acts may be j)unished by a penalty.^ Such a certificate made by a justice of the peace de facto, merely, is a sufficient authorization for registration of a deed.^ A commissioner who takes acknowledgments of deeds has no power to take acknowledgments out of the State, though it seems he may take the acknowledgment in any county within the State, though out of the county for which he is appointed.^ A mortgage does not become invalid if in the certificate of the acknowledgment the officer taking it describes himself as " a justice of the peace within said county," no particular county being named in the certificate or its caption, when the grantor and grantee are both described in the body of the mortgage as of a particular county, and no other county is named therein.* The authority of a notary who is lawfully qualified by hold- ing some other office to take acknowledgments, is quite as ample to authenticate conveyances for the purpose of registra- tion as if he were a notary by appointment.^ iPrepcott V. Hayes, 42 N. H. 56; Fowler r. Beebe, 9 Mass. 2.31; Potter t-. Luther, .3 Johns. (N. Y.) 431 ; M'Instry v. Tanner, 9 Johns. (N. Y.) 135 ; Doe V. Brawn, 5 Barn. & Aid. 243. 2 Brown v. Lunt, 37 Me. 423. See, also, Plymouth r. Painter, 17 Conn. 585 ; Smith V. State, 19 Conn. 493 ; People v. White, 24 Wend. (N. Y.) 527 ; McGregor v. Balch, 14 Vt. 428. 'Jackson v. Colden, 4 Cow. (N. Y.) 266. *Beckel v. Petticrew, 6 Ohio St. 247; Fuhrman v. Loudon, 13 Sarg. & R. (Pa.) 386. See, also. King v. Inhabitants, 1 Barn. & Aid. 330 ; Coles v. Hulme, 8 Barn. & Cress. 568 ; Chandler v. Spear, 22 Vt. 407 ; King v. Wright, 1 Adol. & El. 434; A^Tiittlesy v. Starr, 8 Conn. 134; Joumeay v. Gibson, 56 Pa. St. .57. ^Wilson r. Simpson, 68 Tex. 306. 238 NATURE AND REQUISITES OF THE CONTRACT. The general rule, irrespective of statutory provisions, is that an officer cannot take the acknowledgment of a conveyance to which he is a party, or in which he is directly or indirectly interested. Thus, an acknowledgment of the grantor in a deed of trust taken before the trustee as notary public, is void, though the latter has not accepted the trust ; the deed being for his benefit, his acceptance will be presumed until his dissent is shown.^ Where a notary who has signed a certificate of acknowledg- ment to a mortgage and other witnesses testify that the mort- gagor acknowledged the mortgage, which he denies, the fact that the notary was also attorney for the mortgagee does not change the presumption in favor of the certificate, and the burden is still on the mortgagor to show that he did not acknowledge it.^ Where a mortgage was acknowledged before a deputy clerk, who made an indorsement thereto on the back, but the clerk in making out the certificate failed to include the indorsement therein, is a mistake which may be corrected.^ But a clerk cannot pass on the correctness of a certificate acknowledged by himself and wife. Thus, a clerk of a court, who was the grantor in a deed of trust, acknowledged and executed the same before a justice of the peace who alpo took the privy examination of the grantor's wife ; and then the clerk adjudged the certificate made by the justice of such acknowl- edgment and privy examination to be in due form, and admitted the instrument to probate and ordered registration ; the court held such action on the part of the clerk as wholly void.* § 217. The Capacity of the Officer. — Ministerial or Judicial. — Whether the act of taking the acknowledgment is ^ Bowden v. Parrish, 86 Va. 67. See, also, Wilson v. Traer, 20 Iowa, 231 ; Groesbeck v. Seeley, 13 Mich. 329 ; Brown v. Moore, 38 Tex. 645 ; Wasson V. Connor, 54 Miss. 352; Withers v. Baird, 7 Watts (Pa.), 227; Darst V. Gale, 83 111. 136. Compare Nat. Bank v. Conway, 14 Bank. Reg. 513 ; Gib- son V. Norway Bank, 69 Me. 579. See, also, Rothschild v. Dougher (Tex.), 20 S. W. Rep. 142. ^ Dikeman v. Arnold, 78 Mich. 455. ^Ralston v. Moore, 83 Ky. 571. ^ White V. Connelly, 105 N. Car. 65. REQUISITES AND VALIDITY. 239 ministerial or judicial is a question which has been differently answered. It is held by one class of decisions that the magis- trate does not exercise judicial functions in taking such ac- knowledgment ; that he is not required to determine the grantor's capacity, and does not do so by using the word " vol- untarily " in the certificate. If the grantor acknowledges the signing and sealing of the instrument, it is the officer's duty to certify that fact, and there his duty ends. The act, though official, is purely ministerial, and the adverse party is not thereby precluded from showing the grantor's incapacity at the time of acknowledgment.^ So the taking a certificate of acknowledgment implies the discharge of no judicial duty, but is purely ministerial.^ In other States, however, it is held that the officer taking the acknowledgment acts, at least, in a quasi judicial capacity. The Mississippi Supreme Court holds that whatever may be said of the receiving for record and recording of a deed, it is evident that the taking of an acknowledgment of a grantor is a quasi judicial act and cannot be performed by the grantee in the deed. The officer who takes an acknowledgment acts in a judicial character in determining whether the person rep- resenting himself to be, or represented by some one else to be, the grantor named in the conveyance, actually is the grantor. He determines further whether the person thus adjudged to be the grantor does actually and truly acknowledge before him that he executed the instrument. By his certificate he makes an official record of his adjudication on these points, which cannot be impeached by himself ; and sometimes cannot be impeached by the grantor.^ But the current of authority holds, especially as to acknowl- edgments of married women, that the act of the officer taking ' Truman v. Lore, 14 Ohio St. 144 ; Williamson v. Carskadden, 36 Ohio St. 664. 'Lynch v. Livingston, 6 N. Y. 422, 434 ; Kimball v. Johnson, 14 Wis. 674 ; Elliott V. Peirsol, 1 Pet. (U. S.) 341 ; Emmal v. Webb, 36 Cal. 197 ; Odiorne V. Mason, 9 N. H. 24 ; Frink v. Pond, 46 N. H. 125 ; Gill v. Fauntleroy, 8 B. Mon. (Ky.) 179. See, also, Dawson v. Thurston, 2 Hen. & Munf. (Va.) 132 ; Hamilton v. Pitcher, 53 IVIo. 334. ' Wasson v. Connor, 54 Miss. 352. 240 NATURE AND REQUISITES OP THE CONTRACT. the acknowledgment is judicial. The officer acts judicially, not ministerially. The law imposes on him the duty of ascer- taining, by his view and examination, the truth of the matters to which he is to certify, and points out precisely his duty. Having thus entrusted him to see that the proper forms are observed, his solemn certificate that they have been observed, on the faith of which parties act, contracts are made, moneys are paid, and deeds and mortgages accepted, must, except in cases of fraud or collusion, be considered as entitled to full faith and credit ; and cannot, without rendering titles to real estate exceedingly insecure, be left at any distance of time afterward to the uncertainty and frailty of parol proof, and to all the mistakes, prejudices, imperfections, and hazards that attend it. This rule is founded on reason and sound business principles, and inust prevail except in cases of fraud.^ Thus the act of the officer by whom the acknowledgment of a married woman is taken and certified is judicial, and, for the security of titles, must, in cases where the wife has signed the deed or mortgage and appeared before the officer, be held to be conclusive against her in favor of a perfectly bona fide grantee, for valuable consideration.^ Some jurisdictions permit a. feme coverfs acknowledgment of a deed to be contradicted by parol evidence.^ Others hold ' Jamison v. Jamison, 3 Whart. (Pa.) 457; Paul v. Carpenter, 70 N. Car. 502 ; Scanlan v. Turner, 1 Bailey (S. Car.) 421 ; Kerr v. Russell, 69 111. 666 ; Ham- mers V. Dole, 61 111. 307 ; Withers v. Baird, 7 Watts (Pa.), 227 ; Heeter v. Glasgow, 79 Pa. St. 79 ; Kottman v. Ayer, 1 Strobh. (S. Car.) 576 ; Black v. Gregg, 58 Mo. 565 ; Wilson v. Traer, 20 Iowa, 231 ; Suddereth v. Smyth, 13 Ired. (N. Car.) 452 ; Ford v. Gregory, 10 B. Mon. (Ky.) 175 ; Johnston v. Slater, 11 Gratt. (Va.) 321 ; Brown v. Moore, 38 Tex. 645 ; Sutton v. Sutton, I Dev. &. Bat. (N. Car.) 582 ; Bancks v. Ollerton, 26 Eng. L. & Eq. 509 ; Men- hennet's Case, L. R. 5 C. P. 16 ; Williams v. Baker, 71 Pa. St. 476 ; Homoeo- pathic Mut. Life Ins. Co. v. Marshall, 32 N. J. Eq. 103. 2 Hartley v. Frosh, 6 Tex. 208 ; Bissett v. Bissett, 1 Harr. & McH. (Md.) 211; Schrader v. Decker, 9 Pa. St. 15; Michener r. Cavender, 2 Wright (Pa.), 336 ; Johnston v. Wallace, 53 Miss. 335 ; Landers v. Bolton, 26 Cal. 406 ; M'Neeley v. Rucker, 6 Blackf. (Ind.) 391; McCandless v. Engle, 51 Pa. St. 309. ' ^Sharpe v. McPike, 62 Mo. 300; Wannell v. Kem, 57 Mo. 478; Dodge v. Hollinshead, 6 Minn. 25 ; Drury v. Foster, 2 Wall. (U. S.) 24 ; Hays v. Hays, 5 Rich. (S. Car.) 31 ; Bruce v. Perry, 11 Rich. (S. Car.) 121 ; Morris v. Sar- gent, 18 Iowa, 90 ; Van Orman v. McGregor, 23 Iowa, 300. I REQUISITES AND VALIDITY. 241 that such acknowledgments are conclusive, in the absence of fraud or duress.^ Other States have enacted laws making such acknowledg- ments only prima facie correct,^ and they may be overthrown without alleging fraud, but the proof must be clear, cogent, and convincing.^ iM'Neeley v. Rucker, 6 Blackf. (Ind.) 391; Jordan v. Corey, 2 Carter (Ind.), 385 ; Wright v. Bundy, 11 Ind. 400 ; Hartley v. Frosh, 6 Tex. 208 ; Pool V. Chase, 46 Tex. 207 ; Bissett v. Bissett, 1 Harr. & McH. (Md.) 211 ; Eidgely V. Howard, 3 Harr. & McH. (Md.) 321 ; Central Bank v. Copeland, 18 Md. 305 ; Hornbeck v. Mut. Build. Assn., 88 Pa. St. 64 ; Heeter v. Glasgow, 79 Pa. St. 79 ; Miller r. Wentworth, 82 Pa. St. 280 ; Singer Manf. Co. v. Rook, 84 Pa. St. 442 ; Louden v. Blythe, 16 Pa. St. 532 ; Williams v. Baker, 71 Pa. St. 476 ; Hoffinan v. Coster, 2 Whart. (Pa.) 453 ; Hill v. Bacon, 43 111. 477 ; Calumet, etc., Co. V. Russell, 68 111. 426 ; Kerr v. Russell, 69 111. 666; Graham v. Anderson, 42 111. 614 ; Eyster v. Hathaway, 50 111. 521 ; Lickman v. Harding, 65 111. 505 ; AVood- bourne v. Gorrel, 66 N. Car. 82 ; Paul v. Carpenter, 70 N. Car. 502 ; Mount v. Kesterson, 6 Cold. (Tenn.) 452 ; Finnegan v. Finnegan, 3 Tenn. Ch. 510 ; Norton v. Nichols, 35 Mich. 148 ; Stone v. Montgomery, 35 Miss. 83 ; Was- son V. Connor, 54 Miss. 352 ; Johnston v. Wallace, 53 Miss. 331 ; Kavanaugh V. Day, 10 R. I. 393 ; Greene v. Godfrey, 44 Me. 25 ; Cahall v. Citizens' Ass'n, 61 Ala. 232; Harkins v. Forsyth, 11 Leigh (Va.), 294; Tod v. Baylor, 4 Leigh (Va.), 498 ; Carper v. M'Dowell, 5 Gratt. (Va.) 212 ; Bancks 7'. Ollerton, 26 Eng. L. & Eq. 508 ; Thompson v. Thompson, 2 Chan. Chamb. (Canada) 211 ; Robinson v. Chassey, 1 Hannay (N. Bruns.), 50. Compare Howard r. Scott, 2 Chan. Chamb. 274 ; Allen v. Lenoir, 53 Miss. 321 ; Harrell v. Elliott, 2 Hayw. (Tenn.) 68 ; Russell v. Baptist Theolog. Union, 73 111. 337 ; Byer v. Etnyre, 2 Gill (Md.), 150. "Ford V. Teal, 7 Bush (Ky.), 156; Woodhead v. Foulds, 7 Bush (Ky.), 222; Jett V. Rogers, 12 Bush (Ky.), 564. (Formerly such acknowledgments were conclusive in Kentucky : Barnett v. Shackleford, 6 J. J. Marsh, 532 ; Allen v. Shortridge, 1 Duv. 34.) Landers v. Bolton, 26 Cal. 406; Eaton v. Woydt, 32 Wis. 277 ; Jackson v. Schoonmaker, 4 Johns. (N. Y.) 161 ; Priest v. Cummings, 16 Wend. (N. Y.) 617 ; Watson i'. Campbell, 28 Barb. (N. Y.) 421 ; Steffin v. Bauer, 70 Mo. 399. Compare Fogarty v. Finlay, 10 Cal. 239 ; Rexford v. Rexford, 7 Lans. (N. Y.) 6. How far a foreign certificate has been held conclusive may be seen in the following cases : Crispen v. Hannavan, 50 Mo. 415 ; Sessions v. Reynolds, 7 Sm. & M. (Miss.) 130 ; Southerin v. Mendum, 5 N. H. 420 ; Lacey v. Davis, 4 Mich. 140 ; Welles v. Cole, 6 Gratt. (Va.) 645 ; Wright v. Bundy, 11 Ind. 399 ; McPherson v. Foatherstone, 37 Wis. 632 ; Eaton v. Woydt, 32 Wis. 277 ; Living- ston V. M'Donald, 9 Ohio, 168; Mott v. Smith, 16 Cal. 533; Keller v. Moore, 51 Ala. 340 ; Hart v. Ross, 57 Ala. 518 ; Coldswell's Case, L. R. 10 C. P. 667. 'Bohan v. Casey, 5 Mo. App. 101 ; Mather v. Jarel, 33 Fed. Rep. 366; In- surance Co. r. Nelson, 103 U. S. 544 ; Youngs v. Duvall, 109 U. S. 573. A certificate under this ruling is regarded only as prima facie evidence of VOL. I. — 16 242 NATURE AND REQUISITES OF THE CONTRACT. § 218. The True Distinction. — The conflict of authority- can be reconciled. The common law required that the ac- knowledgment of the wife should be made in open court by fine or recovery, and it always became a matter of record. In the levy of a fine the privy examination constituted part of a judicial proceeding and never could be contradicted. The privy examination of the married woman before the officer taking the acknowledgment and his certificate to the fact of such examination and acknowledgment were substi- tuted for the fine, and are given the same eff'ect by statutory en- actments. By authorizing a notary public or clerk of a court to take such acknowledgments and privy examination, the legislature has conferred upon them duties of the same nature as those formerly exercised by courts, which give to their acts the dignity of judicial proceedings. Hence the official act of taking the privy examination of a married woman, whether by a court, justice, or notary public, is a judicial act, or as it is sometimes designated, a guasi-judicial act.^ Accordingly the private examination of a feme covert is a judicial act.^ So this doctrine of a judicial act had its origin in the con- sideration of acknowledgment by married women when the officer is required to make the privy examination designated in the statute, and applied to such case, this rule is sound in reason and precedent ; ^ otherwise it is a ministerial act. But in many of the States the privy examination of a married woman has been abolished by statute, and she is treated as a feme sole. Accordingly an acknowledgment by a married woman under such an act is ministerial. Those cases which hold that it is always a judicial act will be found upon exami- nation to have improperly applied the ruling in regard to the matters therein stated, and it may be overthrown without alleging and proving fraud and collusion. ^ Henderson v. Smith, 26 W. Ya. 829. See, also, Ennor v. Thompson, 46 HI. 214. 2 Singer Manuf. Co. v. Rook, 84 Pa. St. 442 ; Hom. Mut. Life Ins. Co. t;. Mar- shall, 32 N. J. Eq. 103. » Calumet, etc., Co. v. Russell, 68 111. 426 ; Kerr v. Russell, 69 111. 666. M REQUISITES AND VALIDITY. 243 acknowledgment by a feme covert where a privy examination is made necessary by statute, to acknowledgments not made by married women, or where there has been no requirement of such an examination.^ Statutes which confer upon judges the power to take the ac- knowledgments of deeds and to solemnize marriages, are not judicial in their nature.^ And this is the true doctrine. Un- less a private examination of a married woman is necessary, taking her acknowledgment is ministerial as are all other ac- knowledgments.^ § 219. How Far Certificates of Acknowledgment May Be Corrected. — It seems that an officer may correct his own mistake after the acknowledgment has been taken.^ In case he refuses to make the correction he may be com- pelled to do so by mandamus.^ A mistake in the date of an acknowledgment may be shown and the true date established.^ But evidence in contradiction of facts set forth in the certifi- cate will not be admitted.^ If the deed shows that the grantee made the acknowledgment, this mistake cannot be corrected in a court of equity, so as to give the deed legal effect from its execution.^ And it is generally held that parol evidence is not admissible when no fraud has been perpetrated, to supply omissions and to correct mistakes of the officer.^ That a magistrate cannot 1 People V. Bartels, 138 111. 322. =* People V. Nelson, 133 111. 565. 'Lynch v. Livingston, 6 N. Y. 422; Truman v. Lore, 14 Ohio St. 144; Williamson r. Carskadden, 36 Ohio St. 664 ; Curtiss v. Colby, 39 Mich. 456 ; Doran v. Butler, 74 Mich. 643 ; Fo.earty v. Finlay, 10 Cal. 239. * Jordan r. Corey, 2 Carter (Ind.), 385. MVannall v. Kem, 51 Mo. 150 ; Miller v. Powell, 53 Mo. 254. *Hoit V. Russell, 56 N. H. 559. 'Williamson r. Carskadden, 36 Ohio St. 664; Johnston v. Wallace, 53Mi.'^3. 331, 338. 8 Wood V. Cochrane, 39 Yt. 544. 'Robinson v. Noel, 49 Miss. 253 ; Robinson v. Barfield, 2 Murph. (N. Car.) 390 ; Barnet v. Bamet, 15 Serg. & R. (Pa.) 72 ; O'Ferrall v. Simplot, 4 Iowa, 381 ; Hayden v. Westcott, 11 Conn. 129 ; Chauvin v. Wagner, 18 Mo. 531, 544 ; Wood V. Cochrane, 39 Yt. 544 ; Leftwich v. Neal, 7 W. Ya. 569 ; Ennor v. Thompson, 46 HI. 214 ; Hughes v. Wilkinson, 35 Ala. 453 ; Conn. Ins. Co. v. 244 NATURE AND REQUISITES OP THE CONTRACT. impeach his own acts, is the general rule.^ When one in good faith has purchased the property without notice of fraud, he will be protected.^ This is the general rule.^ § 220. Equity Will Not Correct such Officer's Mis- takes AND Omissions. — Equity will not correct the officer's mistakes and omissions where there is no fraud perpetrated. Thus, a mistake in the certificate of acknowledgment, whereby the grantee appears to have made the acknowledgment, cannot be corrected in a court of equity, so as to give the record of the deed or mortgage legal effect from the inception, for the reason that it cannot be determined from the face of the in- strument whether the error consists in inserting the wrong name, or in taking the acknowledgment of the wrong man.* While it is generally held that an officer may correct, at any time, a mistake in his certificate, conformably with the facts,^ yet a court of equity has no jurisdiction to correct such mistakes or omissions.^ McCormick, 45 Cal. 580 ; Jamison v. Jamison, 3 Whart. (Pa.) 457. Compare Angier v. Scliieffelin, 72 Pa. St. 106 ; A^an Sickle v. People, 29 Mich. 61 ; Rob- inson V. Barfield, 2 Murph. (N. Car.) 390. lElwood V. Klock, 13 Barb. (N. Y.) 50; Stone v. Montgomery, 35 Miss. 83; Greene v. Godfrey, 44 Me. 25 ; Central Bank v. Copeland, 18 Md. 305. Com- pare Truman v. Lore, 14 Ohio St. 144 ; Hoit v. Russell, 56 N. H. 559 ; Jansen V. McCahill, 22 Cal. 563. * Heeter v. Glasgow, 79 Pa. St. 79 ; Hall v. Patterson, 51 Pa. St. 289. 3 Moses V. Dade, 58 Ala. 211 ; White v. Graves, 107 Mass. 325 ; Schrader v. Decker, 9 Pa. St. 14 ; Green v. Scranage, 19 Iowa, 461 ; Mastin v. Halley, 61 Mo. 196 ; Williams v. Baker, 71 Pa. St. 476 ; Pool v. Chase, 46 Tex. 207 ; Louden v. Blythe, 27 Pa. St. 22. Compare Michener v. Cavender, 38 Pa. St. 334 ; Anderson v. Anderson, 9 Kan. 112 ; Norton v. Nichols, 35 Mich. 148. * Wood V. Cochrane, 39 Vt. 544. ^ Jordan v. Corey, 2 Ind. 385. « Wannall v. Kem, 51 Mo. 150 ; O'Ferrall v. Simplot, 4 Iowa, 381 ; Green v. Banton, 1 Dev. Eq. (N. Car.) 504 ; Flanagan r. Young, 2 Harr. & McH. (Md.) 38 ; Henderson v. Rice, 1 Coldw. (Tenn.) 223 ; Selover v. Com. Co., 7 Cal. 266 ; Butler v. Buckingham, 5 Day (Conn.), 504 ; Jacoway v. Gault, 20 Ark. 190; Barnett ?. Shackelford, 6 J. J. Marsh (Ky.), 532; AVillis v. Gattman, 53 Miss. 721 ; Martin v. Dwelly, 6 Wend. (N. Y.) 9 ; Chauvin r. Wagner, 18 Mo. 531; Campbell v. Taul, 3 Yerg. (Tenn.) 548; Grapengether v. Fejervary, 9 Iowa, 163; Carr v. Williams, 10 Ohio, 305; M'Farland v. Febiger, 7 Ohio, 194 ; Heaton v. Fryberger, 38 Iowa, 185. Compare Simpson REQUISITES AND VALIDITY. 245 The certificate may be impeached, however, for fraud, duress, or undue inilueuce ' in a court of equity. Neither will a court of equity compel a married woman to correct her acknowledgment ; " nor compel the registry of an miacknowledged deed ; ^ nor authorize a magistrate to give a new certificate in the place of one lost* Article 7. Delivery of the Instrument. ^221. Deliver}' and Acceptance. ^ 225. Eegistration of Mortgage is § 222. Presumption of Delivery. Prima Facie Evidence of De- ^223. Illustrations. livery. 1 224. Subsequent Acceptance by 1 226. Delivery of Deed in Escrow. Mortgagee. § 221. Delivery and Acceptance. — It is essential to the validity of a deed or mortgage that it be delivered and ac- cepted by the grantee or his agent, or if not actually delivered to the grantee or his agent authorized to receive it, to prove notice to him of its existence and such additional circumstances as will afford a reasonable presumption of his acceptance of it.^ The better opinion seems to be that no deed can take effect as having been delivered until such act of delivery has been assented to by the grantee, and he shall have done something equivalent to an acceptance of it.'' There can be no delivery without an acceptance. The delivery need not be to the grantee in person ; it may be to any authorized person for him.' V. Montgomery, 25 Ark. 365 ; Kilbourn v. Fury, 26 Ohio St. 153 ; Kane v. McCown, 55 Mo. 181. ^Eyster v. Hatheway, 50 111. 521 ; Montgomery v. Hobson, Meigs (Tenn.), 437 ; Fisk v. Stul)bs, 30 Ala. 335 ; Witbeck v. Witbeck, 25 Mich. 439 ; De- vorse r. Snider, 60 Mo. 235 ; Finnegan v. Finnegan, 3 Tenn. Ch. 514. Com- pare Fisher v. Meister, 24 INIich. 447. * Barrett v. Tewksbury, 9 Cal. 15. 'Caldwell v. Head, 17 Mo. 561. * Married Woman's Case, L. R. 2 C. P. 510. 'Bell V. Bank, 11 Bush (Ky.), 34. *2 Washb. Real Prop. 581. ' Merrills v. Swift, 18 Conn. 257 ; Woodward v. Camp, 22 Conn. 457 ; Fisher V. Hall, 41 N. Y. 416, 423 ; Everett v. Everett, 48 N. Y. 218 ; Mather v. Cor- 246 NATURE AND REQUISITES OF THE CONTRACT. Delivery is the final act without which all other formalities are ineffectual. To constitute such delivery the grantor must part with the possession of the deed or the right to retain it.^ The right to deliver the deed by a third person may be in- ferred. Thus a notary public with whom a note and mortgage securing it are left by the mortgagor whose acknowledgment to the mortgage he took, will be presumed to have authority to deliver them in the absence of special instructions to the contrary, and a delivery by him to the mortgagee is sufficient.^ A deed or mortgage may be delivered in many ways. It may be delivered by doing something and .saying nothing, or by saying something and doing nothing, or it may be by both.* But by one or both of these it must be made.* It is not nec- essary that tliere be an actual handing over of the instrument to constitute a delivery.^ Delivery is just as necessary to the completion of the transaction as the signing, sealing, or ac- knowledging of the mortgage.^ Where two or more persons enter into a bond any one of them may deliver it. Thus two persons execute a joint and several bond. Each has implied authority arising out of the nature of the transaction to act for the other, and where one allows the other to take the bond, after both have executed it, his possession of the bond gives him authority to make de- livery of it and to receive the consideration from the obligee.^ liss, 103 Mass. 568 ; Thompkins v. Wheeler, 16 Pet. (U. S.) 106, 109 ; Henrich- sen V. Hodgden, 67 111. 179 ; Buckholder v. Capad, 47 Ind. 418 ; Ely v. Stan- nard, 44 Conn. 528 ; Church v. Oilman, 15 Wend. (N. Y.) 661 ; Stillwell v. Hubbard, 20 Wend. (N. Y.) 44 ; Tibbals v. Jacobs, 31 Conn. 428 ; Berry v. An- derson, 22 Ind. 36, 39 ; Parmelee v. Simpson, 5 Wall. (U. S.) 81. ' Fisher v. Hall, 41 N. Y. 416. * Adams v. Adams, 70 Iowa, 253. 3 Flint V. Phipps, 16 Ore. 437 ; Shep. Touchstone, 57. *Jackson?'. Phipps, 12 Johns. (N. Y.) 418, 421; Byers v. McClanahan, 6 Gill & J. (Md.) 256 ; Stewart v. Redditt, 3 Md. 67. ^Fain v. Smith, 14 Ore. 82 ; 58 Am. Rep. 281. « Goodwin v. Owen, 55 Ind. 243; Dole v. Bodman, 3 Met. (Mass.) 139; Jackson v. Phipps, 12 Johns. (N. Y. ) 418 ; Freeman v. Peay, 23 Ark. 439 ; Chauncey v. Arnold, 24 N. Y. 330 ; Fain v. Smith, 14 Ore. 82 ; 58 Am. Rep. 281 ; 1 Dev. on Deeds, sect. 260 ; Shirley v. Burch, 16 Ore. 83. ■^ Wolf r. Driggs, 44 N. J. Eq. 363. REQUISITES AND VALIDITY. 247 If a bond is delivered conditionally, the condition must be performed before the delivery is binding. Thus if a bond be delivered by one surety thereon to the obligor upon condition, such delivery is not effectual unless the condition be per- formed/ When the person named as payee in a note, and accom- panying mortgage never had any interest in the same and knew nothing of the transaction, and the said papers were not delivered to him but were delivered to another, it was held that there was no delivery.^ But a delivery to a mortgagee who is called by the wrong name in the mortgage, identifies the intended person to be secured, and the delivery is suffi- cient.^ A delivery to the mortgagee's agent is sufficient.* Both delivery by the grantor and acceptance by the grantee are necessary because both are essential to show union of mind.' The object of the delivery is to indicate the grantor's in- tention to give the deed effect as a conveyance.^ A delivery to the register of deeds without the mortgagee's knowledge or consent, but who afterward accepts the deed from the mortgagor's administrator is sufficient.'^ The fact that a deed absolute claimed to be a mortgage is dated eleven days and received ten days before the date of the separate defeasance, only raises the presumption that it was ^King V. Smith, 2 Leigh (Va.), 157; Pawling v. United States, 4 Cranch (U. S.), 219 ; People v. Bostwick, 43 Barb. (N. Y.) 9 ; 32 N. Y. 445 ; United States V. Hammond, 4 Biss. C. C. 283 ; Bibb v. Reid, 3 Ala. 88 ; Wight v. Shelby R. R. Co., 16 B. Men. (Ky.) 5 ; State v. Chrisman, 2 Ind. 1 26. Compare Deardorff t). Foresman, 24 Ind. 481 ; Taylor v. Craig, 2 J. J. Marsh (Ky.), 462 ; Bank v. Curry, 2 Dana (Ky.), 142; Smith v. Moberly, 10 B. Mon. (Ky.) 266; Millett V. Parker, 2 Mete. (Ky.) 608 ; Nash v. Fugate, 24 Gratt. (Va.) 202. 2 Shirley v. Burch, 16 Ore. 83. 'Fisher v. Milmine, 94 111. 328 ; Beaver v. Slanker, 94 111. 175. * Patterson v. Ball, 19 Wis. 243 ; Freeman v. McCollum, 20 Wis. 360. * Hendricks v. Rasson, 53 Mich. 575; Watson r. Hillman, 57 Mich. 609; Wiggins V. Lusk, 12 111. 132 ; Hadlock v. Hadlock, 22 111. 384 ; Wilsey v. Den- nis, 44 Barb. (N. Y.) 359 ; Fonda v. Sage, 46 Barb. (N. Y.) 123. «3 Washb. Real Prop. (5th ed.) 300; Maynard v. Maynard, 10 Mass. 456; Hatch V. Hatch, 9 Mass. 307 ; Woodbury v. Fisher, 20 Ind. 387 ; Utterbach v. Binns, 1 McLean, C. C. 242. ' Lee V. Fletcher, 46 Minn. 49. 248 NATURE AND REQUISITES OF THE CONTRACT. delivered before recording.' But when an administrator exe- cuted a mortgage and note to secure his indebtedness to the estate, and the note and mortgage are afterward found among his papers by his successor in trust, there is no deUvery.^ The mortgagor cannot complain that the mortgage is not accepted if the mortgagee has performed acts showing an ac- ceptance.^ § 222. Presumption of Delivery. — The question of delivery is more a question of fact than of law. No particular form of words is necessary to constitute a delivery.^ The legal pre- sumption is, where the deed is properly executed, that such deed, found in the possession of the grantee, was delivered by the grantor, and accepted by the grantee, in absence of proof to the contrary.^ It is the general rule that a party will accept a deed because it is beneficial to him; the assent of the grantee to accept the conveyance being presumed from the fact that the convey- ance is beneficial to him.^ But the presumption that the party will accept a deed because it is beneficial to him will never be carried so far as to assume that he has accepted it.^ ^ Kraemer v. Adelsberger, 122 N. Y. 467. "Gorham v. Meacham, 63 Vt. 231. 3 Citizens' Bank v. Webre (La.), 10 South Rep. 728. * Nazro v. Ware, 38 Minn. 443 ; Flint v. Phipps, 16 Ore. 437. * Wolverton v. Collins, 34 Iowa, 238 ; Souverbye v. Arden, 1 Johns. Ch. (N. Y.) 240 ; 3 Washb. Real Prop. (5th ed.) p. 312, sect. 31 ; Adams v. Frye, 3 Met. (Mass.) 103 ; Chandler v. Temple, 4 Cush. (Mass.) 285 ; Scrugham v. "Wood, 15 Wend. (N. Y.) 545 ; 30 Am. Dec. 75 ; Jaques v. Trustees, 17 Johns. (N. Y.) 548 ; Games v. Stiles, 14 Pet. (U. S.) 322. ^Munoz V. Wilson, 111 N. Y. 295, 303; Church v. Gilman, 15 Wend. (N. Y.) 656 ; GiflFord v. Corrigan, 105 N. Y. 223. '' Thompson v. Jackson, 10 Bush (Ky.), 424 ; Tuttle v. Turner, 28 Tex. 759. In regard to the extent allowed to the presumption that a party will ac- cept a deed because it is beneficial to him is a question upon which there is a conflict of authority. But the weight of authority is as stated in the text . Prutsman r. Baker, 30 Wis. 644 ; Townsend v. Tickell, 3 Barn. & Aid. 36 ; Younge i). Guibeau, 3 Wall. (U. S.) 636; Jackson v. Phipps, 12 Johns. (N. Y.) 418 ; Rogers v. Carey, 47 Mo. 232 ; Fonda v. Sage, 46 Barb. (N. Y.) 109 ; Hulick V. Scovil, 9 111. 159. Compare Myrover v. French, 73 N. Car. 609. REQUISITES AND VALIDITY. 249 The fact of acknowledgment or proof of a mortgage does not raise the conclusive presumption that it has been delivered/ yet it has been held as presumptive evidence.^ Proceedings by the mortgagee to enforce the title, or his release of it, are conclusive of his acceptance.^ If the mortgage be disposed of so as to clearly indicate the intention of the j^arties that it should take effect as such, the delivery is sufficient.^ § 223, Illustrations. — Evidence that a daughter handed a mortgage, running to her father, to her mother who occupied rooms in her house with her father, which deed she afterward saw in a bureau drawer in their rooms, shows that she in- tended the mortgage for the father, and the transaction was a sufficient delivery.* So where a mortgage runs to several creditors and has been delivered to one for the benefit of all, none of whom has ever repudiated it, an acceptance by each need not be shown.^ The fact that the grantor retains actual possession of a deed is evidence of the non-delivery, but there may be a delivery, though he retain such possession. Thus, a son executed a mortgage for $8,000 to his father and duly acknowledged de- livery, before a master in chancery, and four months thereafter caused it to be registered. After his father's death, being ex- ecutor of his father's estate, he admitted that he owed the estate, among other moneys, the sum of $8,000. Four years thereafter, while the estate remained unsettled, he wrote upon the mortgage that he, as executor, had received payment in full of both principal and interest, and then caused the registry of the mortgage to be cancelled. These circumstances show a de- ^Bell V. Bank, 11 Bush (Ky.),34; Freeman v. Schroeder, 43 Barb (N. Y.) 618 ; 29 How. Pr. 263 ; Jackson v. Richards, 6 Cow. (N. Y.) 617. nVyckoff r. Remsen, 11 Paige (N. Y.), 564. 'Ely V. Stannard, 44 Conn. 528; Crocker v. Lowenthal,83 111. 579; Aldrich V. Willis, 55 Cal. 81. *Nazro v. AVare, 38 Minn. 443. *Ray V. Hallenbeck, 42 Fed. Rep. 381. ^Shelden v. Erskine, 78 Mich. 627. 250 NATURE AND REQUISITES OP THE CONTRACT. livery.^ It is not necessary, to constitute complete delivery, that the instrument should leave the actual possession of the grantor.^ If a deed or mortgage be so disposed of or treated as to evince clearly the intention of the parties that it should take effect as such, it is a sufficient delivery. Thus, the grantor sold land for $700, and the grantee gave him a note for $431.48 balance of the purchase-money, with a verbal agreement that in a short time he would secure this note by a mortgage back on the land. The mortgage was duly executed on June 20, 1873, but dated September 17, 1872, and on the same da}^ deposited with the register of deeds by the grantee, with instructions to record it upon the happening of a certain contingency, which never happened ; but contrary to these instructions, the register recorded it on the same day, and then returned it to the mortgagor. Subse- quently the mortgagor notified the mortgagee by letter that he had secured the debt by mortgage, in compliance with the provisions of the oral agreement, he still holding the instru- ment from 1873 to 1885 when it was delivered to the mort- gagee. This conduct of the mortgagor clearly evinced an in- tention that the mortgage should take effect.^ To show delivery there must be proof of that which evinces an intention on the part of the grantor or mortgagor to part with the investment, and, of course, to pass the title. This inten- tion may be made to appear, either from the circumstances of the transaction^ or from the acts or words of the grantor.'* The certificate of the proper officer, made under the statute, that the grantor signed, sealed, and delivered the deed or mort- gage as his voluntary act and deed, is cogent evidence of de- livery.^ 1 Terhune v. Oldis, 44 N. J. Eq. 146. 2 Folly V. Vantuyl, 4 Hal. (N. J.) 153 ; Crawford v. Bertholf, Sax. (N. J.) 458 ; Cannon v. Cannon, 26 N. J. Eq. 316 ; Ruckman v. Ruckman, 33 N. J. Eq. 354. 3 Nazro v. Ware, 38 Minn. 443. * Crawford v. Bertholf, Sax. (N. J.) 458 ; Ruckman v. Ruckman, 33 N. J. Eq. 354. ^Farlee v. Farlee, 1 Zab. (N. J.) 279. \ik REQUISITES AND VALIDITY. 251 § 224. Subsequent Acceptance by Mortgagee. — A mort- gagee may accept the mortgage which has been made in his favor unknown to him, if the rights of creditors, purchasers, or incumbrancers have not intervened. The mortgagee or his representative may assent to and ratify the execution of such mortgage and enforce its payment.^ So deed or mortgage may be delivered to a stranger for the grantee named therein without any special authority from the grantee to receive it for him. And if the grantee assents to it afterward the instrument is valid from the time of the original delivery.^ A son executed a deed to his father, of his own volition and without the knowledge of the latter, and delivered it to the regis- ter. This was a perfect delivery and upon acceptance by the grantee, the deed took effect from the time of such delivery, no interests of third parties intervening.^ A mortgage after being drafted under the mortgagee's in- structions, was by his direction taken to the mortgagor's home and there executed and acknowledged in the mortgagee's ab- sence before a justice of the peace, whereupon it was given to the justice for record. It was held, that in the absence of any objection afterward, the facts warranted the finding that the mortgage was given to the justice as an agent of the mortgagee, and that there had been an effectual delivery.* Every subsequent ratification has a retrospective effect, and is equivalent to a prior command.^ A subsequent acceptance of the mortgage by the mortgagee ratifies the making and re- cording of it.^ If a mortgage is filed for record by the mort- 1 Munoz r. Wilson, 111 N. Y. 295. *Tho Lady Superior r. McNamara, 3 Barb. (N. Y.) Ch. 378; Goodsell v. Stinnon, 7 Blackf. (Ind.) 437 ; Moody v. Dryden, 72 Iowa, 461. « Rathbun v. Rathbun, 6 Barb. (N. Y.) 102 ; Jackson v. Goodell, 20 Johns. (N. Y.) 187. * Greene v. Conant, 151 Mass. 223. *Co. Litt. 207, a ; Kingsbury v. Burnside, 58 111. 310. *Carnall v. Duval, 22 Ark. 1.36. See, also, Bank r. Drury, 38 Vt. 426; Warner r. Winslow, 1 Sandf. Ch. (N. Y.) 430 ; Foster v. Scj-the Co., 47 Barb. (N. Y.) 505. 252 NATURE AND REQUISITES OF THE CONTRACT. gagor and afterward found in the possession of the mortgagee, this is sufficient proof of its delivery.' When a mortgagor makes a mortgage and tenders it to the mortgagee in compliance with prior instructions, but the mort- gagee refuses to receive it, the mortgagee cannot afterward accept the mortgage without the mortgagor's consent.^ The ratification may be indicated by any words or acts of the grantee or mortgagee which show a clear intention on his part that the instrument shall be considered as having been properly executed and delivered, and as conveying the title to or a lien on the property.^ §225. Registration of Mortgage is Prima Facie Evi- dence OF Delivery. — The registration of a deed or mortgage is prima facie evidence of its delivery.* Hence in the absence of any evidence to the contrary, the fact that the instrument is found upon the records duly acknowledged or attested is prima facie evidence of its delivery.^ But the registration itse If does not act as a delivery,^ and cannot supply the place of delivery.^ Where a mortgage is executed in the absence of the mortgagee and placed upon record by the mortgagor and permitted to remain of record as a mortgage and assumed to be such by all the parties in interest, want of manual delivery is of no importance, as this is a sufficient delivery.^ And such recording in 1 Haskill V. Sevier, 25 Ark. 152. "Adams r. Johnson, 41 Miss. 258. 3 Tucker v. Allen, IG Kan. 312 ; Gould v. Day, 94 U. S. 405. * Dev. on Deeds, sect. 292. 5 Lawrence v. Farley, 24 Hun (N. Y.), 293 ; Kille v. Ege, 79 Pa. St. 15 ; Jack- son V. Perkins, 2 Wend. (N. Y.) 308 ; Munoz v. Wilson, 111 N. Y. 295. « Foley V. Howard, 8 Iowa, 56 ; Hawkes v. Pike, 105 Mass. 560 ; Houfes v. Schultze, 2 111. App. 196 ; 96 111. 335 ; Parker v. Hill, 8 Met. (Mass.) 447. 'Berkshire Ins. Co. v. Sturgis, 13 Gray (Mass.), 177 ; Jones v. Busb,4 Harr. (Del.) 1 ; Hadlock v. Hadlock, 22 111. 384 ; Patterson v. Snell, 67 Me. 559; Maynard v. Maynard, 10 Mass. 456 ; Hatch v. Hatch, 9 Mass. 307 ; Gilbert v. Ins. Co., 23 Wend. (N. Y.) 43 ; Hendricks v. Rasson, 53 Mich. 575 ; Watson v. Hillman, 57 Mich. 609 ; Wiggins v. Lusk, 12 111. 132 ; Hedge v. Drew, 12 Pick. (Mass.) 141. ^Jackson v. Cleveland, 15 Mich. 94. I REQUISITES AND VALIDITY. 253 the absence of evidence to the contrary is presumptively a deHvery.^ Especially is the recording of a deed considered presump- tively a delivery of it as between the grantor and grantee, when the object of the record is to defraud, hinder, or delay creditors.^ The delivery of a mortgage may be inferred from its regis- tration, and the delivery of the bond secured by it will also be presumed from the fact that it is referred to in the mortgage as a subsisting obligation.^ And an execution and recording of a mortgage pursuant to a previous oral agreement to that effect constitute a sufficient delivery/ Where the grantor records the deed, his acts are presump- tive evidence of his intention to part with the title thereby conveyed,'^ and the grantee can hold the land as against the grantor.^ § 226. Delivery of Deed in Escrow. — A deed delivered to a third person in escrow cannot be revoked by the grantor. The depositary of the deed is the agent of both parties, and is bound to deliver the deed on performance of the conditions provided for in the contract.'^ The depositary is the agent of both parties, and as such is bound to deliver the instrument on performance of the condition provided for in the contract under which he holds it.^ The making of a deed in escrow presupposes a contract, ' Sessions r. Sherwood, 78 Mich. 23-1 ; Patrick v. Howard, 47 Mich. 40, 45 ; Stevens v. Castel, 6.3 Mich. 116, 117 ; Gage v. Gage, 36 Mich. 229. 2 Moore ?'. Giles, 49 Conn. .570 ; Sessions v. Sherwood, 78 Mich. 234,242; Gage V. Gage, 36 Mich. 229. ^Geissman v. Wolf, 46 Hun (X. Y.), 289. *Reid V. Abernethy, 77 Iowa, 438 ; Day v. Griffith, 15 Iowa, 104 ; Deere v. Nelson, 73 Iowa, 187. *Kerr v. Birnie, 25 Ark. 225; Hammell v. Hammell, 19 Ohio, 17; Board- man V. Dean, .34 Pa. St. 252. ®Kerr r. Birnie, 25 Ark. 225. 'McDonald v. Huflf. 77 Cal. 279; Cannon v. Handley, 72 Cal. 133, 140; Schmidt v. Deegan, 69 Wis. .300. * Shirley v. Ayres, 14 Ohio, 307 ; Schmidt v. Deegan, 69 Wis. 300. 254 NATURE AND REQUISITES OF THE CONTRACT. which will not be revoked so long as there is no breach of condition ; ' it is irrevocable." The fact that the depositary is the agent of the mortgagee, or where he is a director in a corporation which is the mort- gagee, does not disqualify him for a depositary.^ If the depositary delivers the mortgage before the time des- ignated, without waiting for the event, it is invalid.* But the mortgagor can waive his rights under such circumstances. Thus, notes secured by a mortgage were placed in escrow, to be delivered on performance of certain conditions which were never performed ; but the mortgagor recognized the notes as valid in an agreement with the assignee of the mortgage for their payment and paid part of them. It was held that the mortgagor had waived the provisions of the escrow agreement, and that the notes were a valid claim against the land as to him and his assigns.^ A mortgage without consideration in the hands of the de- positary to await the performance of a condition which would make a consideration for it, cannot be made operative by a fraudulent delivery before the performance of the delivery, and without the mortgagor's consent.® ' Stanton t'. Miller, 58 N. Y. 202 ; Hooper v. Ramsbotton, 6 Taunt. 11. 2 Cannon v. Handley, 72 Cal. 134 ; Bowles v. Woodson, 6 Gratt. (Va.) 78. 3 Andrews v. Thayer, 30 Wis. 228. * Chipman v. Tucker, 38 Wis. 43 ; 20 Am. Rep. 1. ^Dooley t). Potter, 146 Mass. 148. 6 Powell V. Conant, 33 Mich. 396. CHAPTER VII. correction and reformation. Article 1. Filling Blanks After Execution. § 227. English Doctrine. § 243. Minn,esota. I 228. American Doctrine. § 244. Mississippi. ^ 229. Alabama. \ 245. Missouri. \ 230. Arkansas. I 246. Nebraska. I 231. California. | 247. New Hampshire. I 232. Delaware. \ 248. New York. I 233. Georgia. g 249. North Carolina. § 234. Illinois. § 250. Ohio. § 235. Indiana. § 251. Oregon. I 236. Iowa. § 252. Pennsylvania. I 237. Kansas. § 253. South Carolina. i 238. Kentucky. l 254. Tennessee. § 239. Maine. § 255. Texas. \ 240. Maryland. § 256. Virginia. I 241. Massachusetts. § 257. Wisconsin. ? 242. Michigan. § 227. English Doctrine. — The ancient law is that " Every deed well made must be written — i. e., the agreement must be all written before the sealing and delivery of it, for if a man seal and deliver an empty piece of paper or parchment, albeit he do therewithal give commandment that an obligation or other matter shall be written in it, and this be done accord- ingly, yet this is no good deed." ' Hence, a deed executed by the grantor, with the name of the grantee in blank, and then the name filled in after the sale by a third party who made the contract, is void.^ So, when the instrument has nothing to operate upon it is void. Thus, when it refers to a schedule as annexed which was not annexed at the time of execution, a subsequent annexa- 'Shep. Touch., p. 54,68. ^ Hibblewhite v. M'Morine, 6 Mees. & Wels. 200. 255 256 NATURE AND REQUISITES OF THE CONTRACT. tion, in the absence of one of the parties, does not give it oper- ation as part of the deed.' So, where a bail bond was executed, and a condition after- ward inserted, it was held bad as a bail bond.^ The law is that a material alteration in a deed, whether made by a party or a stranger, is fatal to its validity.^ But a blank in part material, which is filled up in the pres- ence of the party, and ratified by him, is a redelivery, and hence the instrument is valid/ So a complete bond is not rendered void by the subsequent addition of another obligor with the assent of all parties.^ It is certain that if an instrument be signed, sealed, and de- livered in blank, and afterward filled up, it is no deed.'' But it was held that a blank for the Christian name of one appointed an attorney by deed, might be filled up when there was evidence that such was the intention of the party execut- ing the deed.^ § 228. American Doctrine. — A deed or mortgage, or any other instrument, affecting real estate, where the name of the grantee, mortgagee, or vendee is left blank, is void, so long as the blank remains. Some of the American courts hold that if the instrument is afterward filled up in accordance with the direction of the maker, it is valid, whether it is filled up in his presence or absence, whether before or after delivery, whether such directions are in writing or only in parol, and whether with or without the knowledge of the party holding under the instrument ; but other courts hold otherwise. But if the in- strument is filled up contrary to the directions of the maker, and to his injury, and with full knowledge on the part of the ^ Weeks v. Maillardet, 14 East. 568. '^Powell V. Duff, 3 Camp. 181 ; and see Bull. N. P. 267. 2 Davidson v. Cooper, 11 Mees. & Wels. 778, 802; Powell v. Divett, 15 East. 29. * Hudson V. Revett, 5 Bing. 368. ^Matson v. Booth, 5 Maule & Sel. 223. « Davidson v. Cooper, 11 Mees. & Wels. 778, 793. ' Eagleton v. Gutteridge, 11 Mees. & Wels. 465. CORRECTION AND REFORMATION. 257 party who takes and holds under it, the instrument is abso- lutely null and void as to him.^ It is generally held, however, that if the instrument is filled up in accordance with the instructions, written or oral, of the maker, in his presence or absence, before or after delivery, and under it the property at that time or afterward comes into the hands of some innocent and bona fide holder for value, the in- strument will be held valid.^ The rule in this country is not uniform. The English rule seems to be modified. Justice Nelson says that it is competent to convey real estate by signing and acknowledging the deed in blank, and delivering the same to an agent, with an express or implied authority to fill up the blank and perfect the con- veyance, that the validity of such a deed cannot well be con- troverted. " Although it was at one time doubted whether a parol authority was adequate to authorize an alteration or addition to a sealed instrument, the better opinion, at this day, is that the power is sufficient." ^ Thus, bonds issued by a railroad company in Massachusetts, payable in blank, no payee being inserted, and issued to a citizen of Massachusetts, which had passed through several intervening holders, can be filled up by a citizen of New Hampshire, payable to himself or order, and then suit can be maintained upon them in the Circuit Court of the United States for Massachusetts.* § 229. Alabama. — In this State the rule is varied. If the obligor gives a bond to an agent with a blank for the payee's name, with an agreement that the payee's name may be in- ^ Ayres v. Probasco, 14 Kan. 175 ; Schintz v. McManamy, 33 Wis. 299 ; Upton V. Archer, 41 Cal. 85. -Pence r. Arbuckle, 22 Minn. 417 ; Knaggs v. Mastin, 9 Kan. 532; Chap- man V. Veach, 32 Kan. 167 ; McClain v. McClain, 52 Iowa, 272 ; Field r. Stapg, 52 Mo. 534 ; Ragsdale v. Robingon, 48 Tex. 380 ; Van Etta v. Evenson, 28 Wis. 33 ; Schintz r. McManamy, 33 Wis. 299 ; State r. Matthews, 44 Kan. 596 ; Bridgeport Bank v. Railroad Co., 30 Conn. 231, 274. 'Drury v. Foster, 2 Wall. (U. S.) 24, 33 ; State r. IMatthews, 44 Kan. 596. ♦ Walker v. Smith, 21 How. (U. S.) 579 ; United States v. Nelson, 2 Brock. C. C. 64 ; Camden Bank v. Hall, 14 N. J. L. 583 ; Redfield on Railroads, 35. VOL. I. — 17 258 NATURE AND REQUISITES OF THE CONTRACT. serted, the agent may accordingly insert the name, and such authority need not be under seal nor in writing. Parol evi- (dence of this arrangement is sufficient, and even such consent may be implied from the nature of the alteration.^ 1 230. Arkansas. — The Arkansas courts hold according to (the general rule, and a writing purporting to be a bond, signed and sealed by a party with a blank left which is material, which is afterward filled and the instrument delivered by one not authorized under seal, is not a deed of the party signing and sealing. However, the rule is otherwise as to promissory notes and bills of exchange. But one cannot bind another by deed, without authority under seal.^ § 231. California. — A deed in due form, signed and ac- knowledged by the grantor, does not become his deed until the name of the grantee is inserted therein ; and an agent of the grantor cannot insert the name of the grantee in the absence of the grantor, unless his authority is in writing.^ §232. Delaware. — A bond executed in blank cannot be filled up without special authority of the obligor. A bond in blank is not a negotiable instrument ; it is a deed which has effect only on delivery, and no delivery can be without express authority and assent of the obligor. That authority must be proved or the bond is a nullity. The execution of a bond in blank does not impart an authority in the holder to fill it up and deliver it at pleasure. On the contrary, this circumstance is enough to put every one on his guard against taking it, without express reference to the obligor.* § 233. Georgia. — An instrument purporting to be a deed, which when made, is incapable of having any legal operation, cannot become afterward a valid deed by being completed » Boardman v. Gore, 1 Stewart, 517 ; Gibbs v. Frost, 4 Ala. 720. * Cross V. State Bank, 5 Ark. 525. 3 Upton V. Archer, 41 Cal. 85. * Clendaniel v. Hastings, 5 Harr. 408. CORRECTION AND REFORMATION. 259 and delivered by a stranger, in the absence of the parties act- ing under parol authority ; it can only be completed by a third person acting under written authority under seal. Thus, a deed, signed, sealed, and attested, but without any grantee^s name, and without the amount of the purchase-money — these being left blank — is inoperative as a muniment of title, and cannot be completed by a third person in the absence of the grantor, without authority under seal. Such instrument is admissible, however, in evidence to show color of title in the party claiming under it.' § 234. Illinois. — A party executing a bond knowing that there are blanks in it to be filled up by inserting particular names or things necessary to make it a perfect instrument, must be considered as agreeing that the blanks may be thus filled after he has executed the bond. If the party signing the paper shall insert in the appropriate places the amount of the penalty, or the names of the sureties, or any other thing he may deem of importance as affecting his interest, he may in that way protect himself against being bound otherwise than as he shall thus specify. But if, relying upon the good faith of the principal, the surety shall permit him to have possession of the bond signed in blank, the surety will have clothed the principal with an apparent authority to fill up the blanks at his discretion, in any appropriate manner consistent with the nature of the obligation proposed to be given, so that, as against the obligee receiving the bond without notice, or negligence and in good faith, the surety will be estopped to allege that he executed the paper with a reservation or upon a condition in respect of the filling of such blanks, and this, whether the blanks to be filled have reference to the penalty of the bond, the names of sureties, or other things. The apparent authority of the principal in an obligation which has been executed in blank by others as sureties, to fiU in the blanks in an appropriate manner, may be implied from the facts and circumstances attending the transaction, and may ^Ingram r. Little, 14 Ga. 173, 260 NATURE AND REQUISITES OF THE CONTRACT. be shown by parol ; and this rule applies to instruments under seal as well as to those which are not under seal/ But if the blanks are tilled without authority, the deed will be void. Thus, if a deed has no description of any land, or the name of any grantee, but is in blank, except the names of the grantors, and the blanks are afterward filled so as to show a grantee and a description of land, it will be void.^ However, a deed executed in blank is good if delivered after grantee's name is inserted by agent of grantor. An objection to a deed, that at the time it left the grantor's hands there was no grantee's name in it, is obviated by proof that the officer who took the acknov/ledgment of the deed, acting as the agent of the grantor, inserted the name of the grantee therein, and then delivered it to the grantee.^ § 235. Indiana. — An alteration in a bond or deed, made after its execution in a material part, without the consent of the parties, vitiates the instrument. But if the alteration is made with the consent of the parties the instrument is valid.* So a surety signing and delivering to the principal obligor a bond, the names of the sureties having been inserted in the body of the instrument, will be held as agreeing that the blanks in such names may be filled after he had executed it.* § 236. Iowa. — Where sureties sign an official bond of their principal, leaving certain blanks as to amount, date, and the like, which they expect to be properly filled, and which the principal does fill accordingly, they are estopped from claiming their liability is affected thereby. By their signing and de- livering the instrument, expecting and knowing that he would fill the blanks in a certain manner, fully empowers him to do so as agreed or understood." ^ Chicago V. Gage, 95 111. 593, overruling People v. Organ, 27 111. 27. * Wilson V. Commissions, 70 111. 46. nicNab V. Young, 81 111. 11. And see Whitaker v. Miller, 83 111. 381. * Richmond Manufg. Co. r. Davis, 7 Black. (Ind.) 412. * State r. Pepper, 31 Ind. 70. « Wright V. Harris, 31 Iowa, 272, See, also, Simms v. Hervey, 19 Iowa, 273 ; CORRECTION AND REFORMATION. 261 § 237. Kansas. — Where a part}- signs and acknowledges a blank mortgage, another person acting as agent of such party cannot afterward, in the absence of his principal, fill up the blanks in such mortgage so as to make it the mortgage of his principal, and then deliver the same to the intended mortgagee, unless he has authority so to do by his principal in writing.^ § 238. Kentucky. — An agent without authority under seal, cannot bind his principal by an instrument under seal. Thus, one partner cannot, by mere authority resulting from a partner- ship, bind his copartner by a writing under seal, but additional authority under seal is necessarj'^, to authorize such an act.^ § 239. Maine. — A party executing a deed, bond, or other instrument, and delivering the same to another, as his deed, knowing that there are blanks in it to be filled, necessary to make it a perfect instrument, must be considered as agreeing that the blanks may be thus filled after he has executed it. The court held that, practically, there is no real distinction in this matter between bonds and simple contracts. There is no more danger of fraud or injury or wrong in allowing in- sertions in a bond than there is in allowing them in a promis- sory note or bill of exchange. Both are agreements or con- tracts, and in neither can unauthorized alterations be made with impunity. Considering that the assumed difference rests on a mere technical rule of the common law, this rule should not be extended beyond its necessary limits — that is, a sealed instrument cannot be executed by another, so far as its dis- tinguishing characteristics as a sealed instrument are in ques- tion, unless by authority under seal. Hence, this principle includes the insertion of the penal sum of a collector's bond.^ Swartz V. Ballou, 47 Iowa, 188 ; McClain v. McClain, 52 Iowa, 272 ; Allen r. Withrow, 110 U. S. 119. ^Ayres v. Probasco, 14 Kan. 175. See, also, Knaggs v. Mastin, 9 Kan. 532 ; State r. Matthews, 44 Kan. 596. * Cummins v. Cassily, 5 B. Mon. 74. See, also, Trimble v. Coons, 2 A. K. Marsh. 375 ; Doniphan v. Gill, 1 B. Mon. 199. 3 South Ben^nck v. TTnntress, 53 Me. 89. See, also, Coolbroth v. Purinton, 29 Me. 469 ; Green v. Walker, 37 Me. 27. 262 NATURE AND REQUISITES OF THE CONTRACT. § 240. Maryland. — The law is well settled by the earliest writers that the signature and seal attached to a blank piece of paper for the purpose of having a bond thereafter written upon it, will not bind a party as an obligor in such bond. This is the doctrine of this State. Thus, a signature and seal attached to a blank piece of paper for the purpose of having a bond thereafter written upon it will not bind the party as an obligor in such bond ; but if the party so signing and sealing after the bond is filled up adopts it as his bond, it is sufficient.^ § 241. Massachusetts. — A party executing a bond, knowing that there are blanks in it, to be filled up by inserting particu- lar names or things, must be considered as agreeing that the blanks may be thus filled, after he has executed the bond. Thus, a collector's bond, in which, after the surety had signed, a blank had been filled, was not so altered as would avoid the bond, if the party executing the bond agrees that it may be afterward filled up.^ Filling up a blank form of a deed by parol authority of one who has signed and sealed it will not make it a valid convey- ance of land unless the instrument is redelivered after being completed in form.^ Where an instrument was signed by several parties and afterward altered by the addition of a seal and interlineation of the words "jointly and severally," a party to the instrument who was present and consented to the alteration would be bound by it though the others would not be bound.* But it is held that the signing in blank does not authorize anything to be written over it beyond a simple contract, and that authority to affix the seal requires a power of attorney under seal.^ But a deed signed for the grantor in his presence and at his request is good without a power of attorney. There is a dis- tinction between acts done in the presence and by the direc- ^Byers v. McClanahan, 6 Gill. & J. 250. ^ Smith ?'. Crooker, 5 Mass. 538. 'Burns v. Lynde, Allen, 305. • * Warring v. Williams, 8 Pick. (Mass.) 322. * Warring v. Williams, 8 Pick. (Mass.) 326. CORRECTION AND REFORMATION. 263 tion of the principal and acts done in his absence. The former are regarded as done by the principal himself, and the instru- ment need not purport to be executed by attorney, while the latter must be done under a power, and must purport to be so done. According to this distinction, where a deed is delivered containing blanks to be filled up, they may be afterward filled in the presence and by the direction of the grantor, and the deed is valid. This is on the ground that such acts are equivalent to a redelivery of the deed in the perfect state by the grantor. The filling the blanks in his presence and by his consent is equivalent to filling by his own hand ; the deed is then under his own control, and may be delivered as a per- fect deed,' § 242. Michigan. — It is intimated that under the statutes of Michigan, and the weight of authority, that parol authority is not sufficient to authorize a mortgagee to insert terms in a mortgage left blank for such purpose ; that such a mortgage is void, because an essential addition has been made by the mortgagee in his favor after execution and without authority of the mortgagor. The court says that " we think " that parol authority to fill blanks is not sufficient.^ § 243. Minnesota. — At the present day the distinction be- tween sealed and unsealed instruments is arbitrarily meaning- less and unsustained by reason. " The courts have for nearly a century been gradually doing away with the formal distinc- tions between these two classes of instruments, and if they have not yet wholly disappeared, it simply proves the difficulty of disturbing a rule established by long usage, even after the reason for the rule has wholly ceased to exist." Therefore, parol authority is sufficient to authorize the filling of a blank in a sealed instrument, and such authority may be in any way by which it might be given in cases of an unsealed instru- ment. Such authority mdy be either express or implied from cir- ^ Gardner v. Gardner, 5 Gush. 483. .'Stebbins v. Watson, 71 Mich. 467. 264 NATURE AND REQUISITES OF THE CONTRACT. cumstances. It will be implied from circumstances whenever these, fairly considered, will justify the inference/ § 244. Mississippi. — A bond delivered with the penalty and amount of the execution in blank is void. A valid deed can- not be made by writing over a signature and by placing upon such blank sheet a seal. The delivery of a deed by an agent authorized to do so by the obligor is not equivalent to a de- livery by the principal, if such authority is by parol.^ § 245. Missouri. — A deed regularly executed in other re- spects, with a blank left therein for the name of the grantee, and placed in that condition in the hands of a third person with verbal authority, but not authority under seal, from the person executing it, to fill up the blanks in his absence and deliver the deed to the person whose name is inserted as grantee, when so filled out and delivered is a valid deed.^ § 246. Nebraska. — If the owner of land deliver to his agent a deed thereof, executed in blank as to the grantee, with ex- press or implied authority to insert the name of the grantee and perfect the conveyance, and the agent does so in good faith, the title will be conveyed and the deed valid.^ § 247. New Hampshire. — It is well-settled law that the al- teration of a note or other instrument by one party without the assent of the other will render void the instrument. There may be some question as to the fact of consent, without any- thing further in the alteration of a deed. In all cases the party consenting makes the other his agent to do the act of altering the instrument, or in effect his agent to make a new instrument in his name, for that is the effect of the operation. " How far the technical rule that an attorney to execute and seal an instrument must be authorized by an instrument 1 State V. Young, 23 Minn. 551, 557. See, also, McClung v. Steen, 32 Fed. Rep. 373 ; Pence v. Arbuckle, 22 Minn. 417. * Williams w. Crutcher, 5 How. 71. » Field r. Stagg, 52 Mo. 534. See, also, Burnside v. Wayman, 49 Mo. 356. * Garland v. Wells, 15 Neb. 298. CORRECTION AND REFORMATION. 265 under seal would apply in such cases may be a matter of some doubt." But this difficulty does not arise in the cases of simple contracts, and the rule is well settled that an altera- tion of an instrument not under seal by one party with the assent of the other, will not render void the instrument/ § 248. New York. — A bond executed in blank as to a ma- terial part with parol authority to an agent to fill up the blank and to deliver it, is valid.^ So an alteration made in a sealed instrument after execu- tion under parol authority does not avoid the instrument.^ But in case no grantee is named in the body of the instru- ment, it is indispensable to prove the delivery in fact with the parol authority to fill the blank with the name of the grantee. The mere possession of the mortgage does not imply a delivery to a party who inserts his own name as grantee. This rule has never been applied to deeds or instruments under seal.* § 249. North Carolina. — A paper writing purporting to be a bond, signed and sealed b}' a party, in which a blank is left for the sum to be afterward inserted, which blank is after- ward filled up, and the paper delivered not in the presence of the party signing and sealing, nor by any person having authority from him under seal, is not a bond of the party so signing and sealing. He who attempts to execute a deed whether for money or other property, as agent for another, must be armed with authority under seal.* § 250. Ohio. — A valid deed cannot be made by writing it over a signature and seal, made upon a blank or an empty sheet of paper. The court says : " We know of no decision by which ' Humphreys v. Guillow, 13 N. H. 385. * Ex parte Kerwin, 8 Cow. 117, following Texira v. Evans. 1 Anstr. 228 ; WooUey v. Constant, 4 Johns. 54, 60. ' Knapp V. Maltby, 13 Wend. 587 ; Waring v. Smyth, 2 Barb. Ch. 119. * Chauncey v. Arnold, 24 N. Y. 330, 335. See, also, Woolley v. Constant, 4 Johns. (N. Y.) 54 ; Ex parte Decker, 6 Cow. 60. ^ Graham v. Holt, 3 Ired. L. 300 ; M'Kee v. Hicks, 2 Dev. 379 ; Davenport v. Sleight, 2 Dev. & Brat. 381. 266 NATURE AND REQUISITES OP THE CONTRACT, this ancient doctrine is overruled. The cases cited by the plaintiff 's counsel are all promissory notes not under seal, and of deeds where all the material parts were written at the time of making the signature and seal. They are not analogous. The authority to fill one particular blank falls far short of authority to make an entire deed. While the distinction be- tween contracts under seal and parol contracts is preserved by our legislation and by our courts, the different modes of exe- cuting them must be preserved." ^ § 251. Oregon. — An instrument purporting to be a mort- gage, but containing the name of no mortgagee, cannot be rendered valid by filling in the name of a mortgagee by an agent, to whom the mortgagor had delivered the paper with instructions to fill the blank and obtain the money from whom- soever would take it and advance the money thereon.^ But parol authority is sufficient to authorize the filling of a blank by the insertion of the name of the grantee in a deed, after its execution, but before delivery.^ § 252, Pennsylvania, — The early cases decided in Pennsyl- vania were decided in accordance with Texira v. Evans, Anstr, 228, cited by Justice Wilson in Master v. Miller, 4 Term Pep. 331.* But this doctrine does not seem to be the rule now. Chief Justice Gibson says that the doctrine of deeds stands on the principles of the common law ; the doctrine of commer- cial instruments stands on the principles of the law merchant. " A deed is a solemn and a formal act ; a commercial instru- ment is neither solemn nor formal. " A deed is not intended for circulation or to be subject to alteration by the exigencies of trade ; but a promissory note or a bill of exchange may induce new responsibilities while it flits from hand to hand as if it were a part of the general ' Ayres v. Harness, 1 Ohio, .368. ^ Shirley v. Burch, 16 Ore. 83. See, also, Kelley v. Bourne, 15 Ore. 476, 3 Cribben v. Deal, 27 Pac. Rep. 1046. ♦Wiley V. Moor, 17 S. & R. 438 ; Sigfried v. Levan, 6 S. & R. 308 ; Stahl v. Berger, 10 S. & R. 170. CORRECTION AND REFORMATION. 267 currency. It is not strange, therefore, that a commercial and a common-law security should have different consequences in respect of responsibilities to third persons. ... A decision in the case of a commercial instrument, therefore, cannot be a precedent, for a case like the present," the fraudulent alteration of a deed. The Chief Justice says further in regard to Texira v. Evans : " Mr. Preston, the learned editor of Shepherd's Touchstone, at page 139, expresses a proper doubt of the solidity of that decision, inasmuch as it is founded on an assumption that a man may be bound by a deed executed in his name by an attorney not constituted by deed, contrary to a fundamental rule of the common law. That case can be sustained, if at all, only on the ground that the obligor had estopped himself by an act in pais." ^ This language clearly indicates that the doctrine of Texira v. Evans has been discarded. § 253. South Carolina. — The general rule is that if a blank piece of paper be signed, sealed, and delivered, and afterward filled up, it is no deed, as there is nothing of substance in it. But a deed executed with a blank and afterward filled up and delivered by the agent of the party is good.^ § 254. Tennessee. — A paper signed and sealed in blank with verbal authority, given at the time, to fill up a bond, which is afterward done, is void as to the party so signing and sealing, unless redelivered or acknowledged after it has been filled up.^ > Wallace V. Harmstad, 15 Pa. St. 462. This point came before the Court of King's Bench, in Texira v. Evans, cited and relied on in Master v. Miller, 1 Anst. 228. The case occurred before Lord Mansfield, and was this : Evans wanted to borrow £400, or so much of it as his credit should be able to raise ; for this purpose he executed a bond, with blanks for the name and sum, and sent ani agent to raise money on the bonds. Texira lent £200 on it, and the agent accordingly filled up the blanks with that sum and Texira's name, and delivered the bond to him. On non eKt factum pleaded, Lord Mansfield held it a good deed and valid. The early decisions of the Pennsylvania courts were in conformity to the case of Texira V. Evans. ''Duncan v. Hodges, 4 McCord, 239 ; Gourdin v. Commander, 6 Rich. 497. ^Gilbert v. Anthony, 1 Yerg. 69. 268 NATURE AND REQUISITES OF THE CONTRACT. The authority to make a deed cannot be verbally conferred, but must be created by an instrument of equal dignity. Thus, an instrument under seal for the payment of money, which was delivered with a blank to be filled for the amount thereof upon verbal authority by the obligor to another to fill said blank — which was afterward done — is void, without redelivery or other valid ratification.^ To authorize the execu- tion of a deed in the name of another, the authority must be by deed, and no previous verbal assent, or subsequent adoption, will bind the party, unless the deed is acknowledged, ratified, and redelivered.^ § 255. Texas. — When a party delivers a deed duly executed, with parol authority to fill the blanks, and this is done, he is estopped from denying its validity against a subsequent purchaser for value, without notice of the manner in which the deed was executed.^ § 256. Virginia. — Bills of exchange and promissory notes are not deeds. Authority to execute them may be given by parol, or even inferred from circumstances ; but a deed cannot take effect without delivery, and that delivery can only be made by the party himself, or some attorney legally authorized by deed for that purpose.* A paper perfect as a bond, except that there is a blank for the name of the obligee, signed and sealed by the obligor, and put into the hands of a third party for the purpose of borrow- ing money upon it, and filled up by the party holding it with the name of one loaning the money upon it, is not the bond of the obligor.^ § 257. Wisconsin. — Where a note and mortgage, otherwise fully executed, except that a blank is left for the name of the 1 Mosby V. State, 4 Sneed, 324. ^ Smith V. Dickinson, 6 Humph. 261. See, also, Turbeville v. Ryan, 1 Humph. 113. 'Ragsdale v. Robinson, 48 Tex. 379. * Harrison v. Tiernans, 4 Rand. 177. » Preston v. Hull, 23 Gratt. 600. CORRECTION AND REFORMATION. 269 payee and mortgagee, are delivered to an agent who is to pro- cure, from whomsoever he can, a loan of money thereon for the maker, it shows an intention that the agent should fill the blanks, and when so filled the instruments are valid without a new execution and delivery.^ Article 2. Alterations. I 258. Material Alterations. I 262. Alteration by a Stranger. ^ 259. IMaterial Alteration of Note, I 263. Estoppel. Without Fraudulent Intent, I 264. The Terms of a INIortgage Does Not Affect the Mortgage. May be Varied by a Contem- § 260. Immaterial Alterations. poraneous Written Agree- § 261. Erasure and Addition of ment. Names. § 258. Material Alterations. — A material alteration of a mortgage after its execution will avoid it as to the party who does not consent to such alteration.^ Thus an alteration of a written agreement which enlarges the liability of the maker, is a material alteration which avoids the instrument." So the unauthorized and material alteration of a mortgage by the mortgagee, or with his privity after execution, unexplained, is presumptively fraudulent, and vitiates the instrument. It re- mains executory until foreclosure, and, like other contracts, may be defeated by such alterations.* The general rule is that a recovery is not permitted in any form of action where the holder of a written security or evi- dence of debt, has altered or changed the instrument in a ma- terial part to his own advantage and with intent to defraud his debtor. Thus, when a holder of a bill or note fraudulently ' Van Etta v. Evenson, 28 Wis. 33 ; Vliet v. Camp, 13 Wis. 198 ; Schintz v. McManamy, 33 Wis. 299. '' Walton Plow Co. v. Campbell (Nebr.), 52 N. W. Rep. 883 ; Coles r. Yorks, 28 Minn. 464. ^ White V. Johns, 24 Minn. 387. * Waring v. Smyth, 2 Barb. Ch. (N. Y.) 119; Marcy v. Dunlap, 5 Lans. (N. Y.) 365 ; Meyer v. Huneke, 55 N. Y. 412 ; Osgood v. Stevenson, 143 Mass. 399 ; Russell v. Reed, 36 Minn. 376. 270 NATURE AND REQUISITES OF THE CONTRACT. alters its legal effect, he not only destroys the instrument by thus destroying its legal identity, but he also extinguishes the debt for which it was executed and delivered.^ And, indeed, it has. been held that where the alteration was a material one, not only was the instrument avoided, but the original consid- eration forfeited, without inquiry as to the intent.^ The holder of a note or bill which has been altered in a material part must be required to show that the change was made innocently, or for a proper purpose, or by a stranger. The party in default, and who ordinarily must have knowledge of all the circumstances attending the alteration, must bear the burden of explaining it and of extricating himself from his position.^ So the unauthorized and material alteration of a mortgage by the mortgagee, or with his privity after execution, unexplained, is presumptively fraudulent, and vitiates the in- strument.* An unauthorized alteration of a non-negotiable promis- sory note by the payee, after the execution thereof, by the insertion of the word " bearer " after the name of the payee, is a material alteration which will nullify the instrument, and such fraudulent alteration of a note secured by a mortgage, cancels the debt which it evidenced and discharges the mortgage.^ The mortgagee or payee not only loses his right of action on the note, but on the mortgage also ; ^ however, if the alteration, ' Daniel on Neg. Inst., sect. 1410 a; Rand. Com. Paper., sect. 1763 ; Chalm. Dig. Bills and Notes, art. 249 ; Chitty on Bills, 100 q. Compare Matteson v. Ellsworth, 33 Wis. 488. '^ Daniel on Neg. Inst., sect. 1411, and cases cited. 3 Daniel on Neg. Inst., sects. 1412, 1413 ; Rand. Com. Paper, sect. 1785 ; Mil- bery v. Storer, 75 Me. 69 ; Croswell v. Labree, 81 Me. 44 ; Robinson v. Reed, 46 Iowa, 219. * Russell V. Reed, 36 Minn. 376. * Walton Plow Co. v. Campbell (Nebr.), 52 N. W. Rep. 883. See, also, Booth V. Powers, 56 N. Y., 22 ; Croswell v. Labree, 81 Me. 44 ; McCauley r. Gordon, 64 Ga. 221 ; Morehead v. Bank, 5 W. Va. 74 ; Needles v. Shaffer, 60 Iowa, 65 ; Union Nat. Bank v. Roberts, 45 Wis. 373. 8 Sherman v. Sherman, 3 Ind. 337; Tate ?>. Fletcher, 77 Ind. 102. Com- pare Gillett V. Powell, Speers Eq. (S. Car.) 144 ; Plyler v. Elliott, 19 S. Car. 257 ; Smith v. Smith, 27 S. Car. 166. I CORRECTION AND REFORMATION. 271 although material, is not made with a fraudulent purpose, it will not have this effect/ § 259. Material Alteration of Note, Without a Fraud- ulent Intent, Does Not Affect the Mortgage. — The altera- tion of a note in a material part without a fraudulent intent, by increasing the rate of interest, and making it joint or several makes the note void ; but the mortgage securing the note is not thereby avoided, and may be enforced.^' Thus, when one executes a mortgage which makes no mention of the bond which was given, and had been altered, it was held, although the alteration in the bond rendered it void, yet this did not affect the mortgage which must be taken as evidence of the debt.^ §260. Immaterial Alterations. — An immaterial altera- tion of a mortgage, or other instrument, that does not affect the legal sense of the instrument, does not avoid it.* Thus, a mortgage executed by husband and wife of her land, for the accommodation of a partnership of which the husband is a member, and as security for the payment of a negotiable promissory note made by the husband to his partner, and in- dorsed by the partner for the same purpose, and to which note the partner, before negotiating it, adds the wife's name as » Vofrle V. Ripper, 34 111. 100 ; Elliott v. Blcair, 47 111. 342. See, also, New- ell V. Mayberry, 3 Leigh (Va.), 250; Martcndale v. Follet, 1 N. H. 95; Smith V. Mace, 44 N. H. 553 ; Bigelow r. Stilphen, 35 Vt. 521 ; Whitmer v. Frye, 10 Mo. 349 ; Waring v. Smyth, 2 Barb. Ch. (N. Y.) 135 ; Warder v. Willyard, 46 Minn. 531. * Heath v. Blake, 28 S. Car. 406. 'Gillett V. Powell, Speers Eq. (S. Car.) 144. See, also, Plyler v. ElHott, 19 S. Car. 264 ; Smith v. Smith, 27 S. Car. 166 ; Ford v. Grey, 1 Salk. 286 ; Price V. Copner, 1 Sim. & St. 347 ; Hoddle v. Healy, 6 Mod. 181 ; Daly v. Kelly, 4 Dow. 435. In connection with this consult Mersman v. Werges, 112 U. S. 139 ; Kennedy v. Ross, 25 Pa. St. 256. *Burlingame v. Brewster, 79 111. 415; State r. Riebe, 27 Minn. 315; Robert- son V. Hay, 91 Pa. St. 242 ; Nickerson ?•. Swett, 135 Mass. 514 ; Harvester Co. V. McLean, 57 Wis. 258 ; Kline v. Raymond. 70 Ind. 271 ; Black v. Cobb, 64 Ala. 127 ; Littlefield v. Coombs, 71 Me. 110 ; Murray v. Graham, 29 Iowa, 520 ; McRaven v. Crisler, 53 Misa. 542 ; McIMichael v. Bankston, 24 La. Ann. 451 ; AVhite V. Fox, 29 Conn. 570. 272 NATURE AND REQUISITES OF THE CONTRACT. maker, without the coDsent or knowledge of herself or her husband, is not thereby avoided as against one who, in igno- rance of the note having been so altered, lends money to the partnership upon the security of the note and mortgage. Justice Gray says that the note, though in form made by the husband to his partner, and indorsed by the partner, was with- out consideration as between them, and was in ftict signed by both of them for the benefit of the partnership. The mortgage of the wife's land was executed and delivered by her and her husband to the partner for the same purpose. The name of the wife was signed to the note by the partner, or by his pro- curement, before it was negotiated for value. The plaintiff received the note and mortgage from the partner, and advanced his money upon the security thereof, in good faith, and in ignorance that the note had been altered. If the wife had herself signed the note, she would have been an accommoda- tion maker, and, in equity at least, a security for the other signers ; and neither the liability of the husband as maker of the note, nor the effect of the mortgage executed by the wife, as well as by the husband, to secure the payment of that note would have been materially altered by the addition of his signature. Therefore, the plaintiff, as indorsee of the note, seeking no decree against the wife personally, should enforce the note against the husband, and the mortgage against the land of the wife.^ A material alteration of a note, before its deliveryto the payee, by one of two joint makers, without the consent of the other, makes it void as to him ; and any change which alters the defendant's contract, whether increasing or diminishing his liability, is material, and therefore the substitution of a later date, delaying the time of payment, is a material alteration.^ § 261. Erasure and Addition of Names. — An erasure of the name of one of several obligors is a material alteration of ^ Mersmann v. Werges, 112 U. S. 139. ''Wood V. Steele, 6 Wall. (U. S.) 80. See, also, Greenfield Savings Bank v. Stowell, 123 Mass. 196. CORRECTION AND REFORMATION. 273 the contract of the others, because it increases the amount which eacli of them may be held to contribute.' The addi- tion of a new person as a principal maker of a promissory note is held by some authorities to be a material alteration.^ The American authorities hold with great unanimity that the addition of the name of a surety, whether before or after the first negotiation of the note, is not such an alteration as discharges the makor.^ On the other hand, an English decision holds a different view, and it was held that the signing of a note by an addi- tional surety, without the consent of the original makers, pre- vented the maintenance of an action on the note against them.* But an earlier decision held that in such a case the addition did not avoid the note or prevent the original surety, on pay- ing the note, from recovering of the principal maker the amount paid.^ So, when a person executes a bond as surety, and leaves it with his principal for delivery to the obligee, and, before do- ing so, the former procures a person to attest the signature of the surety who is not authorized to do so, such attestation is not an alteration of the instrument that impairs or affects its value as an instrument of evidence in the hands of the obligee, be- cause it was made before delivery.^ It has been held by some courts that an immaterial altera- tion, with fraudulent intent even, will not avoid the instru- ment.^ But this is not in accord with other courts.^ ' Martin v. Thomas, 2-i How. (U. S.) 315 ; Smith v. United States, 2 Wall. (U. S.) 219. = Shipp V. Snggett, 9 B. Mon. (Ky.) 5 ; Henry r-. Coats, 17 Ind. 161 ; Wallace v. Jewell, 21 Ohio St. 163 ; Hamilton r. Hooper, 46 Iowa, 515. =* Miller v. Flnley, 26 Mich. 249 ; Wallace v. Jewell, 21 Ohio St. 163, 172 ; Montgomery Eailroad v. Hurst, 9 Ala. 513 ; Stone v. White, 8 Gray (Mass.), 589; Brownell v. Winnie, 29 N. Y. 400 ; McCaughey v. Smith, 27 N. Y. 39. * Gardner v. Walsh, 5 El. & Bl. 83. ^Catton r. Simpson, 8 Ad. & El. 136 ; Ex parte Yates, 2 DeG. & J. 191. «Hall V. Weaver, 34 Fed. Rep. 104. 'Booth V. Powers, 56 N. Y. 22. ^Morrison v. Garth, 78 Mo. 4.34 ; Turner v. Billagram, 2 Cal. 523 ; German Bank V. Dunn, 62 Mo. 79. VOL. I.— 18 274 NATURE AND REQUISlfES OF THE CONTRACT. § 262. Alteration by a Stranger. — An alteration by a anere stranger without the knowledge or consent of the holder, ;and while out of his custody does not destroy or annul the in- istrument.^ This is the rule, that if the alteration, although material, is made hy a stranger to the contract, it will not have the effect of invalidating the instrument, as between the parties to it." § 263. Estoppel. — Any one invoking the aid of estoppel must show that he has not been negligent in the performance of his duty, and has used diligence in protecting his own rights and has perpetrated no fraud. Where a mortgage was executed in blank by a husband and wife, and then changed without the knowledge or consent of the wife, and the husband received the money loaned, and with it paid a prior mortgage on the land attempted to be mortgaged by such second mortgage, and the mortgagee, through his agent, was fully cognizant, at the time he parted with his money and received the mortgage, of the manner in which the mortgage was executed, the wife is not estopped from claiming that the mortgage is not her mortgage, and the mortgage is void as to her. Because she receives an involun- tary benefit, which is received with her knowledge or procur- ation, she is not estopped from denying the validity or legality of the mortgage as to herself.^ But where a mortgagor conveyed premises by way of mort- gage, and the premises were afterward sold under execution issued on a judgment, which became a lien prior to such mort- * Marcy v. Dunlap, 5 Lans. (N. Y.) 365. 2 Hunt V. Gray, 35 N. J. L. 227 ; Cochran v. Nebeker, 48 Ind. 459 ; Bellows V. Weeks, 41 Vt. 590 ; Crockett v. Thomason, 5 Sneed (Tenn.), 342, 344 ; Nich- ols V. Johnson, 10 Conn. 192 ; Murray v. Graham, 29 Iowa, 520 ; Ford v. Ford, 17 Pick. (Mass.) 418; Union Nat. Bank v. Roberts, 45 Wis. 373; NefFr. Horner, 63 Pa. St. 327 ; Bridges v. Winters, 42 Miss. 135 ; Bigelow v. Stilphen, 35 Yt. 521. A stranger signing a note as a witnes.s is an immaterial alteration : Church V. Towle, 142 Mass. 12. An alteration of an instrument by an officer who is merely the custodian of it, will not invalidate it : State v. Berg, 84 Ind. 183. ' Ayres v. Probasco, 14 Kan. 175. CORRECTION AND REFORMATION, 275 gage, and afterward the mortgagor receives title to the mort- gaged premises, through the title created by the sale under execution, he is estopped by the covenants in his mortgage deed from claiming any interest in the premises as against the mortgage.^ So if a mortgagee in possession, under an unrecorded mort- gage, willfully refuses information honestly and properl}- asked of him in regard to his interest, he will be estopped from set- ting up his mortgage to the injury of him to whom he refused information.^ Objection that a deed was executed in blank, and the gran- tee's name inserted after delivery, can only be taken by the grantor, or by some one claiming through him or in his right.^ § 264. The Terms of a Mortgage may be Varied by a Contemporaneous Written Agreement. — The terms of the mortgage may be varied by a contemporaneous written agree- ment. Thus, a trustor executed a deed of trust to a trustee, conveying lands to secure the payment of a debt of $300, with interest from the date. The deed of trust provided that if the debts therein named were not paid within one year, that the trustee should sell the land at public auction to pay the debt. On the same day the deed of trust was executed, the beneficiary executed to the trustor a writing, agreeing that, if he did not succeed in performing a certain dut}^ for the trustor, then the note embraced in the trust deed was to be void and of no ac- count ; or, if he succeeded in performing part of the work specified, then the trust deed was to be void as to half of the amount. It was held that this written agreement and the trust deed must be construed together.* But the terms of a mortgage cannot be varied by a verbal agreement, because a contract cannot rest partly in writing and partly in parol. Thus, a stipulation by which a mort- gagor's equity of redemption was to be cut off upon failure to ■ "Wells V. Somers, 4 111. App. 297. 'Riley v. Qnipley, 50 111. .304. 'McNab V. Young, 81 111, 11, ^ Pitzer V. Bums, 7 W, Va. 68, opinion by Haymond, President. 276 NATURE AND REQUISITES OF THE CONTRACT. perform a condition by a particular time is void. Oral evi- dence of what occurred and of what was said at or even before the execution of the mortgage is inadmissible in evidence.^ So, an objection to the terms of a mortgage by the mort- gagor before signing that it included property which he desired to reserve and use in paying a debt to another, cannot vary the legal effect of the mortgage.^ Article 3. Reforming the Mortgage. I 265. What Mistakes can be Cor- § 268. Innocent Purchasers. rected — In General. § 269. Lost Mortgage. ? 266. Description. § 270. Evidence. I 267. Parties to the Conveyance. § 265. What Mistakes can be Corrected — In General. — Courts of equity have jurisdiction to correct mistakes in mortgages when the rights of third parties have not intervened. Where a mortgage is drawn and executed, which is intended to carry into execution a previous agreement, but which by mistake of the draughtsman, either as to law or fact, does not fulfill that intention, or violates it, equity will correct the mis- take so as to conform to the intention between the parties. So where a mortgage is not technical to express the intention, but there is no difficulty in reforming the instrument to conform to the intention of the parties, as it is apparent on the face of the deed, supported by the parol proof of the agreement and ' QuartermouH v. Kennedy, 29 Ark. 544. 2 Patterson v. Taylor, 15 Fla. 336. In Qiiartermous v. Kennedy, 29 Ark. 544, it is rightly held that a verbal contract cannot vary a written one. As to releasing the equity of redemp- tion, neither a verbal or written contract is sufficient to discharge the mort- gagor's right of redemption, M'hen such right exists. " So inseparable, in- deed, is the equity of redemption from the mortgage that it cannot be dis- annexed even by an express agreement of the parties. If, therefore, it should be expressly stipulated that unless the money should be paid at a particular day, or by or to a particular person, the estate should be irredeemable, the stipulation would be utterly void." 2 Story Eq. Jur. 1019. This is the law as uniformly held by all the courts. CORRECTION AND REFORMATION. 277 understanding of the parties, the necessary correction will be made. But such reformation will not be made where it would prejudice a subsequent judgment creditor or other third party.^ Thus, where a draughtsman in drawing a mortgage on land of a corporation, made it to the mortgagee and his " succes- sors," it was reformed to his " heirs." ^ So when part of the lands agreed to be mortgaged is omitted from the de- scription in the mortgage.^ Or if land is included not owned by the mortgagor.* Or a mistake in the condition of the mortgage.^ If the deed is valid as it stands, the court will not correct a mere error of statement as to the origin of the mortgagor's title.^ Where the omission of the name of the mortgagee is a mere oversight, a court will reform the mortgage by inserting the name.^ When two minds come together and agree on the terms of a contract, and a mistake is made, not in the terms agreed, but in their expression, or the memorial made and kept to furnish evidence of the contract, chancery, as a rule, will reform the memorial or evidence so as to make it express their general agreement. This is the general rule.^ Courts of chancery will lend their aid, for the correction of mistakes in writen instruments, to the original parties thereto, and to all those claiming under them in privity.* Where a deed, in describing a mortgage assumed by the ' Wheeler v. Kirtland. 23 N. J. Eq. 13 ; 24 N. J. Eq. 552. * McMillan v. N. Y. Water Proof Paper Co., 29 N. J. Eq. 610. See, also, Huyler t;. Atwood, 26 N. J. Eq. 504 ; Slsson v. Donnelly, 26 N. J. Eq., 432 ; Anderson v. Baughman, 7 Mich. 69 ; Mendenhall v. Steckel, 47 Md. 453 ; Loomis V. Hudson, 18 Iowa, 416. 'Blodgett V. Hobart, 18 Vt. 414; Hunt v. Hunt, 38 Mich. 161. * Ruhling V. Hackett, 1 Nev. 360. 'Wooden v. Haviland, 18 Conn. 101 ; Manatt v. Starr, 72 Iowa, 677. * Hathaway v. Juneau, 15 Wis. 262. ' Parlin i: Stone, 1 INIcCrary, C. C. 443. * Alexander v. Caldwell, 55 Ala. 517 ; Berry r. Webb, 77 Ala. 507 ; Houston I'. Faul, 86 Ala. 232; 1 Story's Eq. Jur., sect. 16-5; Pom. Eq. 852 et seq.; Graham v. Berryman, 19 N. J. Eq. 29 ; Conover v. Wardell, 22 N. J. Eq. 492 ; Rowley v. Flannelly, 30 N. J. Eq. 612. "East V. Peden, 108 Ind. 92 ; Keister?;. Myers, 115 Ind. 312. 278 NATURE AND KECiUISITES OF THE CONTRACT. grantee, gives the date and the amount, but recites that it was executed by the grantor, whereas it was by the grantor's grantor, and there is no other mortgage of like amount and date, parol evidence is admissible to apply the covenants of ■the mortgage, and a reformation of the covenants is not neces- sary/ Where the certificate of acknowledgment of an instrument ^ identifies the party as known to the officer to be the person who executed the same, a variance in spelling the name of such party as appearing in the instrument, in the certificate will be presumed to be a clerical error merely, and will not . vitiate the acknowledgment.^ § 266. Description. — On the same principle, courts of equity will lend their aid to correct descriptions in a mortgage deed. So a mortgage duly executed may be reformed as to the de- scription of the property conveyed.^ Thus, a description of an undivided one-third of a tract of land may be corrected so as to include the whole tract, when this was the agreement of the parties to the instrument.* So when lands are incorrectly de- scribed in a conveyance through the mistake on the part of the draughtsman, both of the parties knowing the particular tract intended to be conveyed, the correction will be made of this mistake.^ So where it is shown that the description was copied from the deed of a mortgagor, but by mistake the ex- cepted lands were described instead of those granted, the mort- gage deed will be reformed.^ The mistake to be corrected must be such that the deed fails to express what was intended and agreed upon by both par- ties.^ The court, however, in reforming a mortgage will not > New York Life Ins. Co. v. Aitkin, 125 N. Y. G60. 2Rodes V. St. Anthony, etc., Co. (Minn.), 52 N. W. Rep. 27. See, also, Rogers v. Manley, 47 Minn. 403. 'Snellv.Snell, 123 111. 403. * Keister v. Myers, 115 Ind. 312. * Houston V. Faul, 86 Ala. 232. See, also, Witherington v. Mason, 80 Ala. 345. «Tichenor v. Yankey, 89 Ky. 508. ' Barker v. Harlan, 3 Lea (Tenn.), 505. i CORRECTION AND REFORMATION. 279 make a contract for the parties.^ When the terms used in the description contained in a deed or mortgage are clear and in- telligible, the court will put a construction on the terms, and parol evidence is not admissible to control the legal effect of such description.^ But when the description is uncertain and ambiguous, parol evidence will be admissible to fit the descrip- tion to the thing described, but not to add to or change the words of the description.^ § 267. Parties to the Conveyance. — It is settled by uni- form current of decisions that, as between the parties, mistakes in a mortgage may be reformed ; * and on general principles of jurisprudence, courts of equity will interfere to correct mis- takes, not only between the original parties, but also those claiming under them in privity, as heirs, legatees, devisees, as- signees, voluntary grantees, judgment creditors, or purchasers from them, with notice of the facts.^ Because there is a clear equity in favor of the vendee or mortgagee, as the case may be, as against his mortgagor or vendor, on the ground of which a court of equity will interfere to correct the mistake ; because a judgment or execution creditor of such vendor or mort- gagor, with notice of such equity, or a purchaser at a sale under execution, with like notice, stands in the shoes of the vendor or mortgagor, and so can have no better right or higher claim than the debtor himself would be permitted to assert.® Though the parties understood what language was contained in the deed, if they believe the description corresponded with the actual boundaries of the land intended to be conveyed and were mistaken, a cause for reformation is made out.^ The ' Marcy v. Dunlap, 5 'Lam. (N. Y.) 365, 370. 'Waterman v. Johnson, 13 Pick. (Mass.) 261 ; Bond v. Fav,12 Allen (Mass.), 86. •■• Radford v. Edwards, 88 N. Car. .347 ; Meier v. Kelly, 20 Ore. 86. * Davenport r. Sovill, 6 Ohio St. 459. * Strang v. Beach, 11 Ohio St. 283; Simmons v. North, 3 Sm. & M. (Miss.) 67 ; Wall r. Arrington, 13 Ga. 88 ; ^Vhite v. Wilson, 6 Blakcf. (Ind.) 448. * Strang r. Beach, 11 Ohio St. 283, 289 ; East v. Peden, 108 Ind. 92. ' Baker r. Pyatt, 108 Ind. 61, 70; Bush v. Hicks, 60 N. Y. 298; Burr v. Hutchinson, 61 Me. 514. 280 NATURE AND REQUISITES OF THE CONTRACT. mortgagor cannot ask for relief in correcting a mistake in answer to a bill to foreclose. He must file a cross-bill for that purpose.^ The mortgagee may have a mistake corrected after sale, he having purchased the land.^ Judge Fenner says when parties reduce their contracts to writing, and when the terms of the writing exhibit no uncer- tainty or ambiguity as to the nature, the object, and the extent of the engagement, it is presumed that the writing expresses the true, full, and complete undertaking of the parties. Equity may reform and correct a mortgage unambiguous on its face on clear proof that through fraud or error, the mortgage deed has been made to express a different purpose from that which the parties had agreed on and had intended to embody therein ; but to support relief there must be clear proof of the antecedent contract and of the error in committing it to writing.^ Where a deed of trust omits lands accidentally, which were to be mortgaged, the mortgagee is entitled to have it reformed as against the widow and heir of the grantor, and a subsequent purchaser of the land with notice of the mortgagee's rights.* A mistake in the mortgage of a married woman as to the de- scription of the lands merely may be reformed.^ When the language is equivocal or ambiguous, it is con- strued most strongly against the mortgagor, and in a manner to make the mortgage a valid and binding security, because the mortgagor is supposed to make his own selection of words and terms in drawing the mortgage.^ " There is no doubt that the intention is the object to be sought for in construction. And to get at that, the situation of the parties and the nature and object of tlieir transactions may be looked at. But it must be borne in mind that it is » French v. Griffin, 18 N. J. Eq. 279. ' Davenport v. Sovil, 6 Ohio St. 459. See, also, Alexander v. Eea, 50 Ala. 450 ; Greeley v. Decottes, 24 Fla. 475 ; Miller v. Kolb, 47 Ind. 220. ' Ker V. Evershed, 41 La. Ann. 15. *Brinson v. Berry (Miss.), 7 S. Eep. 322. * Carper v. Munger, 62 Ind. 481. Compare Petesch v. Hambach, 48 Wis. 443. "Jerome v. Hopkins, 2 Mich. 9G, 100; Stuart v. "Worden, 42 Mich. 154. CORRECTION AND REFORMATION, 281 not the business of construction to look outside of the instru- ment to get at the intention of the parties, and then carry out that intention whether the instrument contains language suffi- cient to express it or not ; but the sole duty of construction is to find out what was meant by the language of the instrument.^ Equity regards substance rather than form, and enforces the actual intent if lawful and just.^ § 268. Innocent Purchasers. — A mortgage cannot be re- formed as against an innocent purchaser. But a deed or mortgage may be reformed against a subsequent purchaser or mortgagee who acquires his rights with notice of the equities of the party seeking reformation.^ The general rule is that against a bona fide purchaser a mortgage will not be reformed, in its description so as to in- clude lands intended to be mortgaged.* So a bill which seeks to relieve a party must allege that the purchaser took the land with notice of the mistake, 'because, if he is a bona fide pur- chaser, no relief can be obtained.^ A purchaser with notice takes the rights of the mortgagor, and is in no better position.^ A mortgage may be reformed as against the assignee in bank- ruptcy of the mortgagor.' And where a tract of land is mis- described in a mortgage, the equity of the mortgagee to have it corrected is prior in point of time to that of a subsequent judg- ment creditor.^ ^ Farmers' Loan & Tnist Co. v. Commercial Bank, 15 "Wis. 424, 438. 'Stuart V. Worden, 42 Mich. 154. See, also. Carter v. Champion, 8 Conn. 549 ; Beardsley v. Knight, 10 Vt. 185 ; Kennard v. George, 44 N. H. 441 ; Baker v. Morton, 12 Wall. (U. S.) 150. 'Gale V. Morris, 29 N. J. Eq. 222. ♦McLouth V. Hurt, 51 Tex. 115. * Fitch V. Boyer, 51 Tex. 336 ; Sickman v. Wood, 69 111. 329 ; Easter v. Sev- erin, 64 Ind. 375. * Gale V. Morris, 29 N. J. Eq. 222 ; Ruhling v. Hackett, 1 Nev. 360 ; Strang V. Beach, 11 Ohio St. 283 ; Hunt v. Hunt, 38 Mich. 161 ; Fielder v. Varner, 45 Ala. 429 ; Rutger.s v. Kingsland, 3 Halst. Eq. (N. J.) 178, 658. Compare Goodman v. Randall, 44 Conn. 321 ; Manatt v. Starr, 72 Iowa, 677. 'Schulze V. Bolting, 8 Biss. C. C. 174. 8 Brewster v. Clamfit, 33 Ark. 72. See, also, Sample v. Rowe, 24 Ind. 208 ; Flanders v. O'Brien, 36 Ind. 284. 282 NATURE AND REQUISITES OF THE CONTRACT. But the Ohio rule is different, because a mortgage defect- ively executed is not entitled to record, under the registry laws. So, a defective mortgage, when reformed, will not affect the lien of a judgment intervening between the dates of the execution and the reformation of the mortgage.^ The Ohio rule appears to turn on the point that a defective mortgage is not allowed to be recorded by statute ; but, if recorded, it is not thereby valid, and a judgment creditor's lien prior to the reformation of a defect is paramount. The reformation of a mortgage relates back to the date of its execution, as against the mortgagor's wife, who became such after the making of the mortgage.^ § 269. Lost Mortgage. — When an instrument on which a title is founded is lost, a court of equity will interfere to remedy the defect occasioned by such accident.^ In the case of the destruction or withholding by the grantor of a deed of land which has been duly delivered, or a mistake in the description of the land, or the mode of execution, and in the case of a contract to convey real estate, there is no doubt of the power of the court of equity to decree proper conveyance.* Accordingl}^, when a mortgage, which has not been recorded under -a registration law, and the possession is not in the mortgagee, is lost, the mortgagor denying the execution of said mortgage, upon proper proof, the court will decree the making of a new mortgage in substance like the one lost.^ § 270. Evidence. — To justify a court of equity in exercising its power to reform a written instrument on the ground of 1 Hood V. Brown, 2 Ohio, 366 ; Mayham v. Coombs, 14 Ohio, 428 ; White v. Denman, 16 Ohio, 59 ; 1 Ohio St. 110 ; Fosdick v. Barr, 3 Ohio St. 471 ; Holi- day V. Franklin Bank, 16 Ohio, 533 ; Van Thorniley v. Peters, 26 Ohio St. 471. >* Hawkins v. Pearson (xlla.), 11 South. Rep. 304. ^ Shehnardine v. Harrop, 6 Mad. 33. * Warren v. Swett, 31 N. H. 332; Sumner v. Rhodes, 14 Conn. 135; Smith V. Chapman, 4 Conn. 344 ; Busby v. Littlefield, 33 N. H. 76. * Lawrence v. Lawrence, 42 N. H. 109 ; Griffin v. Fries, 23 Fla. 173. CORRECTION AND REFORMATION. 283 mistake, the proof in demonstration of the mistake must be clear and satisfactory. That is : 1. It must be proof that the written instrument did not, at the time of its execution, set forth the intent of the parties ; 2. That the failure to make the instrument express such intention arose through mistake or oversight in draft- ing it/ That is, the evidence must be clear and convincing, making out a mistake to the entire satisfaction of the court. It must not be loose, equivocal, or contradictory, so as to leave the mistake open to doubt." Thus, upon application to have a personal covenant inserted in a mortgage, alleged to have been omitted by mistake of the draughtsman, the proof must be of such character as to leave no doubt whatever in the mind of the court that the mistake has intervened and the instrument is variant from actual con- tract of the parties. It is not enough to show the intention of one of the parties to the instrument, but of both ; the proof must be established incontrovertibly that the error or mistake alleged was that of both parties.^ And more especially is this so in cases where considerable time has elapsed, and the parties of the original transaction have died before application is made for relief.* And this is especially so if the mortgage is to be reformed by parol testimony alone, in which case the court must be satisfied beyond a reasonable doubt of a mutual mistake of both parties to the mortgage, and that they both intended to and believed they had correctly described in the mortgage the land in controversy.^ It is a very material rule that the court will not offer its aid, or allow a written instrument to be affected by parol or other extrinsic evidence, unless the mistake is made out according ' Fritzler v. Robinson, 70 Iowa, 500. 'Lestrade v. Barth, 19 Cal. 660. 'Stiles V. Willis, 66 Md. 552. * Showman v. Miller, 6 Md. 485; Gillespie v. Moon, 2 Johns. Ch. (N. Y.) 585. 'Bodwell V. Heaton, 40 Kan. 36. See, also, Ker v. Evershed, 41 La. Ann. 15. 284 NATUKE AND REQUISITES OF THE CONTRACT. to the understanding of both parties, by proof that is exact and satisfactory/ The plirase, " mutual mistake," as used in equity, means a mistake common to all parties to the written instrument, and it relates to a mistake concerning the contents or the legal effect of the instrument." In a suit to reform a deed or mortgage on the ground of mistake, the plaintiff must allege distinctly what the original agreement was, and point out with clearness wherein there was a mistake, and that it did not arise from gross negligence of the plaintiff.^ ^Sawyer v. Hovey, 3 Allen (Mass.), 331 ; Andrews v. Essex Ins. Co., 3 Mas. C. C. 10. '^ Kilmer v. Smith, 77 N. Y. 226 ; Moxey v. Bigwood, 4 De G., F. & J. 351 ; Fowler v. Fowler, 4 DeG. & J. 250 ; Bentley v. Mackay, 31 Beav. 143 ; Kyle v. Kavanaugh, 103 Mass. 356 ; Young v. McGown, 62 Me. 56 ; Diman v. Railway Co., 5 R. I. 130 ; Barfield v. Price, 40 Cal. 535 ; Page v. Higgins, 150 Mass. 27. * Meier v. Kelly, 20 Ore, 86; Hyland v. Hyland, 19 Ore. 51; Lewis v. Lewis, 5 Ore. 169 ; Ramsey v. Loomis, 6 Ore. 367. CHAPTER VIIL equitable mortgages. Article 1. General Statement. I 271. Definition. § 271. Definition. — An equitable mortgage is one which by want of some proper formality can only be given effect as a mortgage in equity. Or it may be defined as a mortgage in which the mortgagor does not actually convey the prop- erty, but does some act by which he manifests his determina- tion to bind the same as a security. Or it may be said to be a lien upon real estate of such a character, that it is recognized in equity as a security for the payment of money and is treated as a mortgage. Such a mortgage may arise by the deposit of title-deeds to an estate/ by an absolute conveyance intended as a mortgage,^ by a vendor's lien/^ and by informal mortgages and agreements. Informal mortgages, are those instruments intended as mortgages, but which by reason of some defect cannot have such operation without the aid of equity ; and also a great variety of transactions and docu- ments to which equity attaches such character without re- gard to the intention of the parties. The term also includes mortgages of an equitable estate or interest.* An equitable mortgage may be constituted by any writing from which the intention to create it may be gathered.'^ Thus a written agreement for security on certain property for the payment of a debt is in equity a mortgage, and will be ' Storj-'s Eq. Jur., sect. 1020. * See Chapter III, Article 2. "See Chapter IX. *6 Am. & Enp. Ency. Law, 675. V* Chase v. Peck, 21 N. Y. 581 ; Payne v. Wilson, 74 N. Y. 348. 285 286 NATURE AND REQUISITES OF THE CONTRACT. enforced as such against all parties to the agreement and to those who have notice.^ So an agreement by which the owner of land, over his hand and seal, for a sufficient consideration promises to pay a mort- gage given by his predecessor in possession, a tenant for life, and covenants that the same shall be a lien thereon as against himself and heirs, is an equitable lien.^ An agreement that a deed absolute shall be considered a mortgage is valid. And an agreement that the non-payment of the loan within the time specified should convert the mort- gage into an absolute deed does not have that effect. The agreement to turn a mortgage into an absolute deed in case of default is one that finds no favor in equity. The maxim, " Once a mortgage always a mortgage," governs in such cases.'* Such deed is in eff'ect a mortgage, though the grantor does not expressly covenant to repay the money .^ Article 2. By the Deposit of Title-Deeds. I 272. The English Doctrine. by Some of the States in I 273. Parol Agreement not Sufficient. this Country. § 274. Actual Deposit of Title-Deeds ^ 276. Lex Loci Contractus Gov- Necessary. erns. § 275. The English Doctrine Adopted ? 277. Contrary Doctrine. § 272. The English Doctrine. — In England it is generally recognized and a thoroughly established doctrine, that an equitable mortgage may be created by a deposit of the title- deeds as security for a debt.^ 1 Gest V. Packwood, 39 Fed. Rep. 525. * Watkins v. Vrooman, 51 Hun (N. Y.), 175. 3 Horn V. Keteltas, 46 N. Y. 605 ; Carr v. Carr, 52 N. Y. 251 ; Morris v. Nixon, 1 How. (U. S.) 118 ; Villa v. Rodriguez, 12 Wall. (U. S.) 323. * Macauley v. Smith (N. Y.), 30 N. E. Rep. 997. * Russel V. Russel, 1 Bro. C. C. 269 ; Whitehead v. Jordan, 1 Younge & C. 303 ; Pye v. Danbuz, 2 Dick. 759 ; Lacon v. Allen, 3 Drew. 579, 582 ; Ex parte Whitbread, 19 Ves. 209 ; Ex parte Langston, 17 Ves. 230 ; Doe v. Hawke, 2 East. 481 ; Ex parte Coombe, 4 Mad. 249 ; Lucas v. Dorrien, 7 Taunt. 279 ; Ex parte Coming, 9 Ves. 117 ; Birch v. Ellames, 2 Anst. 429. I EQUITABLE MORTGAGES. 287 At one time the doctrine that the deposit of a title-deed was an equitable mortgage was much doubted. The doctrine has been violently attacked and denounced as pernicious by emi- nent English judges, and especially by Lord Eldon and Sir William Grant, yet it is now well settled and firmly established in England.^ If the debtor deposits his title-deeds with a creditor, it is evidence of a valid agreement for a mortgage, and amounts to an equitable mortgage, which is not within the statute of frauds.^ But a deposit of title-deeds as collateral for money advanced on a promissory note on demand, and a subsequent verbal agreement to execute a mortgage of the property comprised in such title-deeds, are insufficient to create a security by way of a mortgage.^ So a deposit of title-deeds by a bond creditor is not of itself sufficient evidence of a deposit by way of equitable mortgage.* An actual deposit of the title-deeds of the property to be mortgaged is not necessary to establish an equitable mortgage in a court of equity ; an intention to deposit the deeds and to show a charge upon the premises is sufficient.^ If there be no registry, it is the settled English doctrine that the mere circumstance of leaving the title-deeds with the mortgagor is not of itself, in a case free from fraud, sufficient to postpone the first mortgagee to a second, who takes the title- deeds with his mortgage, and without notice of the first mort- gage.* § 273. Parol Agreement Not Sufficient. — The English courts have manifested a determination to keep within the letter of the precedents, and not to give the doctrine furtlier extension. Accordingly they have held that a mere parol ' See Ex parte Hooper, 1 Meriv. 9 ; 19 Ves. 477 ; Norris v. AVilkinson, 12 Ves. 192. "Rupsel V. Russel, 1 Bro. C. C. 269 ; Birch r. Ellames, 2 Anst. 427. 3 James v. Rice, 23 Eng. L. & Eq. 567 ; 27 Eng. L. & Eq. 342. * Chapman v. Chapman, 3 Eng. L. & Eq. 70. *Ex parte Edwards, 1 Deac. 611. f Berry v. Mutual Ins. Co., 2 Johns. Ch. (N. Y.) 603. 288 NATURE AND REQUISITES OF THE CONTRACT. agreement to make a mortgage or to deposit a deed for that purpose will not give any title in equity. There must be an actual bona fide deposit of the title-deeds with the mortgagee himself in order to create the lien. This doctrine is found in many cases. ^ § 274. Actual Deposit of Title-Deeds Necessary. — To give effect of a lien to the possession of title-deeds it must be shown affirmatively that they were deposited as a bona fide, present, immediate security. If left, for instance, with an attorney for the purpose of his drawing a mortgage which had been agreed upon by the parties, it will not be sufficient ; ^ otherwise if deposited expressly as a security for a debt.^ The legal effect of a deposit is that the mortgagor shall be liable for the debt,* and that whatever interest he has in the property is bound by the agreement.^ Such a deposit may be made to cover subsequent advances by a subsequent parol agreement without the return of the deeds. Lord Eldon says, " In the cases alluded to I w^ent the length of stating that where the deposit originally was for a particular purpose, that purpose may be enlarged by a subse- quent parol agreement, and this distinction appeared to me to be too thin, that you should not have the benefit of such an agreement unless you added to the terms of that agreement the fact that the deeds were put back into the hands of the owner, and a redelivery of them required ; on which fact there is no doubt that the deposit would amount to an equitable lien within the principle of these cases." ^ It seems that his Lordship w^ould not go so far again in a similar case, and ob- serves that at all events the doctrine is not to be further en- larged.'' » Ex parte Whitbread, 19 Ves. 209 ; Ex parte Langston, 17 Ves. 230 ; Ex parte Cominj;, 9 Ves. il7. 2 2 Wash. Eeal Prop. 89. 3 Ex parte Bulteel, 2 Cox, 243. * Pryce v. Bury, 2 Drew. 41, 42. ^Ex parte Bisdee, 1 Mont., Dea. & De G. 333. ® Ex parte Kensington, 2 Ves. & B. 84. ^ Ex parte Hooper, 1 Meriv. 9. EQUITABLE MORTGAGES. 289 The deposit of deeds entitles the holder to have a mortgage and to have his lien effectuated, although there was no special agreement to assign ; the deposit affords a presumption that such was the intent.^ § 275. — The English Doctrine Adopted by Some of THE States in this Country. — The adoption of the English doctrine in the United States would seem to be in conflict, both with the general established system of registration of mort- gages and the statute of frauds, yet some of the States have accepted the doctrine of the English courts, at least to the ex- tent that where title-deeds are deposited as a present security, and with the intent thereby to give a lien upon the land, such deposit shall operate as an ecjuitable mortgage, notwithstand- ing the statute of frauds. Thus, when the title-deeds are actually deposited by the debtor with his creditor upon an advance of money, and for an antecedent debt as a security, the transaction will constitute an equitable mortgage, the deposit standing in the place of an actual mortgage and dispensing with the necessity of the exe- cution of such mortgage.^ It must be shown affirmatively that the title-deeds were deposited as a bona fide, present, immedi- ate security. If left with the attorney for the purpose of his drawing a mortgage which had been agreed upon by the par- ties, it will not be sufficient. " Mere possession, even by a creditor, is not enough ;" ^ otherwise in England, if deposited expressly as a security for a debt.* This deposit will constitute an equitable mortgage.^ And in the absence of other proof evidence of an advance of ' Birch r. Ellames, 2 Anst. 427 ; Card v. Jeffray, 2 Scho. & Lefr. 374 ; Ex parte Wetherell, 11 Ves. 398 ; Pain v. Smith, 2 Mylne & Keene, 417 ; Keys v. WiUiams, 3 Younge & Coll. 55 ; Edge v. Worthington, 1 Cox, 211 ; Lucas v. Dorrien, 7 Taunt. 279. See, also, Ex parte Coming, 9 Ves. 115 ; Ex parte "Warner, 19 Ves. 202 ; Ex parte Langston, 17 Ves. 227. ' Hutzler v. Phillips, 26 S. Car. 136, 147. * 2 Wash. Real Prop. 89. *Ex parte Bulteel, 2 Cox, 243. ^Gale V. Morris, 29 N. J. Eq. 222. See, also, Hackett r. Reynolds, 4 R. I. 512. VOL. I. — 19 290 NATURE AND EEQUISITES OP THE CONTRACT. money and the finding of title-deeds of the borrower in pos- session of the lender establish an equitable mortgage.^ But such lien of an equitable mortgage cannot be set up at law as a legal estate.^ An assignment by a party of the certificate of purchase by way of security, operates as an equitable mortgage of the inter- est in the land.^ A foreclosure of an equitable mortgage by deposit of title- deeds, must be by suit in equity to establish the lien and have a sale in case the principal, interest, and costs are not paid on the given date/ The general rule is that the deposit of all the deeds as a security for a debt created at the time the deposit is made, constitutes an equitable mortgage.^ In Georgia the deposit of title-deeds does not constitute an equitable mortgage." § 276. Lex Loci Contractus Governs. — The law of the place of the contract governs. Thus, the court will not com- pel the creditor to deliver up the deeds, when he resides or is found in a State with deeds in his possession for lands in another State so deposited in that State. He can hold them until the deed to the lands in the other State is redeemed, if both States recognize this doctrine of equitable mortgages, or if this doctrine is recognized in the State where the land is situated.^ In England it is held that when a citizen of a foreign country, by the laws of which a lien cannot be created, being in England, and there makes a deposit of title-deeds as security, his contract is governed by the laws of England.^ 1 Rockwell V. Hobby, 2 Sandf. Ch. (N. Y.) 9. 2 Jackson v. Parkhurst, 4 Wend. (N. Y.) 369 ; Jackson v. Dunlap, 1 Johns. Cas. (N. Y.) 114. 'Hill V. Eldred, 49 Cal. 398. *Jarvisv. Butcher, 16 Wis. 307. ^ Williams v. Stratton, 10 Sm. & M. (Miss.) 418. See, also, Nat. Bank v. Caldwell, 4 Dill. C. C. 314 ; Wright v. Shumway, 1 Biss. C. C. 23 ; Meador v. Everett, 3 Dill. C. C. 214. 6 Code, sect. 2138 ; Davis v. Davis (Ga.), 14 S. E. Rep. 194. ' Griffin v. Griffin, 18 N. J. Eq. 104. 8 Ex parte Holthausen, L. R., 9 Ch. App. 722. EQUITABLE MORTGAGES. 291 § 277. Contrary Doctrine. — Many of the States have adopted a different doctrine, and hold that an equitable mort- gage cannot be created by the deposit of title-deeds. That a mortgage by parol and deposit of title-deeds is not valid, be- cause such a doctrine would be a judicial repeal of the statute of frauds and perjuries, making void sales, not evidenced by writing, of lands, tenements, and hereditaments ; ^ that there can be no such thing as a valid, efficacious parol mortgage of land,' because such mortgage is contrary to the spirit of the acts of the legislature in the statute of frauds, and acts for the registration of mortgages for public information.^ So in Kentucky, the doctrine of equitable mortgages, founded on the deposit of title-deeds for an antecedent debt, or loan of money, is not sanctioned by the courts of the State, because it is in conflict with the statute of frauds and difficult to maintain.* But where a written instrument is entered into, and de- posited with the title-deeds, stating the purpose of the deposit, the objection is thus removed, and the transaction constitutes an equitable mortgage.^ Article 3. Informal Mortgages. I 278. In General. § 283. Name of Grantor Omitted. \ 279. Omission of Seal. § 284. Agent's Mortgage. I 280. Mortgages with no Acknowl- § 285. Power of Attorney Coupled edgment. with an Interest. § 281. Mortgages Not Attested by a § 286. Assignments of Eents and Sufficient Number of Wit- Profits. nesses. I 287. Stipulation in a Lease, I 282. Name of Grantee Omitted. § 288. Holding as Trustee. § 278. In General. — Mortgages, intended as such, but which lack some formality essential to their validity at law, 1 Meador v. Meador, 3 Hiesk. (Tenn.) 562. See, also, Gothard v. Flynn, 25 Miss. 58. ^ Bowers v. Oyster, 3 P. & W. (Pa.) 239. » Shitz ('. Dieffenbach, 3 Pa. St. 233 ; Spencer v. Haynes, 12 Phila. 452. *Vanmeter v. McFaddin, 8 B. Mon. 435, 437. See, also, English v. Mc- Elroy, 62 Ga.413 ; Bloom v. Noggle,4 Ohio St. 45 ; Hall t'. McDuff, 24 Me. 311. ' * Edwards v. Trumbull, 50 Pa. St. 509 ; Luch's Appeal, 44 Pa. St. 519. 292 NATURE AND REQUISITES OF THE CONTRACT. may generally be given their intended effect in equity. A mortgage defectively executed, or an imperfect attempt to create a mortgage, or to appropriate property to the discharge of a particular debt, will create a mortgage in equity or con- vey a lien on the property so intended to be mortgaged.^ This is on the principle that courts of equity do not regard the forms of instruments, but look to the intention, and give to the acts of parties a construction which is consistent with the intention and with equity.^ Thus, an attempt to make a legal mortgage which fails for the want of some solemnity, is a valid mortgage in equity.^ So a mortgage or trust deed which cannot be enforced by a sale under the power or by a judgment of foreclosure, because it is defective in some of the requisites of a legal mortgage, will, nevertheless, be regarded as an equitable mortgage, and, therefore, is valid in equity. An equitable mortgage may be constituted by any writing from which the intention to mortgage may be gathered, and an attempt to make a legal mortgage, which fails for the want of some solemnity, is a valid mortgage in equity ; ^ and it has been held that an agreement for a mortgage is, in equity, a specific lien upon the land ; '^ and that an equitable mortgage thus created is entitled to a preference over subsequent judgment creditors.^ Though it has been held that, save in exceptional cases, such as accident, fraud, or mistake, the agreement must be in writing. Though an equitable lienor may have priority over a judgment creditor, yet the right thereto rests upon consid- erations peculiar to the case of such a creditor. Those consid- erations are that the lien of a judgment creditor is not specific 1 Payne v. Wilson, 74 N. Y. 348 ; Daggett v. Rankin, 31 Cal. 321 ; Watkins V. Vrooman, 51 Hun (N. Y.), 175. " Flagg V. Mann, 2 Sum. C. C. 486. 3 Payne v. Wilson, 74 N. Y, 348. Judge Story says : " If a transaction resolves itself into a security, what- ever may be its form, and whatever name the parties may choose to give it, it is in equity a mortgage : " Flagg v. Mann, 2 Sum. C. C. 486, 533. *Milleron Eq. Mort. 1, 2. 5 In re Howe, 1 Paige (N. Y.), 125 ; Chase v. Peck, 21 N. Y. 581. 6 In re Howe, 1 Paige (N. Y.), 125 ; Robinson v. Williams, 22 N. Y. 386. EQUITABLE MORTGAGES. 293 and general, and that the debt arises not on the security of the land, but upon the general credit of the debtor and his whole estate.^ One who buys, without notice of the equitable lien, and pays the consideration-money, or one who makes a pres- ent loan and parts with his money, relying upon the title to the land being unincumbered, and upon that alone, will be protected against an equitable lien, though prior in date.^ § 279. Omission of Seal. — The omission of the seal will not affect the validity of a mortgage in equity. As an inter- est in land may pass by a writing not under seal, so a valid mortgage may be created by a written instrument not under seal.^ Thus where a grantee by a writing not under seal agrees to reconvey the same lands to the grantor upon the repayment of the money within a given time, the transac- tion constitutes an equitable mortgage.* So a mortgage, though lacking a seal, is still good as an equitable mortgage, and if acknowledged and recorded will be efficacious in equity.^ § 280. Mortgages with no Acknowledgment. — Though a mortgage is imperfectly acknowledged, or not acknowledged at all, equity will construe it as valid between the parties. Thus, although an acknowledgment of a trust deed taken be- fore one who is trustee in the instrument is worthless as to third parties, yet the deed is valid between the parties to it.^ Want of a proper acknowledgment does not invalidate a deed but only goes to the effect of the record. If not acknowl- edged or proved its record is not provided for by law, and the ^ Hurst V. Hurst, 2 Wash. C. C. 69, 78. * Stafford V. Van Rensselaer, 9 Cow. (N. Y.) 316. ^\tkinson v. Miller, 34 W. Va. 115 ; Woods t). Wallace, 22 Pa. St. 171 ; Harrington v. Fortner, 58 Mo. 468 ; Dunn v. Raley, 58 Mo. 134 ; McClurj? ik Phillips, 49 Mo. 315 ; Gill v. Clark, 54 Mo. 415 ; Kelleran v. Brown, 4 Mas.s. 443. * Eaton V. Green, 22 Pick. (Mass.) 526. ^ Harrington v. Fortner, 58 Mo. 468 ; McClurg v. Phillips, 49 Mo. 315 ; At- kinson V. Miller, 34 W. Va. 115. ' ^Blackv. Gregg, 58Mo. 565. 294 NATURE AND REQUISITES OP THE CONTRACT. fact that it may be copied upon the books of record will not operate as constructive notice to subsequent purchasers.^ The deed, however, is good as between the parties and should prevail against subsequent deeds of those who had notice of its existence.^ § 281. Mortgages not Attested by a Sufficient Number OF Witnesses. — It is held that though a mortgage is not at- tested by a sufficient number of witnesses, through careless- ness or design, it is not, therefore, a legal mortgage, but it may be enforced in equity.^ On the other hand, it has been held that when executed in the presence of only one witness,* when more are required, it is insufficient to pass any interest or estate in the land described, and is not entitled to record.* That such a mortgage is void as a legal mortgage and though recorded, is notice to no one.^ But the deed is legal and binding between the parties thereto and those claiming under them as mere volunteers ; ^ such deed is good between the parties themselves.^ § 282. Name of Grantee Omitted. — When the name of the grantee is omitted, it may be filled in by agreement of the parties. Thus, where a name of a trustee in a deed of trust was omitted in making out the deed, but the grantor gave the cestui que trust verbal authority to fill in the blank with the name of some suitable person, a court of equity has power to reform the instrument and supply the name of the trustee.^ § 283. Name of Grantor Omitted. — When there is no grantor, there can be no mortgage or deed. So a deed not ^ Duspaume v. Burnett, 5 Iowa, 95 ; Price v. McDonald, 1 Md. 403 ; Schults V. Moore, 1 McLean, C. C. 520. * Stevens v. Hampton, 46 Mo. 404. 3 Lake v. Doud, 10 Ohio, 415 ; Abbott v. Godfroy, 1 Mich. 178. * Thompson v. Morgan, 6 Minn. 292 ; Parret v. Shaubhut, 5 Minn. 323. 5 Harper v. Barsh, 10 Rich. Eq. (S. Car.) 149. ^ Johnson v. Jones, 87 Ga. 85 ; Downs v. Yonge, 17 Ga. 295 ; Gardner v. Moore, 51 Ga. 268. ' Marable v. Mayer, 78 Ga. 60. 8 Burnside v. Wayman, 49 Mo. 356 ; McQuie v. Peay, 58 Mo. 56. EQUITABLE MORTGAGES. 295 having been signed by the grantor in any form, is not merely a defective conveyance, but it is wholly void. The fact that the person named therein as grantor acknowledged it to be his deed is not sufficient. The compliance in this respect can never dispense with the manual act of subscribing by the grantor.^ The fact that the person named therein as grantor ac- knowledged it to be his deed is not sufficient. Courts of equity will sometimes give effect to deeds that are defectively executed ; but not to a deed defective because it was not signed by the grantor. The principle upon which a remedy is afforded, is that there is a valid contract lying back of the deed which courts of equity will lay hold of and through it give relief. And this proceeding is not the reformation of a deficient instrument, but belongs rather to the branch of equity jurisprudence which relates to the specific performance of con- tracts of which the defective instrument is the evidence or memorandum.^ Therefore, it is obvious that no relief can be granted which will give effect to such an instrument as a valid mortgage from the day of its date. The decree will operate prosj)ectively only, and upon such title as the party may then have.^ § 284. Agent's Mortgage. — A mortgage on real estate made by an agent for his principal, though inoperative at ^law for want of formal execution in the name of the principal, is bind- ing in equity if the attorney had authority, and the failure to execute in the name of the principal resulted from accident or mistake ; and such mortgage may be enforced against the principal and subsequent lien creditors, and also against sub- sequent purchasers with notice.* It will be sufficient to bind the principal if, upon the whole ' Goodman v. Randall, 44 Conn. 321 ; Shepherd v. Burkhalter, 13 Ga. 443 ; Jacobs V. Railroad Co., 8 Cush. (Mass.) 223. Compare Martin v. Nixon, 92 Mo. 2a. * Dickinson r. Glenney, 27 Conn. 112. ' Goodman ?'. Randall, 44 Conn. 321. * Love V. Sierra Nev. W. & M. Co., 32 Cal. 639. 296 NATURE AND REQUISITES OP THE CONTRACT. instrument, it can be gathered from the terms that the party described himself and acts as agent and intended thereby to bind his principal, and not to bind himself^ Thus, an instrument executed by the president of a corpora- tion in pursuance of the votes of the directors, although in- tended to take effect as the deed of the corporation, yet not having been executed by deed in the name of the corporation, cannot operate as its deed. But the transaction in a court of equity will be regarded as an equitable mortgage.^ § 285. Power of Attorney Coupled with an Interest. — An irrevocable power of attorney to collect rents given as se- curity for money loaned is, between the parties, an equitable mortgage of the rents. Thus, such a power of attorney exe- cuted by a married woman, and acknowledged in the statutory form for a married woman's deed, is valid against her.^ So it was held that such a power was an equitable mort- gage, and as such binding on the property, not only as between the parties, but also, under the English and Irish rule, even against subsequent judgment creditors.* In general, where a letter of attorney forms a part of the contract, and is a security for money or for the performance of any act which is deemed valuable, it is generally made irrevocable in terms, and if not so made, it is deemed irrevocable in law.^ § 286. Assignments of Rents and Profits. — The assign- ment of rents and profits amounts to an equitable mortgage, and will entitle the assignee to go into equity and insist upon the enforcement.^ A distinction, however, must be made between covenants imposing a present and actual charge upon ' Haskell v. Cornish, 13 Cal. 45 ; McDonald v. Bear Riv., etc., Co., 13 Cal. 221. ^ Miller v. Railroad Co., 36 Vt. 452. ^ Joseph Smith Co. v. McGuinness, 14 R. I. 59. * Abbott V. Stratten, 3 Jones & L. (503 ; 9 Irish Eq. 233. See, also, Raymond V. Squire, 11 Johns. (N. Y.) 47 ; Whitworth v. Gaugain, 3 Hare, 416 ; Knapp V. Alvord, 10 Paige (N. Y.), 205. * Walsh V. Whitcomb, 2 Esp. 565 ; Hunt v. Rousmanier, 8 Wheat. (U. S.) 174 ; Pemberton v. Simmons, 100 N. Car. 316. «Ex parte Wills, 1 Ves. Jr. 162. EQUITABLE MORTGAGES. 297 estates, and covenants that the party will charge his estate ; in the former case a specific lien attaches ; in the latter the cov- enant is personal only.^ The intention to give security must be shown.^ A formal mortgage of a leasehold estate by metes and bounds, is the assignment of rents for the whole term, in those juris- dictions where foreclosure cannot be effected by sale, but by foreclosure or proceedings of that nature.^ Where a planter agrees to ship his crop to his factor, to reim- burse him for advances and supplies, such a contract creates no lien or equitable mortgage on the crop produced.* But if a covenant can be construed as an assignment of the rents, then the relation will be that of trustee and cestui que trust. No formal words are necessary to create that relation. Any expres- sion which shows unequivocally the intention of the parties to create a trust will have that effect.^ An assignment of the rents and profits of land as a security for a debt, is a mode of creating an equitable lien on the land in favor of the assignee ; and the assignment of a lease by way of security produces the same effect.® Lord Thurlow says it is an odd way of conveying, but it amounts to an equitable lien.'^ Thus, a party gave his notes in payment on the purchase of a mining ditch and grounds, and agreed in writing with the vendor that, if such notes were not paid when due, he would reconvey the property to the vendor as security for his pay- ment. The notes not being paid, the maker thereof gave the vendor a lease of the property with a right to apply the net profits and proceeds from year to year on the notes. Such ^ Falkner v. O'Brien, 2 Ball & Beat. 223 ; Williams v. Lucas, 2 Cox, 160 ; Freemoult v. Dedire, 1 P. Wms. 429. ^Mandeville v. Welch, 5 Wheat. (U. S.) 277. ^ Hulett V. Soullard, 26 Vt. 295. Compare Allen v. Montgomery, 48 Misa. 101 ; Alexander v. Berry, 54 Miss. 422. * Allen V. Montfromery, 48 Miss. 101. 'Carpenter v-. Cushman, 105 Mass. 417. *3 Pom. Eq. Jur., sect. 1237. ^ ^ Ex parte Wills, 1 Ves. Jr. 162. 298 NATURE AND REQUISITES OF THE CONTRACT. agreement, in equity, was a mortgage, and the lease, with a pledge of the rents and profits, was accepted as a fulfillment of the agreement, and the agreement and lease, taken together, created a continuous lien on the property in favor of the payee of the notes or his assigns from the date of the agreement ; the assignment of the rents and profits of the property to the lessee for the payment of the notes created a lien on the body of the property, which, in case the rents and profits were in- sufficient to pay the same, might be enforced in equity, and during the possession under this lease the lessee was not authorized to charge the property with the expense of operat- ing or improving it, and, if the expenditures in any one year exceeded the receipts, such excess was the lessee's personal debt.^ § 287. Stipulation in a Lease. — Where a lessee takes a lot under a lease, agreeing to erect a house thereon and pay rent monthly, and at the end of the term to have two-thirds of the appraised value of the house herein, he may insert a clause in the lease which will be construed as a mortgage. Thus in this case the lease contained the following : "And it is further agreed the same is hereby declared to be a mortgage as se- curity for the payment of the payments of the monthly rents herein stipulated." It was held that this was a mortgage which might be foreclosed on the non-payment of the first or any month's rent.^ So where a lease is assigned and a bond executed at the same time, stating that the assignment was made to secure a debt due to the assignee and an agreement to reconvey the lease on payment of the money with interest, the transaction is a mortgage.^ § 288. Holding as Trustee. — Chief Justice Shaw says : ^^ Prima facie, it would seem that if a mortgage were made to two, conditioned to secure the payment of a debt to one of them 1 Gest V. Packwood, 39 Fed. Rep. 525. 2 Barroilhet v. Battelle, 7 Cal. 450. See, also, Smith v. Patton, 12 W. Va. 541 ; First Nat. Bank v. Adam, 138 111. 483. ^Jackson v. Green, 4 Johns. (N. Y.) 186. EQUITABLE MORTGAGES. 299 only, the legal estate would vest in the two as tenants in com- mon, but the one having no debt secured would be trustee to the extent of his moiet}^ and hold it in trust to secure the debt due to the actual creditor. As between mortgagor and mort- gagee, the execution and delivery of the mortgage deed trans- ferred the legal estate and vested it in the mortgagee, and the interest of the mortgagor is a right to redeem." ^ But in the equitable and beneficial estate the interests of the parties are unequal and varying. Neither can have a real action against the other, because they are tenants in common, and there has been no actual ouster. They cannot have par- tition because their equitable claims are unequal, fluctuating, and unsettled. The remedy for either of them is by bill in equity.^ Article 4. Agreements to Make Conveyance of Land When Intended as Secur- ity for a Debt. ? 289. Agreement to Give a Mortgage. | 294. Appropriating Specific Prop- § 290. The Property Must be Specific- erty. ally Described. § 295. Omission of Land in the De- ? 291. Agreement to Support. scription by Mistake. I 292. Sufficiency of the Instrument to | 296. A Deed of Land with Power Constitute a Mortgage. of Sale. § 293. Part Performance of the Con- § 297. Interpretation of the Agree- tract. ment. § 289. Agreement to Give a Mortgage. — A written in- strument given as security for a debt, containing any words of conveyance in prsesenti, will oj)erate as an equitable mortgage. Thus an instrument by which a debtor agrees to convey to his creditor land, the same to be sold in payment of the debt, and excess, if any, to be returned to the debtor, is in the nature of a mortgage, and will be so construed ; ^ this is on the principle that equity will treat that as done which by agreement is to 1 Root V. Bancroft, 10 Met. (Mass.) 44. '^Ewer V. Hobbs, .5 Met. (Mass.) 1. See, also, King v. McVickar, 3 Sandf. Ch. (N. Y.) 192 ; Fox v. Fraser, 92 Ind. 265. ^O'Neal V. Seixas, 85 Ala. 80; Oliva v. Bunaforza, 31 N.J. Eq. 395 ; Rich- 'ardson v. Hamlett, 33 Ark. 237 ; Cotterell v. Long, 20 Ohio, 464 ; Delaire v. 300 NATURE AND REQUISITES OF THE CONTRACT. be done.^ Equity will treat such transactions as to collateral consequences in the same manner as if the final acts contem- plated by the parties, had been performed as they ought to have been under the agreement.^ A party bought lands and had them conveyed to his wife for her sole use. He gave his notes on time for the price, and signed a written agreement, to which his wife was not a party, to make with her a mortgage back of the property after a prior mortgage to a bank had been increased sufficiently to raise money to repair the buildings. Afterward a new note and mortgage were executed by the party and his wife to the bank for an increased amount, the old note and mortgage being settled in the transaction. Then the wife refused to agree to the second mortgage in accordance with her husband's agree- ment. She had accepted the deed when it was given, but it did not appear that she knew of the agreement to make the mortgage. This transaction created an equitable mortgage, which the court established by its decree.^ This is upon the principle that equity looks upon that as done which ought to have been done. Equity will treat the subject-matter as to collateral consequences and incidents in the same manner as if the final acts, contemplated by the par- ties, had been executed exactly as they ought to have been, not as the parties might have executed them. The most com- mon cases of the application of the rule are under agreements. All agreements are considered as performed, which were made for a valuable consideration, in favor of persons entitled to insist on their performance. They are to be considered as done at the time when, according to the tenor thereof, they ought to have been done.* Keenan, 3 Des. (S. Car.) 74 ; Poland r. Lamoille R. R. Co., 52 Vt. 144 ; Petrie V. Wright, 6 Sm. & M. (Miss.) 647 ; Hall v. Hall, 50 Conn. 104 ; McQuie v. Peay, 58 Mo. 56. 1 Biebinger v. Continental Bank, 99 U. S. 143 ; Bank v. Carpenter, 7 Ohio, 21 ; Morrow v. Turney, 35 Ala. 131. 2 Daggett V. Rankin, 31 Cal. 321, 326. 3 Hall V. Hall, 50 Conn. 104. *1 Story's Eq. Jur., sect. 64 g. EQUITABLE MORTGAGES. 301 If it may be implied from a written agreement that the land is to be security for a debt, then the instrument amounts to an equitable mortgage.^ § 290. The Property must be Specifically Described. — The lien cannot be enforced and carried into effect when the agreement contains no specific description of any property. When the debt is not charged upon any particular land, the lien is not enforceable.^ Thus, a legatee was paid a certain amount of money by the administrator, who took a receipt in which the legatee agreed that if the amount was not realized out of the personal prop- erty of the estate, the same should be a lien on the real estate, or his interest in the same ; it was held that this instrument created no lien upon the land, because the description was wholly insufficient, and, besides, it neither conveyed nor pur- ported to convey or mortgage the land.^ So a receipt in a note for the purchase-money of land is nugatory, and amounts to nothing more than a mere declara- tion of intention.* But any agreement between the parties in interest that shows any intention to create a lien on specific land may, in equity, be a mortgage.^ Effect has been given to this principle to instruments given by the maker of two notes to his creditors, the notes reciting that they were for the purchase of specific land, and providing that in case the maker should fail to pay them, then he should convey the said land as said security.^ So an agreement on the back of a note making a charge upon particular land is an equitable mortgage. In this way an agree- ' 2 Story's Eq. Jur., sect. 1020 ; Chase v. Peck, 21 N. Y. 583 ; In re Howe, 1 Paige (N. Y.), 125. 'Boehl V. Wadgymar, 54 Tex. 589. Compare Humphreys v. Snyder, Morris (Iowa), 263. ' Langley v. Vaughn, 10 Heisk. (Tenn.) 553. * Gilliam v. Esselman, 5 Sneed (Tenn.), 86. ^Daggett V. Rankin, 31 Cal. 321. « Courtney v. Scott, Litt. Sel. Cas. 457 ; Lyon v. Lyon, 67 N. Y. 250; Wayt 'r. Carwithen, 21 W. Va. 516. 302 NATURE AND REQUISITES OF THE CONTRACT, ment intended to operate as a revival of a mortgage and note which had been paid, may be rendered effective as an equitable mortgage, although ineffectual to revive the mortgage lien.^ So an agreement in a lease that the lessor " is to have a lien " upon certain property for the faithful performance of the lessee's obligations to pay rent, is in effect a mortgage.^ In general, a mortgage or trust deed which cannot be en- forced by a sale under a power or by a judgment of foreclosure, on account of some informality which is requisite to- a com- plete instrument, will, nevertheless, be regarded as an equita- ble mortgage, and the lien will be enforced by proceedings in equity. If the instrument, by its terms, shows that the parties intended that it should operate as a lien or charge upon spe- cific property, it will constitute an equitable mortgage, and may be enforced in a court of equity.^ Doubtless, there must be an identification of the property, so that the equitable mortgagee may say, with a reasonable degree of certainty, what it is that is subject to a lien.* Thus, where the agreement was not for a mortgage on the whole premises, nor for any part of it with specific indication of that part, but for a mortgage on one of the houses then going up, but without pointing out the particular house, such a designa- tion of the property to be charged, though indefinite to some degree, is sufficient for an equitable mortgage.^ § 291. Agreement to Support. — It has been held by some courts that a written instrument under seal but not acknowl- edged, in wliich the signer agrees to maintain his father and mother during their natural lives, and as security for the ful- fillment of the agreement conveys and grants to them " each and severally, a life lien or dower or lien of maintenance for life " in real estate, is a mortgage.^ > Peckham v. Haddock, 36 111. 39. ^ "Whiting V. Eichelberger, 16 Iowa, 422. 'Wayt V. Carwithen, 21 W. Va. 516. * Stewart's Case, cited 2 Sch. & Lefr. 381. s Payne v. Wilson, 74 N. Y. 348. ^Gilson V. Gilson, 2 Allen (Mass.), 115. EQUITABLE MORTGAGES. 303 So upon receiving a grant of land from the grantor the grantee executed an agreement, not under seal, to support and main- tain the grantor, pledging for that purpose, the produce of the land, and should that prove insufficient, to appropriate the en- tire fee. It was held that this agreement being the considera- tion of the grant, the transaction was, in effect, an equitable mortgage.' ^ § 292. Sufficiency of the Instrument to Constitute a Mortgage. — To constitute a legal mortgage no particular words are necessary. The words " we mortgage the property " when accompanied by a provision for the sale of it, in case the money is not paid, are clearly sufficient.^ So a deed or writing used by the parties for the purpose of pledging real property or some interest therein, as security for a debt or obligation which is defective as a common-law mortgage, which by its terms shows that the parties intended that it should operate as a lien, or charge upon specific prop- erty, will constitute an equitable mortgage.^ So any instrument pledging land for a debt is an equitable mortgage, without regard to its form.* Thus, an instrument whereby a corporation " pledges the real and personal estate of said company " for the fulfillment of an agreement, may be enforced as a mortgage.^ A seal is not necessary to an equitable mortgage.^ A debtor may mortgage his share under his father's will, whenever a division shall be made.^ ^ Chase v. Peck, 21 N. Y. 581. * De Leon v. Higuera, 15 Cal. 483. MVayt V. Carwithen, 21 W. Va. 516. * Dunman v. Coleman, 59 Tex. 199 ; Overstreet v. Baxter, 30 Kan. 55 ; Mc- Donald V. Kellogg, 30 Kan. 170 ; Hicks v. Hicks, 5 Gill & J. (Md.) 75 ; Read V. Gaillard, 2 Des. (S. Car.) 552 ; Mellon v. Lemmon, 111 Pa. St. 56 ; Batty v. Snook, 5 Mich. 231 ; Cross v. Hepner, 7 Ind. 359 ; Marshall v. Stewart, 17 Ohio, 356. See, also, Jackson v. CarsAvell, 34 Ga. 279 ; Gale v. Morris, 29 X. J. Eq. 222 ; Stewart v. Hutchins, 6 Hill (N. Y.), 143 ; Mitchell v. Wade, 39 Ark. 377. * Railroad Co. v. Talman, 15 Ala. 472. « Woods V. Wallace, 22 Pa. St. 171 ; Spencer i'. Haynes, 12 Phil. (Pa.) 452. ^ 'Lynch v. Utica Ins. Co., 18 Wend. (N. Y.) 236. 304 NATURE AND REQUISITES OF THE CONTRACT. Where a woman repudiates a contract for the sale of land on the ground that it was made during coverture, her assignee of the vendee's notes for deferred payments, has an equitable lien upon the land for the entire amount of the notes, and not merely for the consideration paid by him for them, since his recourse against the vendee is lost by her wrongful act,^ § 293. Part Performance op the Contract. — While a parol agreement concerning lands remains executory, it is within the statute of frauds, and so not enforceable, for the reason that it is not in writing; yet when the promisor actually executes the agreement by the delivery of a formal mortgage, the objection to its validity on that ground is re- moved, and the agreement becomes as effectual for all pur- poses as if it had been reduced to writing when the contract and mortgage were made.^ And so, generally, a parol agreement in respect to lands cannot be avoided in equity because it is not in writing, where there has been a part performance.^ A fortiori, it cannot be avoided where it has been fully executed.* So a corporation agreed to mortgage its interest in lands not paid for, in favor of some of the members who were about to incur personal liabilities for the company — such agreement be- ing entered in the minutes of the company, and afterward a deed of trust made in conformity therewith. It was held that this deed of trust might be viewed simply in the light of a deed in confirmation of the prior agreement, signed by the party or authorized agent, and was sufficient to bind the corpo- ration.® § 294. Appropriating Specific Property. — A written agreement by the owner of certain lands to pay the creditor a given sum, conditioned that when the land was sold to enable 1 Newman v. Moore (Ky.), 17 S. W. Eep. 740. 'Siemon v. Schurck, 29 N. Y. 598 ; White v. Carpenter, 2 Paige (N.Y.), 217. ' Freeman v. Freeman, 43 N. Y. 34. *Burdick v. Jackson, 7 Hun (N. Y.), 488. 5 Miller v. Moore, 3 Jones Eq. (N. Car.) 431. EQUITABLE MORTGAGES, 305 the owner to realize the amount, the creditor should surrender his possession, and meantime giving the creditor the occupancy in lieu of paying him interest on this sum, was held to con- stitute an equitable mortgage, and amounted to a specific lien on the land/ An agreement in writing to give a mortgage or to appropri- ate specific property to the discharge of a particular debt will create a mortgage in equity, or a special lien on the property so mortgaged.^ And an agreement in writing to give a mort- gage will create a lien upon the land specified as against general creditors.^ § 295. Omission of Land in the Description by Mis- take. — When land intended to be included in a mortgage is, by mistake, omitted, and a judgment is subsequently rendered against the mortgagor, the lien of the judgment creditor is subject to the equity of the mortgage.* And this is the general rule that when land intended to be included in a mortgage is omitted by mistake, a judgment subsequently recovered against the mortgagor, is subordinate to the equity of the mortgage.^ In all cases of mistakes in deeds courts of equity will inter- fere as between the original parties, or those claiming under them in privity, such as personal representatives, heirs, de- visees, legatees, assignees, voluntary creditors, or judgment creditors, or purchasers from them with notice of the facts. As against bona fide purchasers for a full consideration without notice, courts of equity will grant no relief ; because they have, at least, an equal equity to the protection of the courts.® As between the immediate parties to the instrument, the correction ' Blackburn v. Tweedie, 60 Mo. 505. See, also, Chadwick v. Clapp, 69 111. 119. '^ Racouillat v. Sansevain, 376 Cal. 375 ; McQuie v. Peay, 58 Mo. 58 ; Black- burn V. Tweedie, 69 Mo. 505. ' Carter v. Holman, 60 Mo. 498 ; McQuie v. Peay, 58 Mo. 58. * Martin v. Nixon, 92 Mo. 26. * Galway v. Malchow, 7 Nebr. 285 ; Swarts v. Stees, 2 Kan. 236 ; Gouvemeur V. Titus, 6 Paige (N. Y.), 347 ; Freeman on Judg., sect. 357. "« Young V. Coleman, 43 Mo. 179. VOL, 1,-20 306 NATURE AND REQUISITES OF THE CONTRACT. is within the jurisdiction of the court, and should be made. But equity goes further than this, and makes good, defects ex- isting in mortgages contrary to the intention of the parties, even against subsequent judgment creditors claiming under the party who is bound, in conscience, to correct the mistake/ § 296. A Deed of Land with Power of Sale. — A deed of land, with a power of sale to secure the payment of a debt, whether made to a creditor or a third person, is, in equity, es- sentially a mortgage, if there is left a right to redeem on pay- ment of such debt.^ So an instrument securing a single creditor on property, which by its terms can be disposed of only to pay the secured debt, is an equitable mortgage.^ It is the settled doctrine of equity that a conveyance of land for the purpose of securing payment of a sum of money is a mortgage, if it leaves a right to redeem upon payment of the debt. If there is no power of sale, the equity of redemption remains until it is foreclosed by a suit in chancery, or by some other mode recognized by law. If there is a power of sale, whether in the creditor or in some other person to whom the conveyance is made for that purpose, it is still in effect a mort- gage, though in form a deed of trust, and may by foreclosed by sale in pursuance of the terms in which the power is con- ferred, or by suit in chancery.* § 297. Interpretation of the Agreement. — Whatever be the form of the contract, if it be intended to secure a debt or create a security, it is an equitable mortgage. This is the criterion. The terms of the contract need not even express a security, because equity can imply this from the nature of the whole transaction. These mortgages are generally applied to those kind of instruments or contracts by which equity estab- lishes a lien. ^ Will, on Eq. Jur. 75 ; Freem. on Judg., sect. 359. ^Shillaber v. Robinson, 97 U. S. 68. 8Parsell v. Thayer, 39 Mich. 467. *Shillaber v. Robinson, 97 U. S. 68. f EQUITABLE MORTGAGES. 307 There are many instruments not always intended as mort- gages, not having the usual form of mortgages, and which are not legal mortgages, which equity will construe as a lien, and, hence, an equitable mortgage/ In a court of equity, a conveyance of land absolute and unconditional on its face, will be declared and established as a mortgage on clear and certain proof that the parties intended it to stand simply as a security for a debt ; and this fact may be proved by parol evidence, and may be shown by a separate- writing.^ A loan and a deed given as security therefor, with a contract not under seal, showing clearly that the transaction was one giv- ing a security, will be construed as an equitable mortgage,^ and will be enforced as such in the hands of an equitable mortgagee or his assignee, taking the assignment with full knowledge of, and subject to, all equities between the original parties.* ^Ketchum v. St. Louis, 101 U. S. 306; Hall v. Railroad Co., 58 Ala. 10; Newlin v. McAfee, 64 Ala. 357 ; Turner v. Wilkinson, 72 Ala. 361 ; Reming- ton r. Higgins, 54 Cal. 620 ; Carey r. Rawson, 8 Mass. 159 ; Moors r. Albro, 129 Mass. 9 ; Bears v. Ford, 108 111. 16 ; Union Mut. Life Ins. Co. v. Slee, 110 111. 35 ; Ferris v. Wilcox, 51 Mich. 105 ; AHiet v. Young, 34 N.J. Eq. 15 ; Starkes V. Redfield, 52 Wis. 349; Blizzard v. Craigmiles, 7 Lea (Tenn.), 693; Hoile v. Bailey, 58 Wis. 434 ; Beatty v. Brummett, 94 Ind. 76 ; Brown v. Brown, 103 Ind. 23 ; Hall v. Hall, 50 Conn. 104 ; Joseph Smith Co. v. McGuinness, 14 R. I. 59 ; Stewart v. Hutchins, 13 Wend. (N. Y.) 485 ; Scott v. Mewhirter, 49 Iowa, 487 ; Fisk r. Stewart, 24 Minn. 97 ; Marshall v. Stewart, 17 Ohio, 356 ; Lewis V. Small, 71 Me. 552 ; Black v. Gregg, 58 Mo. 565 ; Buse v. Page, 32 Minn. Ill ; Jackson v. Green, 4 Johns. (N. Y.) 186; Parks v. Parks, 66 Ala- 326 ; Radford v. Folsom, 58 Iowa, 473. '^Turner v. Wilkinson, 72 Ala. 361. 3 Bank v. Stimpson, 21 Me. 195 ; Rowell v. Jewett, 69 Me. 293. * Lewis V. Small, 71 Me. 552. 308 nature and requisites of the contract. Article 5. Assignment of Contract of Purchase as Security. § 298. Assignment of Contract of est of a Contract of Pur- Sale, chase. 2 299. Assignment of a Bond for a § 302. Mortgages Before _ Entry — Deed. Pre-emption. § 300. Assignment of Certificate of ^ 303. Mortgaging After Entry, but Purchase of Public Lands. Before Issuance of Patent. § 301. Assignment of a Partial Inter- ? 304. After- Acquired Title. § 298. Assignment of Contract of Sale. — The vendee of lands under a contract of sale has an interest capable of being mortgaged. And when he conveys such interest to a third party to secure him for money advanced to pay the original debt, the transaction will constitute an equitable mort- gage.' So when a party has a contract for the purchase of land, if another person pays the purchase-money and takes title, agree- ing to reconvey to the first party on payment of the money, the transaction is the mortgage of the equitable title.^ Even if such a contract should be interpreted as an option contract, it is binding and enforceable if the option be exercised accord- ing to the terms.^ An assignment of a land contract for security to the as- signee, with the condition that if the debt is paid at the time stipulated, the assignee shall re-assign the contract, is, in equity, a mortgage, and the assignor has the right of redemption.* § 299. Assignment of Bond for a Deed. — A bond for a deed may be mortgaged or the interest held in the land by the obligee. Thus, where a party holds real estate under a bond ^Niggeler v. Maurin, 34 Minn. 118; Eoddy v. Elam, 12 Rich. Eq. (S. Car.) 343 ; Gilkerson v. Connor, 24 S. Car. 321 ; Shoecraft v. Bloxham, 124 U. S. 7.30, 73.5 ; Fitzhugh v. Smith, 62 111. 486 ; Brockway v. Wells, 1 Paige (N. Y.), 617. "Fessler's Appeal, 75 Pa. St. 483; Purdy v. Bullard, 41 Cal. 444; Dwen v. Blake, 44 111. 135. 3 Kerr v. Day, 2 Harris (Pa.), 112; Corson v. Mulvany, 13 Wright (Pa.), 88 ; Lowry v. Mehafty, 10 Watts (Pa.), 389. * Brockway v. Wells, 1 Paige (N. Y.), 617. EQUITABLE MORTGAGES. 309 for a deed from the owner of the legal title, and is in possession' thereof, he has such interest as can be mortgaged.^ And it is held by some courts that the effect of the bond itself is that of a mortgage, the same as though the vendor had' conveyed the land by an absolute deed to the purchaser, and taken a mortgage back to secure the payment of the purchase- money.^ A court of equity has jurisdiction in cases arising out of contracts for the sale of land to relieve against forfeiture, and to foreclose the equity of the delinquent vendee ; the relation of the parties to title-bonds or land contracts, is analogous to that of an equitable mortgagor and mortgagee for purchase- money.^ Even if the bond for title obligate the vendor to make a deed to the laud, so soon as certain payments were made, and certain notes given, and the proof was that these- conditions had been complied with, still the land may be sold to pay the balance of the purchase-money.* § 300. Assignment of Certificate of Purchase of Pub- lic Lands. — The assignment of a certificate of purchase of public lands as security, will be treated as a mortgage.^ Thus, where the owner of a certificate of entry of lands ^ Jones V. Lapham, 15 Kan. 540 ; Baker v. Bishop Hill Colony, 45 111. 264 ; Bull V. Sykes, 7 Wis. 449 ; Button v. Schroyer, 5 Wis. 598 ; Newhouse v. Hill, 7 Blackf. (Ind.) 584 ; Alderson v. Ames, 6 Md. 52 ; Fenno v. Say re, 3 Ala; 458 ; Neligh v. Michenor, 3 Stock. (N. J.) 539 ; Christy v. Dana, 34 Cal. 548. 2 Lewis r. Boskins, 27 Ark. 61; Smith v. Robinson, 13 Ark. 533 ; Shall y, Biscoe, 18 Ark. 142 ; Tanner v. Hicks, 4 Sm. & M. (Miss.) 294 ; Smith «.' Moore, 26 111. 392 ; Smith v. Price, 42 111. 399 ; Scroggins v. Hoadley, 56 Ga.- 165 ; Relfe v. Relfe, 34 Ala. 504 ; Lingan v. Henderson, 1 Bland Ch. (Md.) 236 ; Irvine v. Muse, 10 Heisk. (Tenn.) 477 ; Cleveland v. Martin, 2 Head (Tenn.), 128; Richards v. Fisher, 8 W. Va. 55; Merritt v. Judd, 14 Cal. 59; Purdy V. Bullard, 41 Cal. 444 ; Dukes v. Turner, 44 Iowa, 575 ; Graham v. Mc- Campbell, Meigs (Tenn.), 52 ; Pintard v. Goodloe, Hemp. C. C. 502. 3 Button V. Schroyer, 5 Wis. 598 ; Bull v. Sykes, 7 Wis. 449. *Scro^ns v. Hoadley, 56 Ga. 165. 5 Hill V. Eldred, 49 Cal. 398 ; Stover v. Bounds, 1 Ohio St. 107 ; Case v. Mc- Cabe, 35 Mich. 100 ; Hays v. Hall, 4 Port. (Ala.) 374 ; Ross v. Mitchell, 28 Tex. 150 ; Mowry v. Wood, 12 Wis. 413 ; .Tarvis v. Dutcher, 16 Wis. 307 ; Dodge rt Silverthorn, 12 Wis. 644; Jones r. Yoakam, 5 Neb. 265; Wright v. Shum- way, 1 Biss. C. C. 23 ; Gunderman v. Gunnison, 39 Mich. 313. 310 NATURE AND REQUISITES OF THE CONTRACT. from the United States, assigns said certificate as security for a debt with the condition of defeasance on the payment of the debt, such assignment creates an equitable mortgage on the lands covered by such certificate/ Where the assignment of a land certificate is intended for a security, it is a mortgage as between the parties.^ The same principle applies to school land certificates, and the land de- scribed therein may be mortgaged, subject, of course, to the claims of the State.^ And this is so although the fee of the land remains in the State until the amount of the certificate is paid and the patent issued ; still the purchaser takes an interest in real estate which may be sold, conveyed, or mortgaged.* These certificates are analogous to original land contracts between individuals for the sale and conveyance of real estate.^ So where a claimant of land under the United States home- stead laws has made proof at the proper time at the land office, and has done everything required to entitle him to a patent, he can execute a valid mortgage on the land, although the patent be not issued.® § 301. Assignment of a Partial Interest of a Contract OF Purchase. — The same principle applies to the assignment of a partial interest of a contract of purchase as security ; such assignment will be construed as an equitable mortgage. The holder of the legal title may be enjoined from conveying the property to a third party, and the mortgagee may enforce his rights in equity.'^ * Stover V. Bounds, 1 Ohio St. 107. ^ Gunderman v. Gunnison, 39 Mich. 313. See, also, Campbell v. Dearborn, 109 Mass. 130 ; Odell v. Montross, 68 N. Y. 499 ; Wilson v. Giddings, 28 Ohio St. 554 ; Morgan's Assignees v. Shinn, 15 Wall. (U. S.) 105. 3 Dodge V. Silverthorn, 12 Wis. 644. * Bull V. Sykes, 7 Wis. 449. * Smith V. IMariner, 5 Wis. 551. * Cheney v. AVhite, 5 Neb. 261 ; Jones v. Yoakam, 5 Neb. 265 ; Nycum v. Mc- Allister, 33 Iowa, 375 ; Watson v. Voorhees, 14 Kan. 328 ; In re Cross, 2 Dill. C. C. 320 ; Robbing v. Bunn, 54 111. 48. ^Northup V. Cross, Selden's Notes (N. Y.), 111. EQUITABLE MORTGAGES. 311 § 302, Mortgaging Before Entry — Pre-emption. — A mortgage by a pre-emptor before entry is void/ being contrary to the statute of the United States.^ " Mortgage " is included within the words, " grants or conveys," as used in the United States statute.' So all contracts in violation of this important .provision of the act of Congress are void, and cannot be en- forced.* On the other hand, this doctrine has been denied in Minne- sota ; the court decides that a mortgage is not included in the terms of the statute, because a mortgage is a mere security and does not act as a conveyance.^ §303. Mortgaging After Entry But Before Issuance OF Patent. — The pre-emptor has an interest which he may mortgage after entry of the land and before he receives his patent from the government, and this question must be settled by the United States. Whenever a question in any court, State or Federal, is whether a title to land which had once been the property of the United States is passed, that question must be resolved by the laws of the United States; but whenever according to these laws the title shall have passed, then that property, like all other property in the State, is sub- ^ Brewster v. Madden, 15 Kan. 2-19 ; Green v. Houston, 22 Kan. 35 ; Bull v. Shaw, 48 Cal. 455. ^U. S. Rev. Stat., sect. 2262, Act of Sept. 4, 1841, sect. 13. This act pro- vides that the pre-emptor shall make oath that " he has not directly or indi- rectly made any agreement or contract, in any manner, with any person or persons whatsoever, by which the title which he might acquire from the Government of the United States should inure in whole or in part to the bene- fit of any person except himself." This act also says that " any grant or con- veyance which he may have made, except in the hands of a bona fide pur- chaser, for valuable consideration, shall be null and void." •^ Bass V. Bukor, 6 Mont. 442. * Warren v. Van Brunt, 19 Wall. (U. S.) 646, 655. ^. Tones r. Tainter, 15 Minn. 512, overruling McCue v. Smith, 9 Minn. 252, and Woodbury v. Dorman, 15 Minn. 341, on this point. The groimd upon which the Minnesota court bases its decision is not solid. It holds that the mortgage contemplated by such contract or agreement is but a security, and its execution does not have the effect of making the title acquired by the pre- emptor, to wit, the fee, inure, in whole or in part, to the benefit of another. 'See a refutation of this decision in Bass v. Buker, 6 Mont. 442. 312 NATURE AND REQUISITES OF THE CONTRACT. ject to the State legislation so far as that legislation is con- sistent with the admission, that the title passes and vests ac- cording to the laws of the United States/ This law of the United States provides that " all assignments and transfers of the right hereby secured prior to the issuing of the patent, shall be null and void." ^ But it is not supposed that Congress, in the absence of an express declaration to that effect, intended to tie up these lands in the hands of the original owners until the govern- ment should choose to issue the patent. Justice Davis says : " If it had been the purpose of Congress to attain the object contended for, it would have declared the lands themselves unalienable until the patent was granted. Instead of this the legislation was directed against the assignment or transfer of the right secured by the act, wdiich was the right of pre-emp- tion, leaving the pre-emptor free to sell his land after the entry, if at that time he was in good faith the owner of the land and had done nothing inconsistent with the provisions of the law on the subject." ^ It is well settled that such pre-emptor, having made the entry, paid his mone}'", taken his receipt or certificate, and re- corded the same, has the entire equitable title and interest which he may assign, transfer, and convey, and that the legal title will vest in the grantee upon the issuing of the patent.^ The right of a pre-emptor after entry to mortgage his inter- est does not come within the prohibition of the Federal statute.'^ 1 Irvine I). Marshall, 20 How. (U. S.) 564 ; Gibson v. Chouteau, 13 Wall. (U. S.) 92. See, also, Seymour v. Sanders, 3 Dill. C. C. 440. * U. S. Rev. Stat., sect. 2263. 3 Myers v. Croft, 13 Wall. (U. S.) 291. See, also. Lessee of French v. Spen- cer, 21 How. (U. S.) 228 ; Tredgill v. Pintard, 12 How. (U. S.) 24 ; Landes v. Brant, 10 How. (U. S.) 348. * Dillingham v. Fisher, 5 Wis. 475 ; Stephenson v. Wilson, 37 Wis. 489. * Paige w. Peters, 70 Wis. 178 ; Nycum v. McAllister, 83 Iowa, 374 ; Fuller?;. Hunt, 48 Iowa, 163 ; Kirkaldie v. Larrabee, 31 Cal. 456 ; Orr v. Stewart, 67 Cal. 275 ; Cheney v. White, 5 Neb. 261 ; Jones v. Yoakam, 5 Neb. 265 ; Spiess V. Neuberg, 71 Wis. 279 ; Warren v. Van Brunt, 19 Wall. (U. S.) 654. See Webster v. Bowman, 25 Fed. Rep. 889 ; Gile v. Hallock, 33 Wis. 523. I EQUITABLE MORTGAGES. 313 § 304. After-Acquired Title. — It is well settled that when a mortgage of land is made, purporting to convey the land in fee, any title afterward acquired by the mortgagor will feed the mortgage and inure to the benefit of the mortgagee ; ^ and this is so though the title when the mortgage was made was in the government and afterward acquired by patent from the government.^ Thus, a homesteader, after having mortgaged his right, title, and interest, and the mortgage was foreclosed and the land bid in by the mortgagee who obtained thereon a sheriff 's deed, commuted his homestead entry into a cash entry and paid in full the price, and received a duplicate receipt and certificate of purchase therefor; but it was held that such after-acquired title by the mortgagor fed the mortgage, and inured to the benefit of the mortgagee and purchaser at such foreclosure sale.^ So where a mortgagee has purchased at a foreclosure sale and received a deed, he will hold it against the mortgagor, who, when occupying the land as his tenant, makes a new homestead entry of the land, commutes the same by payment and obtains a patent.* But if the pre-emptor sells the land to another who obtains a patent from the United States, the mortgagee will have no remedy against the property and lose his lien.^ The title afterward acquired by the mortgagor will inure to the benefit of the mortgagee, because the relation of the mort- gagor is one which requires him to preserve the property for the purpose of the security for which it was originally pledged. He is estopped from denying the existence of the lien wliich he has attempted to create, and from defeating, by his own act, the enforcement of the lien against the property thus mortgaged.® ' Clark V. Baker, 14 Cal. 612 ; 76 Am. Dec. 449 ; Sherman v. McCarthy, 57 Cal. 507. 'Christy v. Dana, 42 Cal. 174 ; Camp v. Grider, 62 Cal. 20. ^Orr V. Stewart, 67 Cal. 275. See, also. Hushes v. United States, 4 Wall. (U. S.) 232 ; Lessee of French r. Spencer, 21 How. (U. S.) 228. * Spiess V. Neuburg, 71 Wis. 279. *Bull r. Shaw, 48 Cal. 455. v« Clark V. Baker, 14 Cal. 612; 76 Am. Dec. 449. 314 nature and requisites op the contract. Article 6. By Act of the Legislature. I 305. Liens Created by the State. I 306. Discharging Such Liens. § 305. Liens Created by the State. — The State can create liens by the act of the legislature. Corporations generally have power to mortgage their property. So, bonds issued by a corporation, pledging real estate and personal property of the company for the payment of a deed and interest, and contain- ing other corresponding stipulations, will be treated by the court of ecjuity as a mortgage, and enforced according to the intent of the parties.^ In construing contracts, secret liens are not favored, because they are dangerous and unjust, and it is only when some great public interest is involved that any construction of a law will be made asserting or upholding them.^ Where a railroad corporation accepts bonds issued under an act of the legislature, which declares that they shall " consti- tute a first lien and mortgage upon the road and property " of the company, the word " property " includes all lands of the company, and a valid lien on them is created by the act.^ And this lien of the State upon railroad property embraces lands, although outside of the railroad, not necessary to its use.* But when the act authorizes the issuance of bonds which shall be binding on the property of such company, bonds issued by the company under such act, without the execution of any mortgage to secure them, do not, ipso facto, become a lien upon the property of the corporation so as to be superior, or even equal, in dignity to other bonds in the nature of a mortgage.* > White Water Valley Canal Co. v. Vallette, 21 How. (U. S.) 414. '^ Black V. Scott, 2 Brock. C. C. 330, 346; Conard v. At. Ins. Co., 1 Pet. 386. 3 Wilson V. Boyce, 92 TJ. S. 320. * Whitehead v. Vineyard, 50 Mo. 30. s Brunswick & Albany R. R. Co. v. Huges, 52 Ga. 557. EQUITABLE MORTGAGES. 315 § 306. Discharging Such Liex. — The legislature can also discharge such lien which it has created, when not in contra- vention of the constitution, on receiving the full value of its security ; of this value the legislature is the judge, especially when the statutory lien reserved by the State is for its indem- nity, and is under its control as between it and the bond- holders.^ The provision of the constitution of Missouri says, " The general assembly shall have no power for any purpose what- ever to release the lien held by the State upon any railroad." This provision has reference to the statutory lien held by the State on different railroads for the benefit of the State, lent to them by the issue of State bonds, the principal and interest of which the railroad companies were to pay, and was not meant in case of failure by the railroad company to prevent the State from making a compromise with any railroad company of any debt due it, or to become due, and on the compromise being effected to release the lien.^ The State can also waive its lien, and can substitute a county in the place of the State with a lien.^ 1 Murdock v. Woodson, 2 Dill. C. C. 188. '^Woodson V. Murdock, 22 Wall. (U. S.) 351. See, also, Darby v. Wright, 3 Blatchf. C. C. 170. ^Ketchum v. Pacific EaHroad Co., 4 DiU. C. C. 78. CHAPTER IX. vendor's lien. Article 1. Nature and Effect. §307. Definition. §312. Right of Way. ?308. When the Vendor 9 Lien At- § 313. Parties Entitled to this Lien. taches. §314. Waiving of the Imp] ied Lien. ^309. Payment in Services or in Spe- § 315. Devolution of this Lien and cific Articles. Securities. § 310. Conveyance for Support — Rights §316. Assignment of the Implied of a Vendee of an Equity. Lien. ?311. Selling Real Estate and Personal Property together at a Gross Price. § 307. Definition. — The vendor of real estate has a lien, under certain circumstances, on the estate sold, for the pur- chase-money. The vendee becomes a trustee to the vendor for the purchase-money, or so much as remains unpaid. This equitable mortgage will bind the vendee and his heirs and volunteers, and all purchasers from the vendee, with notice of the existence of the vendor's equity. Prima facie, the lien exists without any special agreement for that purpose.^ This principle is stated that where a conveyance is made prematurely before paj'^ment of the price, the money is a charge on the estate in the hands of the vendee. And this equitable lien on a sale of realty is very different from a lien at law, for it operates after the possession has been changed, and is available by way of charge instead of detainer.^ This lien exists against all the world, except bona fide pur- chasers without notice.* 14 Kent's Com. 151,152. 2 Adams' Eq. Jur. 127. ^Garson v. Green, 1 Johns. Ch. (N. Y.) 308; Hughes v. Kearney, 1 Sch. & Lefr. 132. 316 vendor's lien. 317 A vendor's lien proper, in equity, arises in cases where the owner of land conveys the same by deed, and thus divests himself of the legal title, and all or some part of the purchase price remains unpaid. The vendor, in case of an executory contract for the sale of land before conveyance, also has a lien for the unpaid price ; he cannot be divested of his legal title before payment. In the former case, the vendee cannot do anything to prejudice the vendor's legal title, except by pay- ing the price according to the terms of the contract. The vendor's lien in such a case is not a secret lien. So it is not necessary, as held by many courts, that a vendor's lien shall be expressly reserved in a contract for the sale of land. It is implied by the law, in the absence of any- thing showing an intention to waive it. When expressly re- served, it is in the nature of a mortgage, and there is nothing left to implication. But the fact that a vendor retains the legal title in himself, and agrees to part with it upon full pay- ment of the purchase-money, affords conclusive evidence of his intention to reserve his lien. When the price is paid, the vendee becomes the complete equitable owner, and the vendor is simply the trustee or naked holder of the legal title for the vendee.^ A plain distinction exists between the lien of a grantor after a conveyance, and the interest of the vendor before convey- ance. The former is not a legal estate but is a mere equitable charge on the land. In the latter, although possession may have been delivered to the vendee, and although, under the doctrine of conversion, the vendee may have acquired an equitable estate, yet the vendor retains the legal title, and the vendee cannot prejudice that legal title, or do anything by which it shall be defeated, except by performing the very ob- ligation on his part which the retention of such legal title was intended to secure, namely, by paying the price according to the terms of the contract. To call this complete legal title a lien is certainly a misnomer. In case of a conveyance, the grantor has a lien, but no title. In case of a contract for sale ^ Robinson v. Appleton, 124 111. 276, opinion by Shope, J. 318 NATURE AND REQUISITES OF THE CONTRACT. before conveyance, the vendor has the legal title, and has no need of any lien. His title is a more efficient security, since the vendee cannot defeat it by any act or transfer, even to or with a bona fide purchaser.^ The vendor may have a specific performance of a contract for the sale of land decreed against his vendee.^ This remedy extends in favor of the personal representatives of a deceased vendor,^ and against subsequent purchasers or assignees of the vendee, taking with notice.* The doctrine of vendor's lien is, generally stated, that the vendor of land who has taken no security, although he has made an absolute conveyance by deed, with a formal acknowl- edgment, in the deed or on the back of it, that the considera- tion has been paid, retains an equitable lien for the purchase- money, unless there has been an express or implied waiver in discharge of it ; and this lien will be enforced in equity against the vendee, volunteers, and all others claiming under him, with notice — that is, against all persons except bona fide purchasers for a valuable consideration, without notice.^ So this rule applies with as much force to the case of a purchase by a married woman as to any other.^ This doctrine is adopted in many States of the Union : Alabama,^ Arkansas, iPom. Eq. Jur., sect. 1260 ; Church v. Smith, 39 Wis. 492; Reese v. Burts, 39 Ga. 565 ; Vail v. Drexel, 9 111. App. 439 ; McCaslin v. State, 44 Ind. 151 ; Pitts V. Parker, 44 Miss. 247 ; Driver v. Hudspeth, 16 Ala. 348 ; Sparks v. Hess, 15 Cal. 186. See, also, Mason v. Cadwell, 5 Gilm. (111.) 196 ; Chrisman V. Miller, 21 111. 227 ; Story's Eq., sect. 788. 2 Chambers v. Rowe, 36 111. 171. 3 Burger v. Potter, 32 111. 66. * Champion v. Brown, 6 Johns. Ch. (N. Y.) 398; Story's Eq. Jur., sect. 789. ^Mackreth v. Symmons, 15 Ves. 329 ; Gordon v. Bell, 50 Ala. 213 ; Holman V. Patterson, 29 Ark. 357; Burt v. Wilson, 28 Cal. 632; Francis v. Wells, 2 Colo. 660 ; Johnson v. McGrew, 42 Iowa, 555 ; Walton r. Hargroves, 42 Miss. 18 ; Richards v. Fisher, 8 W. Va. 55 ; Stafford v. Van Rensselaer, 9 Cow. (N. Y.) 316; Ledford v. Smith, 6 Bush (Ky.), 129; Briscoe v. Bronaugh, 1 Tex. 326 ; Marsh v. Turner, 4 Mo. 253 ; Ross v. Whitson, 6 Yerg. (Tenn.) 50 ; Wil- liams V. Roberts, 5 Ohio, 35 ; Carr v. Hobbs, 11 Md. 285 ; Deibler v. Berwick, 4 Blackf. (Ind.) 339 ; Dyer v. Martin, 4 Scam. (111.) 147. « Chilton V. Braiden, 2 Black (U. S.), 458 ; Armstrong v. Ross, 20 N. J. Eq. 109 ; Pylant v. Reeves, 53 Ala. 132. ' 3 Pom. Eq. Jur., sect. 1249 ; Burns v. Taylor, 23 Ala. 255 ; Shall v. Biscoe, vendor's lien. 319 Colorado, District of Columbia, Florida, Illinois, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Mississippi, Mis- souri, New Jersey, New Mexico Territory, New York, North Dakota, Ohio, Oregon, South Dakota, Tennessee, Utah Terri- tory, Texas, and Wisconsin. . Other States have rejected this doctrine: Connecticut/ Delaware, Georgia, Kansas, Maine, Massachusetts, Nebraska, New Hampshire, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont, Vir- ginia, and West Virginia. The Supreme Court of the United States recognizes and en- forces the lien. This court says : " When one person has got the estate of another, he ought not, in conscience, to be allowed to keep it without paying the consideration. It is on the prin- ciple that tlie courts of equity proceed as between vendor and vendee. The purchase-money is treated as a lien on the land, where the vendor has taken no separate security." ^ Judge Gray concludes that the foundation of this doctrine was, that justice required that the vendor should be enabled to charge the land in the hands of the vendee as security for the un- paid purchase-money, and that the restriction of it to real estate 18 Ark. 142 ; Truebody v. Jacobson, 2 Cal. 269 ; Civil Code Cal., 1872, sect. 3046 ; Francis v. Wells, 2 Colo. 660 ; Ford v. Smith, 1 McAr. (Dis. Col.) 592 ; Bradford v. Marfan, 2 Fla. 463 ; Trustees v. Wright, 11 111. 603 ; McCarty v. Pniett, 4 Ind. 226 ; Pierson v. David, 1 Iowa, 23 ; Rev. Stat. Iowa, 1873, sect. 1940 ; Muir v. Cross, 10 B. Mon. (Ky.) 277 ; Gen. Stat. Ky. 1873, p. 589 ; Carr V. Hobbs, 11 Md. 285 ; Sears v. Smith, 2 Mich. 243 ; Duke v. Balme, 16 Minn. 306 ; Trotter v. Erwin, 27 Miss. 772 ; Marsh v. Turner, 4 Mo. 253 ; Corlies v. Rowland, 26 N. J. Eq. 311 ; Bates v. Childers, 4 N. Mex. 347 ; Stafford v. Van Eensselaer, 9 Cow. (N. Y.) 316 ; Williams v. Roberts, 5 Ohio, 35 ; Gee v. Mc- Millan, 14 Ore. 268 ; Ross r. Whitson, 6 Yerg. (Tenn.) 50 ; Pinchain v. Collard, 13 Tex. 333; Charter Oak Life Ins. Co. v. Gisborne, 5 Utah, 319; Willard v. Reas, 26 Wis. 540. ' Atwood V. Vincent, 17 Conn. 575 ; Jones r. Janes, 56 Ga. 325 ; Smith v. Rowland, 13 Kan. 245 ; Philbrook v. Delano, 29 Me. 410 ; Ahrend v. Odiorne, 118 Mass. 261 ; Arlin v. Brown, 44 N. H. 102 ; Cameron v. Mason, 7 Ired. Eq. (N. Car.) 180 ; Stephen's Appeal, 38 Pa. St. 9 ; Perry v. Grant, 10 R. I. 334 ; Wragg V. Compt. Gen., 2 Desau. (S. Car.) 509 ; Gen. St. Vt. 1862, ch. 65, sect. 33 ; Code Ya., 1873, ch. 115, sect. 1 ; Code W. Va., 1870, ch. 75, sect. 1. ''Chilton V. Braiden, 2 Black (U. S.), 458; Peters t-. Bowman, 98 U. S. 56; Tredgill v. Pintard, 12 How. (U. S.) 15. See, also, Coos Bay Wagon Co. v. Crocker, 6 Saw. C. C. 574 ; Brown v. Gihnan, 4 Wheat. (U. S.) 256. 320 NATURE AND REQUISITES OF THE CONTRACT. suggested the inference that the court of chancery was induced to interpose, for the reason that real estate could not be at- tached on mesne process ; nor, except in certain cases, and to a limited extent, be taken in execution for debt. The learned judge rejects the theory of natural equity, because that would apply to a sale of chattels as well as of land ; and also the theory of a trust, as that would include too many other cases to which, confessedly, the doctrine had not been extended, and hence, rejects the doctrine of a vendor's lien.' This theory of the Massachusetts court as to the origin of the doctrine is imperfect and unsatisfactory. The absence of any power at common law to make the land liable for ordinary debts, instead of being the source of the vendor's lien, is itself only another instance and consequence of the same general superiority given to the ownership of the land ; both are inci- dents of one common mode of treating real estate, as compared with personal property.^ Mr. Pomeroy repudiates the idea of its being a trust, and thinks that the original and true ground of the lien arises out of the natural judicial conception, that upon the sale of any- thing on credit, the very identical thing sold should be re- garded in some sort as a special fund out of which payment of the price was to be obtained or, at least, secured ; and that the seller should not be considered as parting absolutely with his whole interest and dominion until the price is fully paid.^ Judge Story states the true ground when he says, " that the principle upon which courts of equity have proceeded in estab- lishing the lien in the nature of a trust is, that a person who has gotten the estate of another ought not, in conscience, as between them, be allowed to keep it, and not pay the full con- sideration-money." * " It has often been objected that the creation of such a trust by courts of equity is in contravention of the statute of frauds. ' Ahrend v. Odiorne, 118 Mass. 261 ; 19 Am. Rep. 449. ^3 Pom. Eq. Jur., sect. 1250, note. '3 Pom. Eq. Jur., sect. 1250. * Story, Eq. Jur., sect. 1219. vendor's lien. 321 But whatever may be tlie original force of such an objection, the doctrine is now too firmly established to be shaken by any mere theoretical doubts." ^ § 308. AVhen the Lien Attaches. — In many of the United States and in England, if the purchase-money is not paid the vendor's lien will be kept alive, for equity requires it. This lien will be enforced in equity against the vendee, volunteers, and all others claiming under him with notice — that is, against all persons except bona fide purchasers for a valuable con- sideration without notice.^ And this doctrine seems to be de- rived from the civil law.^ However, in other States this doctrine has been abandoned.* The vendor's equitable lien attaches, if possession of the estate has been delivered to the purchaser, although there has been no conveyance to him,^ and it attaches upon copyholds and leaseholds as well as freeholds.^ And this doctrine, as to the vendor's lien, applies with as much force to the case of a purchase by a married woman as to any other case.^ ^Storjs Eq. Jur., sect. 1218. ^Bayley v. Greenleaf, 7 Wheat. (U. S.) 46 ; Watson v. Wells, 5 Conn. 468; Fish r. Rowland, 1 Paige (N. Y.),20; Mackreth v. Symmons, 15 Yes. 339; Cheesebrough v. Millard, 1 Johns. Ch. (N. Y.) 409 ; Gordon v. Bell, 50 Ala, 213 ; Holman v. Patterson, 29 Ark. 357 ; Burt v. Wilson, 28 Cal. 632 ; Francis V. AVella, 2 Colo. 660 ; Johnson v. McGrew, 42 Iowa, 555 ; Walton r. Har- groves, 42 Miss. 18 ; Richards v. Fisher, 8 W. Va. 55 ; Stafford r. Van Eens- selaer, 9 Cow. (N. Y.) 316 ; Ledford v. Smith, 6 Bush (Ky.), 129 ; Briscoe v. Bronaugh, 1 Tex. 326 ; Marsh v. Turner, 4 Mo. 253 ; Ross v. Whitson, 6 Yerg. (Tenn.) 50 ; Williams v. Roberts, 5 Ohio, 35 ; Carr v. Hobbs, 11 Md. 285 ; Deibler v. Barwick, 4 Blackf. (Ind.) 339 ; Dyer v. Martin, 4 Scam. (111.) 147 ; Chilton V. Braiden, 2 Black (U. S.), 458. ^Dig., Lib. 18, tit. 1, law 1, sect. 19. ♦Hepburn v. Snyder, 3 Pa. St. 72; Womble v. Battle, 3 Ired. Eq. (N. Car.) 182 ; Wragg v. General, 2 Dessau. (S. Car.) 509 ; Philbrook r. Delano, 29 Me. 410 ; Arlin r. Brown, 44 N. H. 102 ; Atwood v. Vincent, 17 Conn. 576 ; Perry ('.Grant, 10 R. I. .334; Ahrend v. Odiorne, 118 Mass. 261 ; 19 Am. Rep. 449 ; Brown v. Simpson, 4 Kan. 76 ; Yancey v. Mauck, 15 Gratt. (Ya.) 300. * Smith V. Hibbard, 2 Dick. 730 ; Andrew v. Andrew, 8 Dc G., M. & G. 336 ;, LangPtaff v. Nicholson, 25 Beav. 160. *Wrout r. Dawes, 25 Beav. 369 ; Richardson r. Bowman, 40 Miss. 782. 'Chilton r. Braiden, 2 Black (U. S.), 458 ; Armstrong i\ Ross, 20 N. J. Eq. 109 ; Pylant v. Reeves, 53 Ala. 132. VOL. I.— 21 322 NATURE AND REQUISITES OF THE CONTRACT. But the lien will not be given by a court of equity as a se- ewrity for unliquidated and uncertain damages.^ On the other ihand, when the vendor is unable to make title, the vendee has a lien on the land for the purchase-money paid by him.^ A party may have a lien in the exchange of real estate. Accordingly, on exchange of land, $200 was due one of the vendors, which was to be deposited in a bank to be paid when this vendor had performed a certain work on the land he ex- changed. The $200 was never deposited. It was held that after performance of the work specified, this vendor was en- titled to recover the $200, and that he had a lien on the prop- erty he exchanged for the amount.^ Two parties contracted jointly to build and keep a hotel on the ground .owned by one of them. The other partner had an option to buy the interest of such land. It was held in a suit for specific performance of the contract, that the owner of the land had an equitable lien for the purchase-money on the property, which .should be sold to satisfy this lien as in mort- gage cases.* But no lien attaches when the vendor accepts therefor the obligations of a third party, intending to rely for payment on such obligations, and that his vendee shall take the land un- incumbered.^ A vendee may have .a vendor's lieu on land on which there is already a vendor's lien. Thus a vendee on whose land was a vendor's lien, sold part to a third party who paid part and agreed to pay two-tliirds of the original price, but failed to meet one of the notes when due, and the vendee paid it, the third party agreeing to repay him. By mutual agreement the ^ Payne v. Averj', 21 Mich. 524 ; Arlin v. Brown, 44 N. H. 102. '^ Wythers v. Lee, 3 Drew. 396 ; Rose v. Watson, 10 H. L. Cas. 672 ; Story's Eq. Jur., sect. 1231. ^ Brown v. O'Brien, 39 Minn. 13. See, also, Drinkwater v. Moreman, 61 Ga. 395 ; Bryant v. Stephens, 58 Ala. 636 ; Pratt v. Clark, 57 Mo. 189 ; Dawson v. Girard Life Co., 27 Minn. 411 ; Burns v. Taylor, 23 Ala. 255; McDole r.Purdy, 23 Iowa, 277. * Johnson v. Fowler, 68 Mich. 1. See Pope v. Heartwell, 79 Ga. 482. * Springfield, etc.. Railroad Co. v. StcAvart, 51 Ark. 285; Richardson v. Green, 46 Ark. 270. vendor's lien. 323 original vendor conveyed to eacli his respective portion, taking from each new notes for the portion of the unpaid price each had agreed to pay. It was held that the first vendee had a lien on the third party's tract for the two-thirds of the note so paid by him.* So where the vendee of land paid a part of the price and took possession and agreed to execute a mortgage for the residue, and the mortgage was so prepared, which he was to execute, but which he never did execute, pro- viding that the mortgagor should keep the taxes paid, but he also failed to pay the taxes, and the vendor paid them to pre- serve his security, the vendor had a lien according to the terms of the prepared mortgage, not only for the residue of the purchase price, but also for the taxes which he had paid.^ It has been held that a lien will not arise from the ex- change of land for chattels, or for other land.^ But the cor- rect doctrine is, that there is nothing to distinguish an ex- change of lands so far as respects the application of this principle of lien for the purchase-money from a sale of lands.* So a vendor who is fraudulently induced to take land instead of the money for which he originally agreed, may treat the payment as a nullity and enforce his lien.^ AVhere a part of a tract of land burdened with a vendor's lien is mortgaged to secure a contingent liability, the mort- gagee cannot under the statute foreclose the lien for the value of the mortgaged portion ascertained by the decree, so that it shall be decreed to pay its proportion of the lien, when at the time of the decree the mortgagor's liability has not become liquidated absolutely.^ §309. Payment in Services or in Specific Articles. — Other things besides money and notes may be received in ^ Henson v. Reed, 71 Tex. 726. 'Devin v. Eagleson,79 Iowa, 269. 'Coit V. Fougera, .36 Barb. (N. Y.) 195. * Burns v. Taylor, 23 Ala. 255. =^ Bradley v. Bosley, 1 Barb. Ch. (N. Y.) 125. See, also, Mills v. Bliss, 55 N. Y. 139 ; Brown r. O'Brien, 39 Minn. 13. «Gridley v. Brooks- Waterfield Co. (Ky.), 14 S. W. Rep. 407. 324 NATURE AND REQUISITES OF THE CONTRACT. payment, and the vendor's lien will subsist until the con- tract is fulfilled. Accordingly where land is sold for a spe- cific price in money, the vendor has a lien for the price, though it is agreed that the price may be paid in services by the vendee.^ So the lien of the vendor is not aff'ected by taking notes of the vendee payable in sj)ecific articles.^ There must be a debt for unpaid purchase-money to a fixed amount due directly to the vendor. If the obligation of the vendee consists of collateral covenants, or be for the discharge of a liability to a third party no lien is retained when the conveyance is absolute.^ But when specific articles are agreed to be paid for the purchase of real estate, the vendor, upon the failure of the vendee to pay him, may en- force his lien,* §310. Conveyance for Support — Rights of a Vendee OF an Equity. — When the vendee takes only an equity, the vendor's lien does not attach. Thus where a vendee takes real estate with the condition that he must use the income thereof, or so much as is necessary for the support of a party during life, no vendor's lien exists in favor of the vendor, because he is rather the vendee of an equity of the premises, and the lien will not attach.^ Nor is such a lien implied to secure the performance of a consideration for the transfer of real estate, when the consid- eration is of such a nature that the court cannot accurately ascertain and define the amount of the charge to be thus im- posed upon the land, such as the agreement to support the grantor during life.'' The great weight of authority is that a vendor of real prop- erty is not entitled to an implied equitable lien to secure the performance of a consideration, when that is of such a na- 1 Winters v. Fain, 47 Ark. 493 ; Young v. Harris, 36 Ark. 162. "Plowman v. Riddle, 14 Ala. 169. ^ Patterson v. Edwards, 29 Mi.«s. 67. ■ ^ Harvey v. Kelly, 41 Miss. 490. ^McArthur v. Gordon, 51 Hun (N. Y.), 511. « Peters D. Tunell, 43 Minn. 473. vendor's lien. 325 ture that a court cannot accurately ascertain and define the amount of the charge to be imposed upon the land and en- force it/ While there are decisions which support the right of lien in such cases, it is considered that the stronger cur- rent of authority is the other way, and that to allow the im-- plication of a reserved lien in such cases, would be extending the doctrine beyond its established limits. The contract to support the grantor during life is not to be performed by a single act, but performed during an indefinite period. There can be no lien unless it existed from the beginning at the time of the conveyance and before any obligation had become de- fined, certain, and ascertainable." This lien will not be given by a court of equity as a security for unliquidated and uncertain amounts.^ So where a vendee, by his bond reciting the conveyance of the land to him as the consideration of such bond, covenanted to maintain the vendor and his son during their natural lives, it was held that the covenant was the substituted consideration for the purchase-money, and that the bond was not an equit- able incumbrance on the land in behalf either of the obligee or of his son, who was only a beneficiary.* § 311. Selling Real Estate and Personal Property To- gether AT A Gross Price. — When real estate and personal property are sold together, at a gross price, not distinguishing the separate values or price of either, there is no vendor's implied lien on the land ; and though the note taken for the credit pay-: ment recites that it was given for a part of the purchase-money of the land, this will not change the rule, because parol evi- dence is admissible to show that personal property was also included in the sale.^ »ArliniJ. Brown, 44 N. H. 102; Brawley v. Catron, 8 Leigh (Va.), 522; Hiscock V. Norton, 42 Mich. 320 ; Clarke v. Royle, 3 Sim. 499. ''Hammond v. Payton, 34 Minn. 529. n^ayne c. Avery, 21 Mich. 524 ; Arlinv. Brown, 44 N. H. 102. * McKilUp V. McKillip, 8 Barb. (N. Y.) 552. ^Wilkinson v. Parmer, 82 Ala. 367; Robinson v. Lehman, 72 Ala. 401; |lussell V. McCormick, 45 Ala. 587. 326 NATURE AND REQUISITES OF THE CONTRACT. So where the contract of sale embraces both real and per- sonal property, and no data are furnished by which to ascer- tain that a separate and definite price was fixed for the land, there is an implied waiver of the vendor's lien. The verbal admissions of the deceased party, though competent evidence, should be received with great care, especially when many years have elapsed since they were made, and they are incon- sistent with a writing signed at the time of the transaction to which they related.' It is the general rule that the vendor's lien upon real estate, does not arise in the cases of sale of both real estate and per- sonal property for one entire sum or consideration without any distinct price having been set upon the real estate.^ But it is otherwise where it appears that the land and the chattels were valued separately, though conveyed by the same deed.^ § 312. Right of Way. — A party selling the right of way to a railroad company has no vendor's lien on the company's property. So a contract in the form of a deed duly recorded, by which the vendor sells a right of way to a railroad com- pany, which stipulates, without any words reserving a lien, that the said company shall pay a certain amount per annum, or may pay the price in full for said right of way, does not give the vendor a lien on the property of the company.* § 313. Parties Entitled to this Lien. — One who has contracted to convey real estate, but has not made the convey- ance, has an equitable lien upon the land for the unpaid pur- chase-money, as between him and the vendee and those claim- ing under the vendee.^ ' Alexander v. Hooks, 84 Ala. 605. 2 Peters v. Tunell, 43 Minn. 473 ; Stringfellow v. Ivie, 73 Ala. 209 ; McCand- lieh r. Keen, 13 Gratt. (Va.) 615 ; Meigs v. Dimock, 6 Conn. 458 ; Chapman v. Beardsley, 31 Conn. 115 ; Betts v. Sykes, 82 Ala. 378 ; 3 Pom. Eq., sect. 1251, note. * Russell V. McCormick, 45 Ala. 587 ; 6 Am. Rep. 707. * Baltimore and Liberty Turnpike Co. v. Moale, 71 Md. 353. See, also, Walker V. Ware, etc., L. R. 1 Eq. 195 ; Dubois v. Hull, 43 Barb. (N. Y.) 26. 5 Birdcall v. Cropsey, 29 Nebr. 672, 679; Rhea v. Reynolds, 12 Nebr. 128; Whitehorn v. Cranz, 20 Nebr. 392. vendor's lien. 327 A statute ^ which provides that " when any real estate shall be conveyed," the vendor shall have no lien on the land unless it is stated in the deed what part of the consideration remains unpaid, does not deprive the vendor of his lien on the land as against a remote bona fide purchaser, where neither the deed of the vendor nor that of the vendee was recorded or lodged for record.^ On an administrator's sale of land, the price of which the intestate had not fully paid, the intestate's vendor will not be preferred in the distribution of the proceeds unless he has given public notice that his interest also might be sold, or shows that the land brought its full value.^ The fact that a deed recites the payment of the purchase- money does not waive or destroy the vendor's lien for the pur- chase-money.* And where a party furnishes another with mone}^ to buy land under an agreement, that the vendee will give him a mortgage on the property to secure such debt as soon as the deed is received, but the vendee refuses to give the mort- gage, the party furnishing the money will have a vendor's lien which he can enforce against the land.' So in a case for money advanced, which was used in buying land, the fact that a party holds the purchase-money notes, though they have never been assigned to him, and that the vendee has made payments to him, which have been credited on the notes, show, as between them, that the party is holding the notes as securitv for his advances, and he is entitled to a vendor's lien as against the vendee's widow, who claims a homestead.® So where a vendor sells land by an executory contract, on credit, and places the vendee in possession, and the vendee, without obtaining a legal title from the vendor by paying all his purchase-money, sells it to a third party and 1 Gen. Stat, of Ky., ch. 63, art. 1, sect. 24. ^Lncy V. Hopkins (Ky.), 13 S. W. Rep. 518. 'Thompson r. Atwater, 84 Ga. 270. * Clark V. Collins, 76 Tex. 33. 'Williams v. Rice, 60 Mich. 102. See, also, 2 Dev. Deeds, 1150, and cases cited. « Dudley v. Goddard (Ky.), 12 S. W. Rep. 302. 328 NATURE AND REQUISITES OP THE CONTRACT. gives a deed to the same, the vendor can enforce his lien, although the second vendee has paid all the purchase-money to the first vendee, from whom he bought the land.^ One holding land under a deed reserving a vendor's lien and selling subject thereto, is himself entitled to a lien upon whatever interest he may have conveyed by reason of his con- tract and to foreclose such lien, notwithstanding the foreclosure of the pre-existing lien.^ § 314. Waiving op the Implied Lien. — Wherever this lien is recognized, it is not waived, in the absence of an express agreement to that effect, by taking a note or other personal security of the vendee for the purchase-money.^ But it is waived by taking a distinct and independent security, unless there is at the time an express agreement for its retention.* Taking a mortgage of other property is a waiver ; ^ so is it a waiver by taking personal security ; ^ or taking the bond or note of the vendee with a surety ; ^ or taking a negotiable note drawn by the vendee and indorsed by a third person, or drawn by a third person and indorsed by the vendee.* An express security on the land itself for the whole amount un- paid, as by a mortgage or deed of trust, will likewise merge the lien.^ And it was held that taking a mortgage for the » Fisher v. McNulty, 30 W. Va. 186. ^Burchard v. Record (Tex.), 17 S. W. Rep. 241. 'Winter v. Anson, 3 Russ. 488 ; Garaon v. Green, 1 Johns. Ch. (N. Y.) 308 ; Ex parte Peake, 1 Mad. 191 ; Christian v. Austin, 36 Tex. 540 ; Denny* v. Steakly, 2 Heisk. (Tenn.) 156 ; Selby v. Stanley, 4 Minn. 65. *Bauni ?'. Grigsby, 21 Cal. 175; Campbell v. Baldwin, 2 Humph. (Tenn.) 248 ; Fonda v. Jones, 42 Miss. 792. 5 Richardson v. Ridgely, 8 Gill. & J. (Md.) 87 ; Young v. Wood, 11 B. Mon. (Ky.) 123. « Boon V. Murphy, 6 Blackf. (Ind.) 272 ; Mayham v. Coombs, 14 Ohio, 428 ; McGonigal v. Plummer, 30 Md. 422. " Kinney v Ensminger (Ala), 10 South Rep. 143 ; Corrico v. Merchants, etc., Nat. Bank, 33 Md. 235. ^Boynton v. Champlin, 42 111. 57 ; Yaryan v. Shririer, 26 Ind. 364 ; Sanders V. McAffee, 41 Ga. 684; Schwarz v. Stein, 29 Md. 112; Curette v. Briggs, 47 Mo. 356. ^Mattix V. Weand, 19 Ind. 151 ; Little v. Brown, 2 Leigh (Va.), 353. Com- pare Boos V. Ewing, 17 Ohio, 500. vendor's lien. 329 purchase-money excludes the lien, although the security is de- fective or inadequate/ An express security or an express contract for a lien on the land conveyed, as to part of the amount remaining unpaid, will he an implied waiver of the lien to any greater extent.^ But taking collateral security will not waive this lien where there is an express agreement that it shall survive.^ A clause in a bond for a deed providing for the forfeiture of the contract, and all payments made thereon, in case of default in any other j^ayment, will not operate as a waiver of the vendor's lien on the premises for the unpaid purchase-money. Because such clause of forfeiture is not a security independent of the land, and is intended for the benefit of the vendor, which he may enforce or not, at his pleasure.* The vendee or his assignee can take no advantage of such clause.^ Gen- erally, whether there has been a waiver of this implied lien is a question of intention.'' Where a husband purchases land and takes the deed in his wife's name, it does not waive the vendor's lien.^ And subsequent purchasers of land subject to a vendor's lien are not released from its operation by an exten- sion of time of payment granted to their vendor, without their consent.^ A vendor loses his lien when, in making a settlement, he brings in other items, thus mingling different accounts so that the vendor's lien cannot be separated.^ So, when he transfers the notes, even with the advice of the vendee, he loses his lien ; ^^ and also, if he takes the security of a third person." > Camden v. Vail, 23 Cal. 633. 'Fish V. Howland, 1 Paige (N. Y.), 20, 30; Brown v. Oilman, 4 Wheat. (U. S.) 256. ' Daughaday v. Paine, 6 Minn. 443. * Robinson v. Appleton, 124 111. 276. * Mason v. Cad well, 5 Gilm. (III.) 196; Chrisman v. Miller, 21 111. 227. « Cordova v. Hood, 17 Wall. (U.S.) 1; Campbell v. Baldwin, 2 Humph. (Tenn.) 248. ^ Davis t). Smith, 88 Ala. 596. *Dalton V. Rainey, 75 Tex. 516. 'Erickson v. Smith, 79 Iowa, 374. And see Reusch v. Keenan, 42 La. Ann. 419. '"Grulin V. Richardson, 128 111. 178; Richards v. Learning, 27 111. 432; vl^hndorf r. Cope, 122 111. 133. " Rice V. Rice, 36 Fed. Rep. 858. 330 NATURE AND REQUISITES OF THE CONTRACT. Where the vendor indorses the purchase-money notes and transfers them to a third party, and the notes are not paid at maturity, and he is, therefore, compelled to take them back, his lien is revived.^ An assignment for the benefit of creditors, in Iowa, waives the vendor's lien, though the assignee takes the place of the assignor as to his rights.^ If the vendor takes collateral or other security for the purchase-money, he waives his lien on the property sold.^ So, if he transfers the evidence of the in- debtedness, he loses his lien, * or if he keeps back title to part of the premises as security.^ But when the vendor sells the premises to the vendee for a certain amount and takes a mortgage back for part of the pur- chase-money, and the balance in cash from a third party who takes a mortgage on the premises from the vendee as security, and by agreement of all the parties the deed and both mort- gages were executed, delivered, and recorded at the same time, he does not necessarily waive his prior equitable lien for the purchase-money, which drew with it the lien of his mortgage, and gave it preference to the third party's mortgage.^ Taking an invalid mortgage does not waive the vendor's lien/ § 315. Devolution op this Lien and Securities. — The vendor's implied lien does not die with him, but survives to his personal representatives.* Since such a lien is a mere chose in action, it must necessarily go by succession to the vendor's executor or administrator, and not to his heirs, or widow, as sucli.^ Upon the death of the vendor the securities 1 Bancroft v. Cosby, 74 Cal. 583. 2 Prouty V. Clark, 73 Iowa, 55. ^iiett v. Collins, 103 111. 74. * Elder v. Jones, 85 111. 384. See, also, Richards v. Learning, 27 111. 431 ; Conover v. Warren, 1 Gilm. (111.) 498. »Kirkham v. Boston, 67 111. 599. « Boies V. Benham, 127 N. Y. 620. 'Chapman v. Chapman, 55 Ark. 542. 8 Hubbard v. Clark (N. J.), 7 Atl. Rep. 26 ; Nat. Bank v. Mill Co., 39 Fed. Rep. 89. 9 Evans v. Enloe, 70 Wis. 345. vendor's lien. 331 which he has taken for the purchase-money go to his personal representatives.^ § 316. Assignment of the Implied Lien. — Whether the benefit of the vendor's impHed lien or equity accompanies an assignment of the note or bond for the purchase-money is a question of dispute. The weight of authority, however, is that such an equity is assignable with the note or bond. In some of the States no distinction is made between the vendor's implied lien and express lien, as to transferability, and the as- signment of the note and bond for the purchase-money is held to carry the lien in either case.^ However, a contrary doctrine is held by able courts ; that a vendor's implied lien is a mere personal equitable right in the vendor, and is not assignable. It looks only to the security of the vendor, and does not pass to the assignee of the vendee's obligation for the consideration-money, and, consequently, cannot be enforced in the assignee's favor.^ While there is a great diversity of opinion in this country, yet the weight of authority holds that either the implied or ex- press lien of the vendor, may be assigned by assigning the note or bond given for the purchase-money. ' Smith V. Moore, 26 111. 393 ; Martin v. O'Bannon, 35 Ark. 62 ; Masterson V. Pullen, 62 Ala. 145 ; Lewis v. Hawkins, 23 Wall. (U. S.) 119 ; Cleveland v. Martin, 2 Head (Tenn.), 128; Merritt v. Jiidd, 14 Cal. 59; Dukes v. Turner, 44 Iowa, 575; Button v. Schroyer, 5 Wis. 598 ; Scroggins v. Hoadley, 56 'Ga. 165 ; Lingan v. Henderson, 1 Bland Cli. (Md.) 236 ; Richards v. Fisher, 8 W. Va. 55 ; Walkenhorst v. Lewis, 24 Kan. 420. * Wells V. Morrow, 38 Ala. 125 ; Fisher v. Johnson, 5 Ind. 492 ; Honore v. Bakewell, 6 B. Mon. (Ky.) 67 ; Rakestraw v. Hamilton, 14 Iowa, 147 ; White V. Stover, 10 Ala. 441 ; Wilkinson v. May, 69 Ala. 33 ; Nichols v. Glover, 41 Ind. 24; AViseman v. Hutchinson, 20 Ind. 40; Ripperdonr. Cozine, 8 B. Mon. (Ky.) 465 ; Bank v. Knapp, 61 Miss. 485 ; made so by the Code of 1880, sect. 1124 ; Sloan v. Campbell, 71 IVIp. 387 ; Brooks r. Young, 60 Tex. 32 ; Cannon V. McDaniel, 46 Tex. 303 ; Bates v. Childers, 4 N. Mex. 347. MValsh V. Boyle, 30 Md. 262 ; Webb v. Robinson, 14 Ga. 216; Simpson v. Montgomery, 25 Ark. 365 ; Sheratz v. Nicodemus, 7 Yerg. (Tenn.) 9 ; Ross v. Heintzen, 36 Cal. 313 ; Keith v. Horner, 32 111. 525 ; Lindsey v. Bates, 42 Miss. 397 ; Hecht v. Spears, 27 Ark. 229 ; 11 Am. Rep. 784 ; Baum v. Grigsby, 21 Cal. 172; AVellborn i). Bonner, 9 Ga. 82; Briggs v. Hill, 6 How. (Miss.) 362; Ham- mon V. Peyton, 34 Minn. 529 ; Small v. Stagg, 95 111. 39 ; Markoe v. Andras, 67 111. 34 ; "BonneU v. Holt, 89 111. 71 ; Nat. Bank v. Mill Co., 39 Fed. Rep. 89. 332 nature and requisites of the contract. Article 2. Reservation of Vendor^s Lien. § 317. A Lien by Contract. § 324. Assignment of the Purchase- § 318. In Case of Title Bonds. Money Notes. § 319. Reservation of Lien in Note. § 325. Waiver and Extinguishment § 320. Reservation in Deed. of the Express Lien. § 321. Purchase-Money Notes. § 326. Assumption of Lien. § 322. Reservation as to Crops. § 327. Substituting Note or Bond. ^ 323. Rights to Rents and Profits. § 317. A Lien by Contract. — There is a broad line of de- markation between the rights of the vendor under an absolute deed with warranty, which recites the existence of unpaid pur- chase-money notes, but retains no express lien in terms for their payment, and his rights under a deed which declares that a lien is reserved for unpaid purchase-money. Under the former the vendor has parted with the title, and has only an implied vendor's lien for the purchase-money ; under the latter the superior title remains with the vendor, and the deed is evidence of the executory contract. It is true the expression has sometimes been used in opinions, that, until the purchase- money is paid the superior title is in the vendor ; but it is sug- gested that this is found in discussions where there was an express lien, or where the contract was executory.^ This express lien has not the objectionable characteristics of the equitable lien of the vendor who has parted with the legal title acknowledging the receipt of the purchase-money, with which it is often confounded, but is wholly dissimilar, being the same in effect as a conveyance and mortgage back to secure the purchase-money.^ The vendor has a right, when the deed is executed, to insert in ' Baker v. Compton, 52 Tex. 252 See, also, Lowery v. Peterson, 75 Ala. 109 ; Church V. Smith, 39 Wis. 492 ; Ransom v. Brown, 63 Tex. 188 ; Reese v. Burts, 39 Ga. 565 ; Pitts v. Parker, 44 Miss 247 ; Hutton v. Moore, 26 Ark. 382 ; White v. Blakemore, 8 Lea (Tenn.), 49; Driver ?>. Hudspeth, 16 Ala. 348. 2 Moore v. Anders, 14 Ark. 628. See, also. Bell ?>. McDuffie, 71 Ga. 264; Servis v. Beatty, 32 Miss. 52 ; Yancey v. Mauck, 15 Gratt. (Va.) 300 ; Amory v. ReiUy, 9Ind. 490. vendor's lien, 333 it a clause reserving a vendor's lien for the unpaid purchase- money/ And it is held that one who has contracted to convey real estate, but has not made the conveyance, has an equitable lien upon the land for the unpaid purchase-money as between him and the vendee, and those claiming under the vendee,^ and that a vendor's lien may arise as well before the conveyance as after it.^ §318. In Case op Title Bonds. — The relation of the par- ties to a title bond is that of mortgagor and mortgagee. The action to establish a vendor's lien is analogous to a foreclosure of a mortgage. A strong analogy also exists between the action for the vendor's lien and a suit for a specific perform- ance.* So a title bond is at common law a mortgage,^ and the relation of the parties is that of mortgagor and mortgagee,^ and this doctrine prevails.'^ Or the rule may be stated that the legal effect of a title bond is like a deed executed by the vendor, and a mortgage back by the vendee.^ There can be no just and proper distinction between a mort- gage to secure the payment of the purchase-money executed contemporaneously with the conveyance of the land, and the reservation of the legal estate as a security for its payment.' 'Findley v. Armstrong, 23 W. Va. 113 ; Warren v. Branch, 15 W. Va. 38. "^ Birdsall v. Cropsey, 29 Nebr. 672, 679. •''English V. Russell, 1 Hemp. C. C. 35; Hill v. Grigsby, 32 Cal. 55; Yan(?ey V. Mauck, 15 Gratt. (Va.) 300 ; Servis v. Beatty, 32 Miss. 52. See Wright v. Troutman, 81 111. 374. The vendor's implied lien is a right which has no existence until it is es- tablished by the decree of court in a particular case : Gilman v. Brown, 1 Mas. C. C. 191 ; Hutton v. Moore, 26 Ark. .382, 386 ; Campbell v. Rankin, 28 Ark. 401, 406. '' Wells V. Francis, 7 Colo. 396. See, also, Lowery v. Peterson, 75 Ala. 109. ^Merritt v. Judd, 14 Cal. 59. « Button V. Schroyer, 5 Wis. 598; Lewis v. Hawkins, 23 Wall. (U. S.) 119. 'Lingan v. Henderson, 1 Bland. Ch. (Md.) 236; Moreton v. Harrison, 1 Bland. Ch. (Md.) 491 ; Relfe v. Relfe, 34 Ala. 500, 504. ^Holman v. Patterson, 29 Ark. 363 ; Martin v. O'Bannon, 35 Ark. 68 ; Har- din V. Boyd, 113 V. S. 756. 'Graham y.McCampbell, Meigs (Tenn.), 52; Bankhead v. Owen, 60 Ala. ^57, 467. 334 NATURE AND REQUISITES OF THE CONTRACT. Because when the vendor retains the legal title as a security for the purchase-money, the essential incidents of a mortgage attach/ § 319, Reservation op Lien in Note. — The reservation of the vendor's lien may be in the note given for the purchase- money. The reservation of the purchase-money lien in the notes, renders the sale executory in the same manner as if the reservation was contained in the deed itself.^ And this reser- vation in a note is not affected by substituting a new note re- serving the same lien.^ When the legal title is left in the vendor it is not necessary, in order to reserve the vendor's lien, to insert the reservation in the note taken for the purchase-money, the lien to hold until paid in full.* This reservation may be oral. Thus, an oral agreement at the time the note was given that the husband's name thereon as personal security should not operate as a waiver or abandonment of the vendor's lien, is sufficient to preserve the lien.^ The reservation in a purchase-money note given for land renders the sale executory in the same manner as if the reser- vation was contained in the deed itself.^ § 320. Reservation in Deed. — A deed from the State land agent containing a stipulation that when the purchase-money is paid " then this to be a good and sufficient deed to convey said lots, otherwise to be null and void, and said lots to be and remain the property of the said State," does not convey the legal title.^ 1 Roper V. McCook, 7 Ala. 318 ; Conner v. Banks, 18 Ala. 42 ; Magruder v. Campbell, 40 Ala. 611. " Lundy v. Pierson, 67 Tex. 233 ; McKelvain v. Allen, 58 Tex. 387. 'Helm V. Weaver, 69 Tex. 143. *Thacker v. Booth (Ky.), 6 S. W. Rep. 460. * Ramage v. Towles, 85 Ala. 588. 8 McKelvain v. Allen, 58 Tex. 383, 387. ^Stratton?'. Cole, 78 Me. 553. The statute of 1832 provides that "in the eale of lands by the land agent, the lien which the State retains in the land as security for the payment of the purchase-money, may be expressed in the deed of conveyance from the State instead of taking a mortgage thereon." vendor's lien. 335 It seems clear that however expressed and in whatever in- strument, the lien or estate to be retained by the State is at least as effectual and great as that of a mortgage.^ And when an express reservation is made in a deed it is notice to every one.^ To make this lien effective it must be expressly charged upon the land.^ It is sufficient if the deed describes the notes for the purchase-money, and the haben- dum is " to have and to hold on the payment of the notes herein above stated." * And a stipulation that the " land shall be bound for the notes " given for the purchase-money creates an effectual lien.^ A deed of land " charged with the pa3aiient " of certain sums creates a lien in the nature of a mortgage and not in the nature of a vendor's lien,^ When one buys land sold by a decree of court which reserves a lien for purchase-money, he takes subject to the lien reserved.^ A deed providing on its face that it shall be absolute on the payment of certain notes, but in default of payment shall be void, amounts in equity to a mortgage.^ So a stipulation in a deed that the title shall not vest in the grantee until the pur- chase-money is paid, is in equity a mortgage.^ This express lien becomes a matter of record when the deed is recorded.^*^ This express lien is good in case both personal property and real are sold for a gross sum." ' Oakeg v. Moore, 24 Me. 214. "Bank v. Bradley, 15 Lea (Tenn.), 279; Lucas v. Hendrix, 92 Ind. 54, 57; Ufford V. Wells, 52 Tex. 612; Coles v. AVithcrs, 33 Gratt. (Va.) lS(j; Webster V. Mann, 52 Tex. 416 ; Eichelberger v. Gitt, 104 Pa. St. 64 ; Davis v. Hamilton, 50 Miss. 213; Caldwell v. Fraim, 32 Tex. 310. 'Heist V. Baker, 49 Pa. St. 9. *Blaisdell v. Smith, 3 111. App. 150. * Moore v. Lackey, 53 Miss. 85. See, also, Ross v. Swan, 7 Lea (Tenn.), 463; I^vi\ Ferrell, 83 Ky. 417. ^Lucy ti Hopkins (Ky.), 13 S. W. Rep. 518. ^Neese v. Riley, 77 Tex. 348. ..t VENDOR S LIEN. 337 interest on the purchase-money is a valid lien.^ The vendor and vendee, for most purposes, occupy the relation of mort- gagor and mortgagee. And in North Carolina it is held that the only sense in which the mortgagee can be said to have any interest in the crops, when not reserved, growing on the mortgaged land, is that he has the right to them after taking possession as an incident to his possession.^ The express lien which the vendor of land reserves on the crops for the year when the purchase-money shall become due, attaches as soon as the vendee acquires title to the crops.^ § 323. Right to Rents and Profits. — In a proceeding to enforce a vendor's lien, when the vendor remains in possession, and there is a delay in completing the transfer beyond the specified time, the vendee should be credited with a share of whatever the vendor may have received in respect to the use and enjoyment of the property, proportioned to the amount he may have paid on the purchase.^ In fulfillment of his promise to reconvey the property as security for the payment of the purchase-money, if not paid in a certain time, the vendee gave a lease on the propert}^ to the vendor with a right to apply the rents and profits from year to year on the purchase-money notes. It was held that the assign- ment of the rents and profits created a lien on the body of the property, which could be enforced in equity, in case the rents and profits were not sufficient to pay the debt.^ § 324. Assignment of the Purchase-Money Notes. — A lien of the vendor for a note given for unpaid purchase-money, under an express lien, is not lost by the taking of a note as security with the agreement that the legal title shall not pass, but that the assignee may collect and apply the proceeds to • Darlington v. Robbing, 60 Vt. 347 ; Smith v. Atkins, 18 Vt. 461 ; Batchel- der V. JennesH, 59 Vt. 104 ; Leslie v. Guthrie, 1 Bing. (N. C.) 697 ; Langton v. Horton, 1 Hare, 549 ; Lewis v. Lyman, 22 Pick. (Mass.) 437. ^Killebrew v. Hines, 104 N. Car. 182. 'Williams v. Cunningham, 52 Ark. 439. * Grove v. Miles, 71 111. 376. \Gest V. Packwood, 39 Fed. Eep. 525. VOL. I.— 22 338 NATURE AND REQUISITES OP THE CONTRACT. the debt secured ; this is a mere collateral security and the vendor does not waive his lien.^ Where the vendee gets nothing from the would-be vendor, but acquires the same land by a subsequent purchase from another, who has paramount title, there is no lien which at- taches from the first sale, because there was no title conferred, and the subsequent acquisition by the vendee cannot be treated a buying in, to perfect a title as in an ordinary case of a vendee purchasing an outstanding title.^ And when a vendor transfers notes for the price, for the full consideration to a third person without indorsement and with- out recourse or warranty, his right and power to demand or receive payment of the price ceases to exist, and with it his right to demand a resolution of the same in event of non- payment, and the corresponding obligation of the buyer.^ When two notes are given for the purchase-money of land, and the vendor assigns the one last falling due and retains the first, the assigned note is entitled to the priority and superior lien ; and this priority of lien passes to a sub-purchaser of the land who acquires the assigned note as part of the considera- tion of the purchase.* Because such note would be entitled to a preference of payment as a charge on the land over the other note retained by the vendor.^ The fact that the vendor's decedent surrenders the original notes for the purchase-money, and accepts new ones does not divest the lien.'' In Texas the sale and indorsement of a note reserving a lien, given for the purchase-money, " without recourse," does not extinguish the indorser's lien which passes to the indorsee.^ In Maryland, however, such an indorsement has been held to extinguish the lien, because the owner thereof was thereby . ^Cate V. Gate, 87 Tenn. 41. >* Harper v. Wilkins, 65 Miss. 215. 3 People's Bank v. Cage, 40 La. Ann. 138, * Parsons v. Martin, 86 Ala. 852. 5 Ala. Gold Life Ins. Co. v. Hall, 58 Ala. 1 ; White v. King, 53 Ala. 162. «Hitt V. Pickett (Ky.), 11 S. W. Rep. 9. ^ Neese v. Riley, 77 Tex. 348 ; White v. Downs, 40 Tex. 226. vendor's lien. 339 released from liability on the note, and no longer had any interest in the lien/ Some of the States have enacted la^ws that the assisfnee or transferee of a purchase-money note shall have the vendor's lien pass to him.^ But a transfer of the note before such stat- ute did not pass the lien.^ But after the statute is passed, it makes no difference whether the note is assigned before or after maturity/ But such lien will not pass to the assignee where the vendor has conveyed by an absolute deed/ In such assignments of the notes, where there is no writing to indicate the transfer, the vendors are necessary parties to complete the foreclosure/ § 325. Waiver and Extinguishment of the Express Lien. — This express lien is governed by the same rules that a mortgage is, and passes by the assignment of the note secured by it.^ It is not waived as an implied lien is by taking other security.^ This reservation may secure an agreement to pay in specific articles.' This reserved lien is not lost or extin- guished as an implied lien is by accepting other security,'^ Where the wife can conve}^ her separate estate, and she makes a reservation allowing the vendee to take out a mort2:ao:e on the ^to"^&" ^Schnebly v. Ragan, 7 Gill & John. (:Md.) 120. See, also, Hazelrigg v. Boarman (Ky.), 2 S. W. Rep. 769 ; Woods v. Bailey, 3 Fla. 41 ; 2 Dan. on Notes and Bills, 272 ; Buckhart r. HoMard, 14 Ore. 39. ''Ala. Code, 1886, sect. 1764 ; Ark. Mansf. Dig., sect. 474 'Weaver i;. Brown, 87 Ala. 533. * Morris v. Ham, 47 Ark. 293. ^Crossland v. Powers (Ark.), 13 S. W. Rep. 732, 6 Davis r. Smith, 88 Ala. 596. 'Carpenter v. Mitchell, 54 111. 126; :Markoe ?'. Andras, 67 111.34; Dingleyi;, Bank, 57 Cal. 467. * Carpenter v. Mitchell, 54 111. 126. See, also. King r. Young Men's Assn., 1 Woods C. C. 386 ; Chitwood v. Trimble, 2 Baxt. (Tenn.) 78 ; Gordon v. Rixey, 76 Va. 694 ; Kirk v. Williams, 24 Fed. Rep. 437. »Ruhl r. Ruhl, 24 W. Va. 279, 287. "Strickland v. Summerville, 55 Mo. 164; Hurley v. Hollyday, 35 Md. 469; Bradley v. Curtis, 79 Ky. 327; Huffman v. Cauhle, 86 Ind. 591; Price v. Lauve, 49 Tex. 74 ; Whitehurst v. Yandall, 7 Baxt. (Tenn.) 228 ; Bozeman v. Ivey, 49 Ala. 75 ; Hatcher v. Hatcher, 1 Rand. (Va.) 53 ; Dunlap v. Shanklin, 10 W. Va. 662. Compare Hawkins v. Thunnan, 1 Idaho, 598. 340 NATURE AND REQUISITES OF THE CONTRACT. land, and to pay her a part of the proceeds, and then to give her a second mortgage back to secure the balance due, she will be estopped to deny a waiver of her lien, and to enforce it as against the first mortgagee/ But notes referred to in a deed which contains a waiver of the maker's personal property exemptions do not waive the vendor's lien.^ But when the deed recites that the grantor took the notes of a third person, though indorsed by the grantee, and it is not shown that they were only taken as se- curity for the purchase-money which was still due, the vendor thus waives his lien.^ The recital in a deed of payment does not waive nor destroy the vendor's lien, but such recital is prima facie evidence of payment, which the vendor must explain or disprove in seek- ing to enforce his lien/ But the vendor is estopped to assert his express lien as against an innocent third person, as, for in- stance, a junior lien-holder without notice/ When the vendor has taken other security, and the evidence shows that he relies wholly upon the other security, he has waived his lien/ A change of notes, or a reducing them to judgment, does not divest the lien/ A lien expressly reserved cannot be modified by evidence of a verbal agreement that there should be no lien/ § 326. Assumption of Lien. — The vendee may convey the land in such a manner that his grantee assumes the payment of the original vendor's lien, and thus renders himself per- ' Wilder v. Wilder, 89 Ala. 414. "Thompson v. Sheppard, 85 Ala. 611. ^Dutton V. Bratt (Ark.), 11 S. W. Rep. 821. * Kelly V. Kansner, 81 Ala. 500. ''Bunton v. Palm (Tex.), 9 S. W. Rep. 182. « Warren v. Branch, 15 W. Va. 21, 22; Byrna r. Woodward, 10 Lea (Tenn.), 444 ; Frazier v. Hendren, 80 Va. 265 ; Daniels v. Moses, 12 S. Car. 130. See, also,, Butler v. Williams, 5 Heisk. (Tenn.) 241. ' Boseman v. Ivey, 49 Ala. 75 ; Coles v. Withers, 33 Gratt. (Va.) 186. See, also, Conner v. Banks, 18 Ala. 42 ; Luddington v. Gabbert, 5 W. Va. 330. 8 Hutchinson v. Patrick, 22 Tex. 318. vendor's lien. 341 sonally liable therefor. The element which lies at the bottom of this assumption, and which alone gives it efficacy is the fact that the vendor's lien is included in the purchase price, as a constituent part thereof, and the grantee actually secures or pays to his grantor only the balance of the gross price after deducting such vendor's lien. When the deed executed by the grantor contains a clause sufficiently showing such intent, the acceptance thereof by the grantee consummates the assump- tion of the original vendor's lien, and creates a personal lia- bility on his part which inures to the benefit of the original vendor as though he had himself executed the deed.^ Thus, a vendee's agreement with his vendor to pay the pur- chase price of land to a third person, designated by the vendor — being a former incumbrancer — renders the vendee liable to such third person for the amount, and the same may be re- covered by a suit of such third person against the vendee or his personal representatives.^ The person who thus assumes a mortgage or lien debt becomes, as to the mortgagor or lienor, the principal debtor and the mort- gagor as surety. Upon such a promise the original vendor can maintain an action at law.^ This is upon the ground that the original vendor, in adopting the act of the vendee for his benefit, is brought into privity with the promisor, and may enforce the promise as if it were made directly to him.* However, there are cases holding that where lands are pur- chased subject to a mortgage or vendor's lien, and the vendee enters into a bond at the time, or subsequently, to pay off the incumbrance, that this alone, without other circumstances, will not be regarded as a sufficient demonstration of his intention to make it his personal debt with respect to the fund primarily liable for its payment.'' ^ 3 Pom. Eq. Jur., sect. 1206. ^ O'Conner r. O'Conner, 88 Tenn. 76. •"•Moore v. Stovall, 2 Lea (Tenn.), 543. * Lawrence v. Fox, 20 N. Y. 268 ; Burr v. Beers, 24 N. Y. 178 ; Thompson v. Bertram, 14 Iowa, 476 ; Thompson v. Thompson, 4 Ohio St. 333. 5 Billinghurst v. Walker, 2 Bro. C. C. 604 ; Evelyn v. Evelyn, 2 P. Wm. 664, and note ; T^veddell v. Tweddell, 2 Bro. C. C. 101. 342 NATURE AND REQUISITES OF THE CONTRACT. These cases proceed upon the notion that the assumption of the incumbrance is only by way of collateral security, the land remaining the principal and the primary fund for its payment. But slight circumstances take this class of cases out of this rule/ Slight circumstances, in addition to a cove- nant to pay, are sufficient to make the debt, in such cases, the personal debt of the vendee.^ Lord Thurlow says : " The mere purchase of an estate sub- ject to charges — as, an equity of redemption — does not make the personal estate of the purchaser liable to the charge ; but if the charge is i3art of the price, then the personal estate is liable." ^ § 327. Substituting Note or Bond. — Where a purchaser of land assumes as part of the agreed purchase-money, a debt which the vendor owes to a third party and gives his note pay- able to that third person by agreement among the three, the vendor's lien attaches to the note unless waived, and may be enforced by the payee by a bill in his own name.* And when such notes are received with the intention orally expressed that the vendor's lien is not to be relinquished, it is sufficient to overcome the implication of the contrary intention raised upon the mere fact of taking personal security, with a waiver of exemptions on the notes.^ The change of notes or the substitution of notes of another person docs not effect the lien." A third person who pays the money on behalf of the pur- chaser to the vendor upon an express agreement among the three that he shall have a lien for it upon the land, will be held in equity to succeed to the vendor's lien.^ J Earl of Oxford r. Lady Rodney, 14 Ves. 418. ''.Warintx r. Ward, 7 Ves. 336 ; Woods v. Huntingford, 3 Ves. 128. SBillinghurst v. Walker, 2 Bro. C. C. 604. * Woodall V. Kelly, 85 Ala. 368 ; Carver v. Eads, 65 Ala. 190. 6 Cordova v. Hood, 17 Wall. (U. S.) 1 ; Napier v. Jones, 47 Ala. 90 ; Fonda V. Jones, 42 Miss. 792 ; 2 Am. Rep. 669 ; Moshier v. Meek, 80 111. 79. ^ Bozeman v. Ivey, 49 Ala. 75 ; Bank v. Good, 21 W. Va. 455 ; Coles v. Withers, 33 Gratt. (Va.) 186 ; Woodward v. Echols, 58 Ala. 655 ; Hess v. Dille, 23 W. Va. 90. ' Mitchell V. Butt, 45 Ga. 162. vendor's lien. 343 A lien can be reserved for purchase-money in favor of a third part}^ by express provision of the deed.^ When a vendee gave his note for the purchase-price and afterward paid the note from the proceeds of his minor chil- dren's property, the children will be subrogated to the vendor's lien.^ So where a bond was given to a wife and then another to her husband representing the same land, the wife's disap- pearing, the wife may rely upon the husband's bond to up- hold her rights,* Article 3. Priorities. 1 328. Rights of Bona Fide Purchas- 1 332. Remedy of Vendor— Election. ers and Mortgagees. § 333. Ejectment May Be Brought. § 329. Pennsylvania Doctrine. I 334. In Case of Two Funds. 1 330. Mechanics' Lien and Home- 1 335. Election of Remedy — Contrary stead Rights. Doctrine. § 331, Rights of the Creditors of the Vendee. §328. Rights of Bona Fide Purchasers and Mort- gagees. — The vendor's implied lien does not prevail against bona fide purchasers and mortgagees without notice.* This lien is paramount to a homestead right acquired by the purchaser,^ and a wife has no dower right in lands thus sold to her husband as against the vendor's lien. Thus where the husband sells land on which there is a vendor's lien, the wife cannot claim dower in it.^ When the vendor transfers the purchase-money notes without indorsement or guaranty he has no longer any priority.^ ' Mize V. Barnes, 78 Ky. 506 ; Perkins v. Gibson, 51 Miss. 699 ; James v. Burbridge, 33 W. Va. 272, 275. ^ Oury V. Saunders, 77 Tex. 278. ^ Acton r. Waddington, 46 N. J. Eq. 16. * Adams v. Buchanan, 49 Mo. 64 ; Houston v. Stanton, 11 Ala. 412 ; Moshier V. Meek, 80 111. 79 ; Haines v. Chaillee (Ind.), 28 N. E. Rep. 848. * Berry v. Boggess, 62 Tex. 239. ^Culbertson v. Stevens, 82 Va. 406 ; Hugunin v. Cochrane, 51 111. 302. ^ Hunt V. Harber, 80 Ga. 746. 344 NATURE AND REQUISITES OF THE CONTRACT. The vendee cannot destroy the lien by creating other liens as a conveyance or mortgage to parties with notice/ or mechanics' lien for labor and materials furnished the vendee with notice of the vendor's lien.^ A bona fide purchaser of land without notice of the vendor's lien takes it discharged of any such liability.^ He will be protected against the operation of the lien because in foro con- scientise he must be considered as holding a right paramount to that of a negligent and confiding vendor, who has been in- cautious as to part with his title without securing the consid- eration by mortgage or sufficient personal guaranty, and has made his vendee the ostensible owner in equity as well as real owner in law of the land. And if this were not so, the law requiring deeds to be recorded would be of no avail. The rule caveat emptor applies to purchasers of defective legal titles. But the purchaser of the legal title is not to be affected by any latent equity, whether founded on trust, fraud, or otherwise, of which he has no actual notice, or which does not appear in some deed necessary on the deduction of title so as to amount to constructive notice.* The same rule applies to a bona fide mortgagee of such ven- dee, and he is entitled to equal protection." And a mortgage for the purchase-money executed simultaneously with the deed from the vendor takes precedence and priority over liens aris- ing from the mortgagor's act." And a purchaser acquiring title through a sale in good faith without notice of the vendor's lien, has a paramount title.'^ The vendor's lien exists and is enforceable, it is commonly held, against all persons except bona fide purchasers without ^ Rogers v. Blum, 56 Tex. 1 ; Beattie v. Dickinson, 39 Ark. 203 ; Sitz v. Deihl, 55 Mo. 17. 2 Seitz V. Railroad Co., 16 Kan. 133 ; Thorpe v. Durbon, 45 Iowa, 192 ; CJoch- ran v. Wimberly, 44 Miss. 503. ^ Adams v. Buchanan, 49 Mo. 64. ^Clark?;. Hunt, 3 J. J. Marsh. (Ky.) 553; Anderson v. Wells, 6 B. Mon. (Ky.) 540, 541 . 6 Eubank v. Poston, 5 Mon. (Ky.) 288. « Rogers v. Tucker, 94 Mo. 346. ' Yetter v. Fitts, 113 Ind. 34. vendor's lien. 345 notice.^ A purchaser cannot claim to be innocent so long as the mortgage remains uncancelled.^ §329. Pennsylvania Doctrine. — In Pennsylvania a ven- dor's lien will be divested by subsequent sheriff sales, unless it is in the nature of testamentary provisions for wife and children, or is incapable of valuation, or is expressly created to run with the land.^ A clause of reservation of a vendor's lien on specific land conveyed in a deed is not a condition, nor a reservation of any estate in the vendor, which does not pass to the vendee at a sheriff's sale, and the greatest effect that can be claimed for this clause is that it created an equita- ble lien for so much, which lien is discharged by a sale.* § 330. Mechanics' Lien and Homestead Rights. — The vendor's lien is paramount to a homestead right of the pur- chaser.^ Neither can the purchaser destroy this lien by creat- ing another lien, as for instance, mechanic's lien for labor and material expended on the land.*' If he creates a mechanic's lien, it wdll be subordinate to the vendor's.'' But where parties have placed machinery in a mill pur- chased by the vendee, they may remove it where the vendor's lien is discharged, though they do not replace the old ma- chinery as found at first.^ § 331. Rights of the Creditors of the Vendee. — The vendor's implied lien does not prevail, as a general rule, against creditors of the vendee, but upon this question there ' Dunton v. Outhouse, 64 Mich. 419. ^Dugan V. Lyman (N. J.), 23 Atl. Rep. 657. See, also, Crow v. Conant (Mich.), 51 N. W. Rep. 450. 'Strauss's Appeal, 49 Pa. St. 353. * Pierce v. Gardner, 83 Pa. St. 211 ; Hiester v. Green, 48 Pa. St. 96. * Berry v. Boggess, 62 Tex. 239; Williams v. Samuels (Ky.), 13 S. W. Rep. 438. ® Thorpe r. Durbon, 45 Iowa, 192; Cochran i;. Wimberly, 44 Miss. 500; Seitz V. R. R. Co., 16 Kan. 1.33. ' Irish V. Lundin, 28 Nebr. 84. ^Slocum V. Caldwell (Ky.), 13 S. W. Rep. 1069 ; Northern Bank v. Decke- bach, 83 Ky. 154. 346 NATURE AND REQUISITES OF THE CONTRACT. is no uniformity of doctrine. So where creditors have secured the legal title to property upon which a secret lien is claimed, without notice of such lien, they will hold the property as against persons claiming such lien.' And it is generally stated that a purchaser of real estate for valuable consideration, and without notice, is not bound by an equitable lien on the land for the unpaid purchase-money.^ But it is held otherwise as to judgment creditors.^ Still, on the other hand, it is held that the vendor's lien exists as against judgment and general creditors.* This doctrine is denied in some of the States ^ and is indorsed in many other States.^ A late case decided by the Michigan Supreme Court holds that the vendor's lien is paramount to all others, except those of a bona fide purchaser without notice.^ However, the doc- trine is not uniform in this regard. § 332. Remedy op Vendor — Election. — A deed expressly retaining a lien for unpaid purchase-money does not divest the vendor's title. He may elect to sue either for recovery of the laud or for the purchase-money with foreclosure; and merely filing his petition to foreclose the lien is not such an election as prevents him from amending and asking for re- covery of the land.^ Nor can it be objected to when the bill in equity is brought to enforce a vendor's lien, that the vendor should have first exhausted his remedy at law.^ When de- fault of payment occurs, the vendor may elect to sue for the unpaid purchase-money, or disaffirm the contract, and recover the land.'" 1 Taylor v. Baldwin, 10 Barb. (N. Y.) 626 ; Bayley v. Greenleaf, 7 Wheat. (U. S.) 46. 2 Aldridge v. Dunn, 7 Blackf. (Ind.) 249. ^Story Eq. Jur. 430. *Repp V. Repp, 12 Gill & J. (Md.) .341 ; Brown v. Vanlier, 7 Humph. (Tenn.) 239. s Bayley v. Greenleaf, 7 Wheat. (IT. S.) 46. «See 1 White & Tudor's Eq. Gas. (3d Am. Ed.) 371-4. 'Dunton v. Outhouse, 64 Mich. 419. 8 Stone Land & Cattle Co. r. Boon, 73 Tex. 548. * 'Burgess v. Fairbanks, 83 Cal. 215. 1° Hamblen v. Folts, 70 Tex. 132; Micou v. Ashurst, 55 Ala. 607; McConnell vendor's lien. 347 § 333. Ejectment may be Brought, — It is the general rule that ejectment may not be maintained against the vendee ex- cept when time is the essence of the contract, either made so by the language employed, ^ or arising from the circumstances surrounding the transaction.^ But in some cases the right has been sustained, after default, to bring ejectment on general principles.^ In New York, after default, the vendor is entitled to immediate possession, and may bring ejectment to gain possession.* § 334. In Case of Two Funds. — In case a creditor has two funds to which he may resort for payment, or has a lien on two parcels of land, or on land and personal property, and an- other creditor has a lien on only one of the funds, or on the parcel of land, or on the land and not on the personal prop- erty, the latter may compel the former, who has two funds, to resort to the fund or property to which the latter has no recourse, and exhaust it before subjecting the other fund.^ §335. Election op Remedy — Contrary Doctrine. — Of course, the general rule is that the vendor need not first ex- haust his remedy at law before proceeding in equity ; ^ that he need not first exhaust his remedy against the personal estate V. Beattie, 34 Ark. 113 ; Palmer v. Harris, 100 111. 276 ; Smith v. Rowland, 13 Kan. 245, 251 ; Bradley v. Bosley, 1 Barb. Ch. (N. Y.) 152 ; Galloway v. Hamil- ton, 1 Dana (Ky.), 576; Richardson v. Baker, 5 J. J. Marsh. (Ky.) 323; High V. Batte, 10 Yerg. (Tenn.) 186 ; Huffinan v. Cauble, 86 Ind. 593. 1 Higbie v. Farr, 28 Minn. 439 ; Mickelwait v. Leland, 54 Iowa, 662 ; Peters r. Canfield, 74 Mich. 498 ; Overman v. Jackson, 104 N. Car. 4 ; Gunst r. Pel- ham, 74 Tex. 586 ; Judd v. Skidmore, 33 Minn. 140 ; Sornberger v. Berggren, 20 Nebr. 399 ; Schumann v. Mark, 35 Minn. 379. 2 Austin V. Wacks, 30 Minn. 335 ; Gilman v. Smith, 71 Md. 171. 3 Gregg V. Von Phul, 1 Wall. (U. S.) 274; Burnett v. Caldwell, 9 Wall. (U. S.) 290 ; Kerns v. Dean, 77 Cal. 555 ; Wallace v. Maples, 79 Cal. 433 ; Rose V. Perkins, 98 Mo 253 ; Miles v. Lewis, 115 Pa. St. 580. * Wright V. Moore, 21 Wend. (N. Y.) 230; Ketchum v. Evertson, 13 Johns. (N. Y.) 359. ^ Cheeseborough v. Millard, 1 Johns. Ch. (N. Y.) 409 ; Aldrich v. Cooper, 3 White & Tudor's Lead. Cas. Eq. 198, and note ; Bryant v. Stephens, 58 Ala. 636, 641. « Burgess v. Fairbanks, 83 Cal. 215 ; Sparks v. Hess, 15 Cal. 186, 193. 348 NATURE AND REQUISITES OF THE CONTRACT. of the vendee.' But to this general rule there is a contrary doctrine, which holds that as a vendor's lien is a mere equita- ble right, therefore it cannot be asserted until the vendor has exhausted his legal remedy against the personal estate of the vendee.^ i336. Reservation of the Rights of Assignee, i 337. Rights of Vendee. 1338. Contribution. I 339. Order of Payment. ; 340. Subrogation of Surety. ; 341. Limitation and Laches. i342. Parties. Article 4. Enforcement of the Lien Lien §343. Pleadings. §344. Comminghng the Aggregate Price of Real and Personal Property. § 345. Defense — Tender of Deed. § 346. Decree. § 347. Sale of Land. § 336. Reservation op the Lien — Rights of Assignee. — An assignee of a note or bond given for the purchase-money, as a general rule, is entitled to the benefit of the security and may enforce specific performance, or may enforce the lien re- served in the same manner as his assignor.^ This reserved lien is regarded as an incident to the debt* In a suit to enforce a vendor's lien against an assignee with 1 Smith V. Rowland, 13 Kan. 245, 251. 2 Pratt V. Van Wyck, 6 Gill & Johns. (IMd.) 495 ; Bottorf v. Conner, 1 Blackf. (Ind.) 287; Russell v. Todd, 7 Blackf. (Ind.) 239. (The law is different in Indiana now : Hufiman v. Cauble, 86 Ind. 591, 593) ; Richardson v. Stil- linger, 12 Gill & Johns. (Md.) 477. 3 Sloan V. Campbell, 71 Mo. 387 ; Brooks v. Young, 60 Tex. 32 ; Rakestraw V. Hamilton, 14 Iowa, 147 ; Reynolds v. Morse, 52 loAva, 155 ; Ober v. Gallagher, 93 U. S. 199 ; James r. Burbridge, 33 W. Va. 272 ; Wright v. Troutman, 81 111. 374 ; Felton v. Smith, 84 Ind. 485 ; Tharpe v. Dunlap, 4 Heisk. (Tcnn.) 674 ; Walkenhorst v. Lewis, 24 Kan. 420 ; Walker r. Kee, 16 S. Car. 76 ; Camp- bell V. Rankin, 28 Ark. 401 ; Martin v. O'Bannon, 35 Ark. 62 ; McClintic v. Wise, 25 Gratt. (Va.) 448 ; Hobson v. Edwards, 57 Miss. 128 ; Hadley v. Nash, 69 N. Car. 162 ; Adams r. Cowherd, 30 Mo. 458 ; Lowery v. Peterson, 75 Ala. 109 ; Bradley r. Curtis, 79 Ky. 327. This is the English doctrine. * Lowery v. Peterson, 75 Ala. 109 : James v. Burbridge, 33 W. Va. 272 ; Tingle v. Fisher, 20 W. Va. 497 ; Gwathmeys v. Ragfand, 1 Rand. (Va.) 466 ; Grubbs v. Wysors, 32 Gratt. (Va.) 127 ; McClintic v. Wise, 25 Gratt. (Va.) 448. 1 vendor's lien. 349 notice of the lien, it cannot be objected that the vendor has an adequate remedy at law on the contract with the original ven- dee when the latter is insolvent/ If the note does not contain a full description of the land as set out in the petition, other evidence must be introduced to give full description, or no decree will be rendered.^ But if the note shows upon its face that an express lien of particular land is reserved the assignee may enforce its payment.^ If a party buys land knowing that there is an outstanding note for the purchase-money previously assigned by the vendor, he takes the land subject to the lien of that note,* unless the note was transferred after maturity, then he has all the equities that the maker would have.^ The assignment is good until set aside, when the assignor can then enforce the lien as to his equities.^ At common law the assignee stands in no better situation than the assignor. But in Ohio, under statutory provisions, a mortgage void as to creditors is void as against an assignee for the benefit of creditors,^ though valid as to the mortgagor. § 337. Rights of the A^'exdee. — Any vendee may have his notes protected by pajdng the purchase-money due, or by bringing it into court under appropriate pleading before judg- ment.^ But when he is in possession he cannot recoup dam- ages for breach of warranty of title as to part of the land in a suit to enforce the vendor's lien, unless his vendor is insolvent.^ If he alleges that the lien does not exist for any reason in a 1 Bates r. Childers, 4 X. :\Iex. 347. ^ Daugherty v. Eastbum, 74 Tex. 08. 3 Bailey v. Smock, 61 Mo. 213 ; Osborne v. Royer, 1 Lea (Tenn.), 217. * Young V. Atkins, 4 Heisk. (Tenn.) 529 ; Joslin v. N. J. Car Co., 36 N. J. L. 141 ; Bassett v. Hughes, 43 Wis. 319 ; Bristow v. Lane, 21 111. 194 ; Bohanan v. Pope, 42 Me. 93 ; Vrooman v. Turner, 8 Hun (X. Y.), 78 ; Brown v. Roger Williams Ins. Co., 5 R. I. 394 ; Carnegie v. Morrison, 2 Met. 381 ; Urquhart v. Brayton, 12 R. I. 169. *Shinn v. Fredericks, 56 111. 4.39. « Green v. Betts, 1 Fed. Rep. 289. ' ^ Kilbourne v. Fay, 29 Ohio St. 264. * Stone Land and Cattle Co. v. Boon, 73 Tex. 548; MVoodall V. Kelly, 85 Ala. 368. 350 NATURE AND REQUISITES OF THE CONTRACT. particular case, the bvirden is on him to show the circum- stances which sustain his allegation.^ The wife's land can also be sold for the purchase-money, though the husband made the purchase and took title in her name." Where a second vendee is ignorant of the existence of an outstanding note for purchase-money with no negligence on his part, he takes the property unaffected by any lien in favor of the holder of the note.^ But if the note is described in a mortgage, then he has notice. The vendee may incumber his interest and it may be sold upon execution,* but subject to the rights of the vendor.' He has a lien upon the land for what he has paid upon the contract which he can enforce," and this lien may be enforced as against a purchaser from the vendor with notice.^ § 338. Contribution. — Whether several persons who have successively purchased portions of an incumbered estate shall be liable to contribution, is a question upon which the authori- ties are not uniform.** Where land is sold subject to a vendor's lien, in separate parcels, to different persons, by simultaneous deeds, the grantees stand upon equal footing, and one who pays the incumbrance is entitled to contribution from the 1 Carson v. Green, 1 Johns. Ch. (N. Y.) 308 ; Gilman v. Brown, 1 Mas. C. C. 191, 213, 21-1 ; Schnebly v. Ragan, 7 Gill & J. (Md.) 120, 125 ; Thompldns v. Mitchell, 2 Rand. (Va.) 428, 429 ; Allen v. Bennett, 8 Sm. & M. (Miss.) 672, 681 ; Campbell v. Baldwin, 2 Humph. (Tenn.) 248, 258 ; Manly v. Slason, 21 Vt. 271. 2 Williams v. Simmons, 79 Ga. 649. ^ Nat. Valley Bank v. Harman, 75 Va. 604. * Smith V. Moore, 26 111. 393 ; Lewis v. Hawkins, 23 Wall. (U. S.) 119 ; But- ton V. Schroyer, 5 Wis. 598 ; Martin v. O'Bannon, 35 Ark. 62 ; Scroggins r. Hoadley, 56 Ga. 165 ; Masterson v. Pullen, 62 Ala. 145 ; Schorn v. McWhirter, 8 Baxt. (Tenn.) 201 ; Richards v. Fisher, 8 W. Va. 55 ; Merritt v. Judd, 14 Cal. 59 ; Purdy v. Bullard, 41 Cal. 444 ; Dukes v. Turner, 44 Iowa, 575 ; Walken- horst V. Lewis, 24 Kan. 420. * Thompson v. Heffner, 11 Bush (Ky.), 353. «3Pom. Eq. Jur. 1263. ^ Clark i;. Jacob, 56 How. Pr. (N. Y.) 519; Stewart v. Wood, 63 Mo. 252; Rose V. Watson, 10 H. L. Cas. 672. 8 See 2 Waah. Real Prop. (4th Ed.) 200, 220. vendor's lien. 351 others.^ Thus, two sub-purchasers of land subject to a vendor's hen, buying ^t the same time, must contribute ratably to the purchase-money. If one of the two sub-purchasers, liable to contribute to the discharge of the vendor's lien, owes a part of the purchase-money to the original vendee, that will first be applied, and he will contribute pro rata to the remainder.^ And if land which is subject to a lien of a judgment or other incumbrance is sold in parcels to different persons by succes- sive alienation, it is chargeable in the hands of the purchasers in the inverse order of such alienation.^ So where a vendor has a lien upon land which has been divided into lots and sold by the vendee, the whole is subject to the lien in making sale for its satisfaction, and the last lot purchased will be sold first, and so on in the inverse order until satisfaction is obtained.* § 339. Order op Payment. — When bonds are secured by a vendor's lien, and are assigned at different times to different persons, they are to be satisfied out of the proceeds of the land upon which they are secured in the order of their assignment.^ But there is no uniformity of decision, and no general rule can be stated. In Pennsylvania, where bonds are to be paid to various parties, some as assignees, and assigned at different times, it is held that the respective assignees and the mort- gagee, when he holds some of the bonds, are entitled to a pro rata dividend of the proceeds, according to the amounts of the bonds which they hold.*^ So in Mississippi, where notes are assigned at different times, and which mature at different times, the holders of all the notes stand upon an equal footing 1 Stevens v. Cooper, 1 Johns. Ch. (N. Y.) 425 ; Bailey v. INIyrick, 50 Me. 171 ; Johnson v. White, 11 Barb. (N. Y.) 194 ; Aiken v. Gale, 37 N. H. 501 ; Bates V. Ruddick, 2 Iowa, 423. nVilkes V. Smith, 4 Heisk. (Tenn.) 86. ^ Whitten v. Saunders, 75 Va. 563 ; Harman v. Oberdorfer, 33 Gratt. (Va.) 497. ♦Alabama v. Stanton, 5 Lea (Tenn.), 423. ^Paxton V. Rich, 85 Va. 378; McClintic v. Wise, 25 Gratt. (Va.) 448; Menken v. Taylor, 4 Lea (Tenn.), 445. ^ Donley v. M'Kean, 17 S. & R. 400 ; Mohler's Appeal, 5 Barr, 421. 352 NATURE AND REQUISITES OF THE CONTRACT. and are each entitled to share ratably in the proceeds of the sale of the mortgaged property/ In Alabama, however, where the purchaser of land executes several notes for the purchase- money due at different times, secured by mortgage or other instrument, he creates a lien on the land for their payment, and an assignment of the notes is an assignment pro tanto of the security for their payment, and the several assignees are entitled to priority of payment according to the date of their respective agreements, without regard to the time when the notes severally mature.^ Then the rule in Texas is that when a series of notes are given at the same time for the purchase-money, the notes fall- ing due at different dates, the vendor's lien being reserved, they are equally secured in the common fund, and have equal rights to be satisfied out of it.^ The assignee of one of the notes secured by mortgage is en- titled, as a general rule, to be paid out of the proceeds of the mortgaged property in preference to the mortgagee who retains one or more notes secured by the same mortgage.* § 340. Subrogation of Surety. — The subrogation of the surety for indemnity, on payment of the debt of his principal, to all the rights, remedies, and securities of the creditor against the principal debt is a familiar doctrine of courts of chancery. Equity adopts this mode to compel the ultimate discharge of the debt by him who in good conscience ought to pay it, and to relieve him whom none but the creditor could ask to pay. To effect this the surety is allowed to take the place of the creditor and make use of the creditor's securities as if they were his own.^ 1 Henderson v. Herrod, 10 Sm. & M. 631. 2 Alabama Gold Life Ins. Co. v. Hall, 58 Ala. 1 ; White v. King, 53 Ala. 162 ; Cullum ?'. Erwin, 4 Ala. 452. 3 McDonough v. Cross, 40 Tex. 287 ; Delespine r. Campbell, 45 Tex. 628 ; Ellis V. Singlotary, 45 Tex. 27 ; Cannon v. McDaniel, 46 Tex. 314 ; Paris Ex. Bank v. Beard, 49 Tex. 363. * Cullum V. Erwin, 4 Ala. 455 ; Bryant r. Damon, 6 Gray (Mass.), 564 ; Van Rensselaer v. Stafford, Hopkins Ch. (N. Y.) 574 ; Bank v. Bank, 9 Wend. (N. Y.) 412 ; Salzman v. Creditors, 2 Rob. (La.) 241 ; Whitehead v. Fisher, 64 Tex. 638. ^McCormick v. Irwin, 35 Pa. St. Ill, 117. vendor's lien. 353 Thus, a surety upon a note given to a vendor for the pur- chase-money, who pays it, is subrogated to the vendor's lien if no equity in favor of the vendor would thereby be displaced/ But this principle has no application where its enforcement would be unjust and inequitable. It may be invoked for in- demnity, and sometimes, and on certain conditions, for exon- eration, by a surety against his principal, but not in case when it would operate to the prejudice of the creditor. Thus, it has been held that the surety upon paying the debt is entitled to all the securities held by a creditor, provided the creditor has no lien upon them or right to make them available against the principal debtor, to enforce the payment of a debt different from that which the surety has paid. But if the creditor had such a right, and one arising out of the transaction itself, of which the suretyship forms a part, then the right of the surety to the benefit of the securities is subordinate to the right of the creditor to make them available for the payment of the other claims, and can only be made available after the para- mount right is satisfied.^ This principle will apply to a case where the creditor has a security for the entire debt, payable in installments, for one only of which the surety is personally liable. To allow the surety, on payment of his installment, to have the benefit of the security which was provided for the entire debt, and post- pone the creditor until the surety is indemnified, would be, in effect, in a case where the security is insufficient to pay the whole debt, to require the creditor to indemnify instead of the principal debtor; for the creditor has the prior, subsisting, paramount right to resort to the security until his entire debt is satisfied.^ But the payment of a purchase-money mortgage by a firm, standing in the names of the partners, does not subrogate the firm to the vendor's lien.* And the fact that a mortgage was ^ Grubbs v. Wysors, 32 Gratt. (Va.) 127. "^ Farebrother v. Wodenhouse, 23 Beav. 18. 3 Grubbs v. Wyson, 32 Gratt. (Va.) 127, 130. See, also, McConnell v. Beattie, 34 Ark. 113 ; Menken v. Taylor, 4 Lea (Tenn.), 445. *Ratcliflf V. Mason (Ky.), 14 S. W. Rep. 9G0. VOL. I.— 23 354 NATURE AND REQUISITES OF THE CONTRACT. given for money advanced by the mortgagee to pay off a vendor's lien on the land, does not subrogate the mortgagee to (the vendor's rights.^ § 341. Limitations and Laches. — An equitable lien of a vendor is not an estate in the land itself, but is a charge or right which has its inception only by bill filed for enforcement. From the fact that it is a mere remedy or security, and not a right of property, it results in those States where a mortgage is held as a security only, that the lien cannot be enforced after the bar of the statute of limitations has barred the debt.^ In such jurisdictaons the barring of the debt also bars the fore- closure of the mortgage or vendor's lien, intended to secure it ; hence, as a logical sequence, this rule applies in those States where a mortgage is regarded merely as a pledge or security, the title remaining in the mortgagor until foreclosure, and the rights and remedies being clearly equitable.^ So when the statute of limitations bars an action for a debt, as a vendor's lien, the lien expires with the debt, and cannot be enforced.* This rule, however, does not generally apply where the legal estate passes to the mortgagee. Thus, in Virginia, the vendor's lien may be enforced in equity within twenty years, even though the action of the debt secured thereby is barred by limitation.^ Delay is not always to be considered laches.® The delay must be such as to afford a reasonable presumption of the satis- faction or abandonment of the claim, or such as to present a proper defense by reason of the death of parties or loss of evi- 1 Kline v. Ragland, 47 Ark. 111. ''Linthicum v. Tapscott, 28 Ark. 267; Waddell v. Carlock, 41 Ark. 523; Borst V. Corey, 15 N. Y. 505 ; Trotter v. Erwin, 27 Miss. 772. ^Ewell V. Daggs, 108 U. S. 143 ; Schmucker v. Sibert, 18 Kan. 104 ; 26 Am. Rep. 765 ; Day v. Baldwin, 34 Iowa, 380 ; Lord v. Morris, 18 Cal. 482 ; Mc- Carthy V. White, 21 Cal. 495 ; Eborn v. Cannon, 32 Tex. 231. * Chase v. Cartright, 53 Ark. 358 ; Stevens w. Shannon, 43 Ark. 464, 467. * Tunstall v. Withers, 86 Va. 892. See, also, Phillips v. Adams, 78 Ala. 225 ; May V. Wilkinson, 76 Ala. 543 ; Hardin v. Boyd, 113 U. S. 756. « Coles V. Ballard, 78 Va. 139. vendor's lien. 355 dence ; so that whether the lapse of time is sufficient to bar recovery must of necessity depend upon the particular circum- stances of each case.* So under the common-law rule, the vendor's lien may be enforced, although the debt be barred by the statute of limi- tations.^ Under both of these rules, the relation of a purchaser by title bond to the vendor is that, in effect, of mortgagor to mortgagee, and what will bar foreclosure under a mortgage will have the same effect as to foreclosure of a vendor's lien.^ § 342. Parties. — The only necessary or proj)er parties to a foreclosure of a vendor's lien are the parties to the original contract and those occupying the property or claiming some interest therein subsequent to the original contract.^ A holder of an adverse title to the contract of a vendor's lien is an un- necessary and improper party to the foreclosure.'^ Some courts hold, as a vendor's lien in effect is a mortgage, that the same persons must be made parties that are necessary in foreclosure of a mortgage.^ When land is sold by decree of court for dis- tribution among the heirs of the deceased owner, all persons in whom the title is vested are necessary parties.^ So, also, a person in possession from the vendee before suit to foreclose the vendor's lien is a necessary party.^ Where a purchaser agrees to pay off a mortgage as part of the price embracing the land conveyed to him and other lands owned by the vendor, but fails to comply with his agreement, 'Tazewell r. Saunders, 13 Gratt. (Va.) 354; Terry v. Fontaine, 83 Va. 451. ^'Bizzell V. Nix, 60 Ala. 281 ; White v. Blakemore, 8 Lea (Tenn.), 49. 3 Lewis V. Hawkins, 23 Wall. (U. S.) 119; Butler v. Douglass, 1 McCrary, C. C. 630 ; Gudger v. Barnes, 4 Heisk. (Tenn.) 570 ; Daniels v. Moses, 12 S. Car. 130 ; Lewis v. McDowell, 88 N. Car. 261 ; Adair v. Adair, 78 Mo. 630. * Faubion v. Rogers, 66 Tex. 472. ^Morcland v. Metz, 24 W. Va. 119 ; Faubion r. Rogers, 6f) Tex. 472. « Wells V. Francis, 7 Colo. 396; King v. Young jNIen's Ass'n, 1 Woods C. C. 386 ; Gaston v. White, 46 Mo. 486 ; Dukes v. Turner, 44 Iowa, 575 ; Iowa Rev. Code, 1873, sects. 3329, .3.3.30 ; Law of Tenn. of 1885, ch. 9. ' Gardner v. Kelso, 80 Ala. 497. ^Ballard r. Carter, 71 Tex. 161. 356 NATURE AND REQUISITES OF THE CONTRACT. the vendor may pay the amount and enforce his lien against the vendee.^ In West Virginia it is not error to decree sale to pay such lien without making other creditors, having subsequent liens thereon, parties, and ascertaining the amount and priority of their debts.^ If, however, the lien is for land conveyed by trust-deed, then the trustees should be made parties, but it is not necessary to make the cestuis que trustent in deeds parties before decreeing in favor of the person holding the vendor's lien.^ In such cases the doctrine which requires lienors in an ordinary credit- ors' suit to be made parties does not apply .^ A vendor's executor can maintain an action to enforce the vendor's lien on land conveyed by his testator during his life.^ The assignee may foreclose the lien without making the as- signor a party." So where a third party is the payee he has a right to the debt and a right to enforce the lien, and the grantor is not a necessary party, nor after his death his personal representatives or heirs. Or if a third party becomes the assignee he is en- titled to the debt and to the lien as its incident, and in a suit by him or his assignee to enforce it, the grantor, or, after his death, his heirs or personal representatives are not necessary parties.^ The lien may be enforced against the widow and heirs of an insolvent vendee, as no lien can be superior to this.« § 343. Pleadings, — Generally, the vendor may maintain a bill to enforce his security, whenever the vendee, if he had paid ' Strohm v. Good, 113 Ind. 93. 2 Cunningham v. Hedrick, 23 W. Va. 579 ; Neeley v. Ruleys, 26 W. Va. 686, 688. 3 Arnold v. Cobum, 32 W. Va. 272. ♦Cunningham v. Hedrick, 23 W. Va. 579; Neeley v. Ruleys, 26 W. Va. 686. 5 Robinson v. Appleton, 124 111. 276. « Kirk V. Sheets, 90 Ala. 504. ' James v. Burbridge, 33 W. Va. 272. 8 Solomon v. Skinner, 82 Tex. 345. vendor's lien. 367 the purchase-money, could maintaiu a bill for specific perform- ance/ And when a vendor resorts to a court of equity to enforce his lien, he must allege the contract of sale with reasonable certainty, and the consideration and terms of payment must be alleged and clearly proven.^ Thus, where a bill alleges that the unpaid purchase-money was to be paid in five or six years, at a given rate of interest, and the vendor proved that the vendee was to have six or seven years in which to make such payment the bill wdll be dismissed.^ Generally, where there is a want of precision and certainty, and want of equity, the bill will be dismissed/ So, where the petition, in an action on a note and foreclosure lien, merely states that " the notes are liens " on the land, not showing how the lien was acquired, or contains no averments as to the contract, but avers that the vendor was " able, will- ing, and ready to make a deed " to said land, but shows no title thereto in himself, it is fatally defective/ The vendor must set out the contract, and, if he has not already conveyed, the character of the title to be made. If he has conveyed, that fact should be set out, and if not, he must allege that he is able and willing to do so according to the terms.^ And the vendor may have judgment in personam if the alle- gation of the petition is sufficient to authorize it, although the allegation may not be sufficient to authorize judgment in remJ If the complaint contains the section, range, township, county, and State, it is a reasonable certainty of description, and is sufficient.^ But when there is nothing in the bill to * Hopper I'. Hopper, 16 N. J. Eq. 147 ; Sykes v. Betts, 87 Ala. 537. * Diinton V. Outhous, 64 Mich. 419 ; Mowrey v. Vandling, 9 Mich. 39. nVaterfield v. Wilber, 64 Mich. 642. * Cleaver v. Matthews, 83 Va. 801. 5 Mitchell V. Clark (Ky.), 6 S. W. Rep. 908. «Bullard v. Graham, 87 Ky. 120; Calvin v. Duncan, 12 Bush (Ky.), 101; Bybee v. Smith (Ky.), 11 S. W. Rep. 722. ' Bullard v. Graham, 87 Ky. 120. * Thompson v. Sheppard, 85 Ala. 611 ; Gaston v. Weir, 84 Ala. 193. 358 NATURE AND KEQUISITES OF THE CONTRACT. identify the land for wliicli the foreclosure is made, the bill is insufficient.^ If the purchase-money be made payable on a day certain, the payment then is not dependent upon making the title, and the vendor need not aver an offer on his part to convey, or to aver his readiness to make title.^ If the vendee has posses- sion, he cannot deny his liability on the note, bond, or con- tract for the purchase-money.^ The vendor must also aver the amount of the unpaid pur- chase-money.* In the division of land to make a settlement, where the petition gives such a description of the land that the court may, from the description given, determine whether or not the land is susceptible of advantageous division, the alle- gation in that regard need not be made.^ And it is sufficient to aver that the vendor sold land to one of two vendees for a certain sum, of which sum said vendee paid part, leaving a balance due and unpaid, and that at the time of sale, for reasons known to such vendee, and at his re- quest, a conveyance was made by the vendor with the name of another vendee inserted therein who knew all the facts of the transaction ; this will be sufficient to enforce the vendor's lien against such other vendee for the balance of the unpaid pur- chase-money.^ If a vendor retains the legal title, his heirs-at-law are neces- sary parties as holders of the legal title if he died intestate ; but if the bill alleges that he left a will, the devisees are necessary parties.^ § 344. Commingling the Aggregate Price of Real and Personal Property. — When, by the contract, no lien or se- ' Daniel v. Watson, 72 Tex. 642. ''Burkett v. Munford, 70 Ala, 423; Reeve v. Downs, 22 Kan. 330; Mun- ford V. Pearce, 70 Ala. 452. 3 Harvey v. Morris, 63 Mo. 475; Brock v. Hidy, 13 Ohio St. 306; Mclndoe V. Morman, 26 Wis. 588. ^Calvin v. Duncan, 12 Bush (Ky.), 101. ^Cockrill V. Mize (Ky.), 12 S. W. Rep. 1040. « Burgess v. Fairbanks, 83 Cal. 215. ' Liles V. Ratchford, 88 Ala. 397. vendor's lien. 359 curity is carved out or reserved, either expressly or by impli- cation, when it becomes a matter of presumption, whether or not the presumption arises before conveyance is made, depends on the same principle applicable after a conveyance is made. When there is a blending and commingling in the same note or contract of the aggregate price of real and personal property sold at the same time, and the agreed price of the real and per- sonal property cannot be separated and definitely ascertained, by reference to either the writings or extrinsic evidence, or both, the presumption of the intention of the equitable lien is re- butted, and the vendor's lien cannot be enforced.^ So when the considerations are blended and combined, and it is impos- sible, without resort to conjectural inquiries, to separate them in the pleadings or proof, the presumption must be that the vendor did not look to the lands for payment, but relied ex- clusively on the personal liability of the vendee." A blending of considerations is obnoxious. It must be shown what price was agreed to be paid for the lands at the time of making the contract, and the relation of vendor and vendee established as a matter of separate negotiation.^ Thus under a written agreement between two married sisters, their husbands uniting with them for a " distribution and final settlement of the estate " of their deceased father, it is stipulated that one is to take certain lands and pay the other $500, and the second is to take certain other lands with all the personal property, pay all the debts, and save the first harmless against them ; no words of conveyance being used, but promises to the effect that " all proper instruments and conveyances necessary to carry out this agreement are to be executed between the parties," and that " this instrument is to be recorded as a final settlement and distribution of said es- tate ;" a vendor's lien to enforce the payment of the $500 does not arise by operation of law, and the facts repel the presump- tion that it was retained by contract ; and though it is alleged ' Sykes v. Betts, 87 Ala. 537. '^Stringfellow v. Ivie, 73 Ala. 209. ^Alexander v. Hooks, 84 Ala. 605. 360 NATURE AND REQUISITES OF THE CONTRACT. that there were in fact no outstanding debts, and that the per- sonal assets were valueless, these allegations do not show that the $500 was one-half of the estimated difference in value of the lands only.^ § 345. Defense — Tender of Deed. — As a general rule the vendor is not obliged to tender a deed before beginning suit in an equitable action to enforce a lien under a contract for the unpaid purchase-money.^ If he avers his ability and readi- ness to convey, it is unnecessary to make such tender unless it appears that the contract was executory and that the payment of the jDurchase-money was to be contemporaneous with the execution of the conveyance or subsequent thereto.^ If the time of performance has passed, neither party offer- ing to perform, no action at law will lie, but either party may claim specific performance in equity, making an offer of his willingness and readiness to perform.* The action to enforce a vendor's lien is, in effect, an equitable one, and in such action a tender of the deed is not required.* The general rule is that the vendor in actions of specific performance of contracts must aver in the bill performance or a readiness and willingness to perform on his part.^ And even if the vendor is able to perform at the time of the final judgment, he is entitled to his relief, although he may not have been in a state to perform at the time he brought suit.^ He may be compelled to pay costs, but nevertheless his cause of action had accrued upon the filing of the bill or the com- mencement of the suit.* And so it is not necessary for the ^ Sykes v. Betts, 87 Ala. 537, opinion by Clopton, J. 2 Wakefield v. Johnson, 26 Ark. 506 ; Klyce v. Broyles, 37 Miss. 524 ; Turner V. Lassiter, 27 Ark. 662 ; Mclndoe v. Merman, 26 Wis. 588 ; Freeson v. Bis- 8ell, 63 N. Y. 168. 3 Davis V. Smith, 88 Ala. 596. * Bruce v. Tilson, 25 N. Y. 194 ; Stevenson v. Maxwell, 2 N. Y. 408. » Freeson v. Bissell, 63 N. Y. 1(58. ® Walker v. Jeffreys, 1 Hare, 352. ' Baldwin y. Salter, 8 Paige (N. Y.), 475; Stevenson v. Maxwell, 2 N. Y. 408 ; Bruce v. Tilson, 25 N. Y. 194. ^ Vroom V, Ditmas, 4 Paige (N. Y.), 526. vendor's lien. 361 vendor actually to execute a deed after his ofiFer and the ven- dee's refusal to comply with the contract.^ This doctrine is sustained on the principle that concurrent promises are those where the acts to be performed are simul- taneous, and either party may sue the other for breach of the contract on showing either that he was able, ready, and willing to do this act at the proper time and in the proper manner, or that he was prevented from doing it by the act of the other contracting party.^ The vendor must do one of two things — he must make a tender of a sufficient warranty deed, and the tender must be kept good by bringing the instrument into court, or he must make an averment of his readiness and willingness to execute the deed that will vest title in the vendee.^ In case the representatives of the vendor bring suit, they must show that they are willing and able to give a deed, and make the heir or devisee who holds the legal title in trust for the vendee a party to the suit, so that he will be bound by the decree.* Where one obtains possession under a contract of sale and afterward acquires an outstanding title adverse to the vendor's, neither he nor his assignee, with notice, can use it to defeat an action to enforce the vendor's lien, the vendor having con- tracted to give a quit-claim deed only.^ However, in Indiana and some other States, it is held that if a tender be not made it must be alleged that the plaintiff is willing and ready to deliver a deed to the vendee which will convey a good title.^ The general rule is that when the vendor resorts to a personal action against the vendee it is necessary that a 1 Carpenter v. Holcomb, 105 Mass. 281 ; Cobb v. Hall, 33 Vt. 233 ; White v. Mann, 26 Me. 361 ; Hanna v. Eatekin, 43 111. 462. * Howland r. Leach, 11 Pick. (Mass.) 151 ; Tinney v. Ashley, 15 Pick. (Mass.) 54(i ; INIcWilliams v. Brookens, 39 Wis. 334. ' Goodwine v. INIorey, 111 Ind. 68. * Thomson v. Smith, 63 N. Y. 301. * Robinson v. Appleton, 124 111. 276. * Goodwine v. Morey, 111 Ind. 68. 362 NATURE AND REQUISITES OF THE CONTRACT. tender of a deed be first made, and that the tender be kept good.^ § 346. Decree. — A foreclosure sale of the vendor's lien exhausts it. After the land has been sold, bringing only part of the judgment, and redeemed by the vendee, the vendor's lien is divested.^ The decree must either enforce the vendor's lien or rescind the contract.^ In Virginia the court may decree sale of the land to satisfy the lien, with any previous accounts of rents and profits.* If the vendee, while remaining in possession of the land, can claim an abatement of the purchase-money in a suit to enforce the vendor's lien on the ground that the conveyance was not properly executed to pass title to a portion which con- stituted the homestead, the defense must be interposed by cross-bill or answer, alleging the insolvency of the vendor, and electing to recoup damages on account of a defect of the title. Nor can the defense avail, when it appears that the vendor is able and willing to execute a sufficient conveyance and the re- lief is decreed to him on the express condition that he does so.' In an action to enforce a vendor's lien against an assignee for value, of the original vendee, personal judgment should not be rendered against the assignee.® And a judgment on land described in the petition but including land which was excepted from the conveyance to the vendee, is in nowise pre- judicial to the vendee.^ A vendee to claim the land by buying in an outstanding paramount title, must first surrender the land to the vendor. ^Wyvell V. Jones, 37 Minn. 68; Berryhill v. Byington, 10 Iowa, 223; Critchett v. Cooper, 65 N. H. 167 ; Griffith v. Winborne, 105 N. Car. 403 ; Eddy V. Davis, 116 N. Y. 247. ' ''Todd r. Davey, 60 Iowa, 532. 'Baldwin r-. Whaley, 78 Mo. 186. ♦ Neff V. Wooding, 83 Va. 432 ; Code of 1873, ch. 115, sect. 1. Chapter 182, sect. 9, applies to suits for the enforcement of judgment liens. 5 Woodall V. Kelly, 85 Ala. 368 ; Tedder v. Steele, 70 Ala. 347. 6 Bates V. Childers, 4 N. Mex 347. ^Nass V. Chadwick, 76 Tex. 572. vendor's lien. 363 Thus, where the vendor's title depends on adverse possession to a part of the land, a decree enforcing the lien against the land is proper ; for neither the vendee nor his assignee can set up this adverse title, which has been bought, against the ven- dor without first giving up the possession he has derived from the vendor/ And a purchaser under a contract of sale may- be restrained from impairing the vendor's lien. He may make improvements if he does not impair the vendor's security. If the vendee sells buildings to a purchaser with notice of a fraudulent intent to impair the vendor's security, no title passes as against the vendor.^ Ordinarily the vendor has a right to strict foreclosure of the contract after default by the vendee ; in which case the vendee will be allowed a specified time to pay the balance due, or be barred of all rights thereunder.^ §347. Sale of Land. — A decree foreclosing the vendor's lien and ordering sale of the laud, and directing a sale to be made in a county in which the land is situated, is correct ; but such sale in a different county would be a nullity.* And a sale of the land passes the growing crops, unless the decree otherwise orders.^ But the vendor's lien is subordinate to any prior lawful lien on the crops.® And in Kentucky the court may order sale of the land in separate parts, where it appears from the description in the petition that it is divisible, though there is no special allegation of that fact.'^ And in Iowa an unrecorded lien for unpaid purchase-money cannot be enforced by the vendor after a conveyance by the vendee, unless such * Robinison v. Appleton, 124 111. 276. MVeed v. Hall, 101 Pa. St. 592. ^ Button V. Schroyer, 5 Wis. 598 ; Baker v. Beach, 15 Wis. 99; Church v. Smith, 39 Wis. 492; Buswell v. Peterson, 41 Wis. 82; Kirby v. Harrison, 2 Ohio St. 326 ; Benedict v. Lynch, 1 Johns. Ch. (N. Y.) 374 ; McKinney v. Jones, 55 Wis. 39. ♦Dalton V. Rainey, 75 Tex. 516. 5 Yates V. Smith, 11 111. App. 459; Johnston v. Smith, 70 Ala. 108; Smith v, Hap:ue, 25 Kan. 246. « Wooten V. Bellinger, 17 Fla. 289. 'Lucy V. Hopkins (Ky.), 13 S. W. Rep. 518 ; Civil Code, sect. 694. 364 NATURE AND REQUISITES OF THE CONTRACT, conveyance is made after suit is brought by the vendor.^ But a verbal contract for the sale of land is not a conveyance within the meaning of this section, and does not defeat the lien of the vendor, where there is a subsequent conveyance within the meaning of this section, in accordance with the terms of the contract after suit is brought by the vendor.^ » Code, ssect. 1940. 2 Shropshire v. Lyle, 31 Fed. Rep. 694. \ CHAPTER X. THE PARTIES TO THE MORTGAGE. Article 1. Classification and Competency of Grantors. 348. In General. I 363. 349. Insane and Feeble-Minded Per- sons. § 364. 350. Mortgages of Insane Persons are Voidable. § 365. 351. Infancy — Persons Under Age. 352. Affirmance of Voidable Mort- ? 366. gages. 353. Married Woman's Mortgage. ? 367. 354. Mortgaging Her Property to Se- cure her Husband's Debts. ^ 368. 355. What Consideration is Valid. 356. The Wolfe's Equity of Exonera- ? 369. tion. ? 370. 357. The Husband Cannot Extend § 371. the Wife's Mortgage Without Her Consent. ? 372. I 358. Lex Rei Sitfe Governs. § 373. \ 359. Administrators and Executors. \ 360. Guardian. § 374. \ 361. Partners. \ 362. Real Estate Held by a Partner- I 375. ship. Taking Mortgages in the Firm Name. Mortgage of Real Estate by One of the Firm. Rights of Mortgagee With No- tice. One Partner May Become Surety for the Firm. After Dissolution of the Part- nership. Corporations — Power to Mort- gage Real Estate. Religious Corporations. Corporate Franchises. Validating Defective Mort- gages. Corporate Seal. Execution by Attorney in Fact. Mode of Executing the Au- thority. Joint Mortgagors. § 348. In General. — It is a general rule of law that all persons may be parties to a contract, unless they are incompe- tent by reason of a personal disability, or from considerations of public policy. In every contract there must be, of necessity, at least two parties ; one who is bound to perform the contract, and the other who is entitled to have it performed. In case of mortgages on real estate, provisions are made by statute, authorizing guardians to execute mortgages for persons ^under natural or legal disability. So trustees, executors, and 365 366 NATURE AND REQUISITES OF THE CONTRACT. administrators are authorized to execute mortgages in their representative capacity. This statutory power must be strictly followed. Thus, the power of the guardian to mortgage his ward's land is limited and purely statutory and must be exer- cised strictly for the purpose for which it is giveu.^ § 349. Insane and Feeble-Minded Persons. — " Lunaticus," or " no7i compos mentis," or " insana mentis " is equivalent to the English phrase " of unsound mind." These expressions all import a total deprivation of sense, and courts of law so under- stand them.^ It is the general rule that a conveyance of an insane person, or one of feeble mind ^ is ineffectual to convey title to land, as against the grantor or against his heirs and devisees, unless it is confirmed by the grantor when of sane mind.^ Such conveyance may be confirmed by the grantor afterward sane, or by his heirs ; if under guardianship, the conveyance is absolutely void.^ And this right of avoiding the contract exists notwithstanding the person with whom the insane man contracted was not apprised of his condition, and had no reason to suspect such insanity, and did not over- reach him by any fraud or deception.^ So an insane person or his guardian may bring an action to recover land on which a deed was made by him while insane, without first restoring the consideration to the grantee, the deed not having been ratified nor confirmed.'' It is generally held that a person of unsound mind is not bound by his contract, though no fraud nor imposition has been practiced on him.^ In England such persons are held by their contracts, unless fraud and imposition have been practiced, but the doctrine in iMerritt v. Simpson, 41 111. 391. 2 Ex parte Barnsley, 3 Atk. 1G8. ' Brio-ham v. Fayerweather, 144 Mass. 48. *Valpey v. Rea, 130 Mass. 384. 5 Wait V. Maxwell, 5 Pick. (Mass.) 219. ® Seavers v. Phelps, 11 Pick. (Mass.) 304. '' Gihson v. Soper, 6 Gray (Mass.), 279 ; Arnold v. Richmond Iron Work?^, 1 Gray (Mass.), 434. 8 Chew V. Bank, 14 Md. 318. THE PARTIES TO THE MORTGAGE. 367 the United States is the other way. If not so, the effect in many cases would be to place lunatics on the same footing with persons of sound mind.^ However, if the mortgagor comprehended at the time he executed the mortgage what he was doing, and if no fraud has been practiced on him, the instrument will he held valid.^ In some cases it has been held that when a mortgage is made in good faith, for the benefit of the lunatic, without notice of incapacity, and so far performed that if rescinded the party executing cannot be placed in statu quo, the contract must stand.^ Equity will not interfere to avoid an executed contract, where it was made in good faith, without knowledge of the incapacity, and the lunatic has had the benefit of it.* A grantor in a deed of trust was mentally incompetent to execute it. The grantee mortgaged the premises to secure a loan to one who had no knowledge of the grantor's condition, a portion of the money being paid to the grantor. A brother of the mortgagee drew the deed and was present at its execu- tion, and acted as agent of the mortgagee in negotiating the loan. It was held that the mortgage would not be considered as having been taken in good faith without notice and was in- valid except as to the portion received by the grantor.^ The evidence of the mortgagor's mental incapacity must be clear and satisfactory in order to avoid his mortgage.® § 350. Mortgages of Insane Persons are Voidable. — The contracts of insane persons, in the absence of fraud and impo- sition, are not void but voidable.^ In an action to set aside * Hovey v. Hobson, 53 Me. 451 ; Chew v. Bank, 14 Md. 299, 318. * Day V. Seely, 17 Vt. 542. ^Mutual Life Ins. Co. v. Hunt, 79 N. Y. 541 ; Riggs v. Am. Tract Society, 84 X. Y. 330. *Loomis V. Spencer, 2 Paige (N. Y.), 158 ; Canfield v. Fairbanks, 63 Barb. (N. Y.) 401. ^Sponable v. Hanson, 87 Mich. 204. « Howell V. Griffiths (N. J. Ch.), 22 Atl. Rep. 928. ' Ingraham v. Baldwin, 9 N. Y. 45 ; Loomis v. Spencer, 2 Paige (N. Y.), 158 ; Beals V. See, 10 Barr (Pa.), 56 ; Allis v. Billings, 6 Met. (Mass.) 415 ; Howe v. Howe, 99 Mass. 98 ; Allen v. Berryhill, 27 Iowa, 534 ; 1 Am. Rep. 309 ; Eaton (•. Eaton, 37 N. J. L. 108 ; Hunt v. Wier, 4 Dana (Ky.), 348. 368 NATURE AND REQUISITES OF THE CONTRACT. such a contract, fraud or unconscionable advantage, or at least knowledge of the insanity must be shown.^ If this is es- tablished by an averment that the grantor was insane, then the burden is upon the grantee to show, among other things, that he accepted the conveyance in ignorance of such mental unsoundness.^ But if he holds the estate for which he has paid no consideration, he cannot defeat the action to set aside the conveyance on account of the insanity of his grantor by showing that the grantor had the appearance of being men- tally sound, and that he accepted the deed without knowledge of the insanity of such grantor.^ Thus, an injunction to pre- vent the sale of mortgaged premises will be' made perpetual when it appears that the mortgagor was rendered imbecile by habitual drunkenness and reduced to a condition verging on insanity by the mortgagee, who had thus obtained complete control over him, and when no valuable consideration was shown to have been given for the mortgage.* A mortgage will not be set aside, however, on account of the weakness of the mortgagor's intellect unless fraud has been used or advantage has been taken of such disability by the mortgagee.^ The rule is generally stated that an executed contract made with a lunatic, in good faith, for a full consideration, without advantage taken of the lunatic, without knowledge of the in- sanity and without such information as would lead a prudent person to a belief of the incapacity, and when there had been no finding by a commission de lunatico inquirendo, will be in- forced as against a lunatic.^ ^ Lincoln v. Buckmaster, 32 Vt. 652 ; Person v. Warren, 14 Barb. (N. Y.) 488 ; Musselman v. Cravens, 47 Ind. 1 ; Young v. Stevens, 4S N. H. 133 ; Beh- rens v. McKenzie, 23 Iowa, 343 ; May v. Maj^ 109 Mass. 254. ^ Riggs V. Am. Tract Society, 84 N. Y. 330 ; Fulwider v. Ingels, 87 Ind. 414. ='Hull V. Louth, 109 Ind. 315. * Van Horn v. Keenan, 28 111. 445. ^ Marmon v. Marmon, 47 Iowa, 121. ^Lincoln v. Buckmaster, 32 Vt. 652 ; Matthiessen v. McMahon, 38 N. J. L. 536 ; Bank v. Moore, 78 Pa. St. 407 ; 21 Am. Rep. 24 ; Wilder v. AVeakley, 34 Ind. 181 ; Menkins v. Lightner, 18 111. 282 ; Loomis v. Spencer, 2 Paige (N. Y.), 153. THE PARTIES TO THE MORTGAGE. 369 When one has wholly lost his understanding, and is abso- lutely 7ion compos mentis, then his contract is absolutely void and not voidable.^ §351. Infancy — Persons Under Age. — It is generally held that the deed of an infant is not void but only voidable.^ At common law it was sometimes held that an infant was not bound by his contract, unless he ratified it after becoming of age. . In other cases it was held that in order to avoid the contract, there must be a disaffirmance after majority ; and in some cases it was held that the disaffirmance must be made within a reasonable time after attaining full age. And again it was held that a disaffirmance at any time within the statute of limitations would be sufficient ; and in some cases of executed contracts it was held that there could be no disaffirmance without a return of the property or money received by the in- fant pursuant to the contract, and other cases held the contrary doctrine.^ In many cases the disaffirmance of a deed made during in- fancy is a fraud upon third parties. But this has never been held sufficient to avoid the disaffirmance, for it would take- away the very protection which the law intends to throw around the infant to guard him from the effects of his folly,, rashness, and misconduct.'* So the right of an infant to avoid his contracts is absolute and paramount to all equities in favor of third persons, includ- ing purchasers without notice.^ But there is no reason why one, who by means of a voidable ' Osterhout v. Shoemaker, .3 Hill (N. Y.), 531 ; Odell v. Buck, 21 Wend. (N. Y.) 142 ; Van Dusen v. Sweet, 51 N. Y. 379 ; Lozear v. Shields, 23 N. J. Eq. 509 ; Miller v. Craig, 36 111. 109 ; Spiers v. Sewell, 4 Bush (Ky.), 339 ; Dennett t'. Dennett, 44 N.H. 531. *Ir\'ine v. Irvine, 9 Wall. (U. S.) 617, 625; Thompson r. Strickland, 52 Miss. 574 ; Nightingale v. Withington, 15 Mass. 272, 274. 3 2 Kent's Com. 245 ei seq. ; 2 Greenl. Ev., sects. 362-368 ; Tucker v. More- land, 10 Pet. (IT. S.) 58. * Tucker v. Moreland, 10 Pet. (V. S.) 58. ^Jenkins r. Jenkins, 12 Iowa, 195; Myers r. Sandei-s, 7 Dana (Ky.), 506; Hawes ;•. Railroad Co., 64 Iowa, 315 ; Leacox v. Griffith, 76 Iowa, 89. vol.. I. — 24 370 NATURE AND REQUISITES OF THE CONTRACT. .contract made in his infancy, has obtained possession of prop- •erty which he retains on coming of age should be allowed to •disaffirm the contract and at the same time retain the benefit derived from it. In such case, if he retains the property, it is justly held that he affirms the contract.' Where land is conveyed and a mortgage given back for the purchase-money, it is but one transaction, and the title passes by the deed subject to the mortgage ; and where the grantee in such case is an infant, he may disaffirm the deed on coming of age, but by retaining the land he affirms the mortgage.^ If an infant, upon his coming of age, allows a foreclosure and sale, he thus confirms the contract.^ So if an infant wishes to avoid his mortgage, he must do so promptly upon coming of age.* Where the father, for himself and as guardian for his minor heirs, purchases land and takes a deed to himself, and then agrees to give a mortgage for the purchase-money, the mort- gage is good in equity against the minors who aj)pear by guardian ad litem, and do not disclaim the title to the land vested in them.^ And one who takes and holds the legal title to land in trust, cannot disaffirm or avoid his deed in the exe- cution of the trust on the ground of his minority.^ So, if one of the partners is a minor at the time of the execution of the mortgage, and his acts after becoming of age are such as to affirm the contract of partnership, the mortgage is valid.^ ^ Lawson v. Lovejoy, 8 Me. 405 ; Boyden v. Boyden, 9 Met. (Mass.) 519 ; Cresinger v. Welch, 15 Ohio, 156 ; Boody v. McKenney, 23 Me. 517 ; Robbins V. Eaton, 10 N. H. 561 ; Boston Bank v. Chamberlin, 15 Mass. 220 ; Hubbard v. Cummings, 1 Me. 11 ; Palmer v. Miller, 25 Barb. (N. Y.) 399. * Young V. McKee, 13 Mich. 552; Willis v. Twambly, 13 Mass. 204. ='Flynn v. Powers, 35 How. (N. Y.) 279; Terry v. McClintock, 41 Mich. 492. * Askey v. Williams, 74 Tex. 294 ; Loomer v. Wlieelwright, 3 Sand. Ch. (N. Y.) 135 ; Featherston v. McDonnell, 15 U. C. C. P. 162. Upon this ques- tion there is an unreconcilable conflict, and it is held that an avoidance may be made any time before the statute has barred an entry : Cole v. Pennoyer, 14 111. 158 ; Jackson v. Burchin, 14 Johns. (N. Y.) 124 ; Vaughan v. Parr, 20 Ark. GOO ; Moore v. Abernathy, 7 Blackf. (Ind.) 442. * Peers i;. McLaughlin, 88 Cal. 294. «Nordholdt v. Nordholdt, 87 Cal. 552. ' Salinas v. Bennett, 33 S. Car. 285. THE PARTIES TO THE MORTGAGE. 371 § 352. Affirmance of Voidable Mortgage. — An infant upon coming of age may affirm his mortgage in many ways. Thus, if he continues to hold the estate, he thereby affirms his mortgage made in infancy.^ So he may affirm by a convey- ance after majority to a third person subject to the mortgage. But such a deed, which does not refer to the mortgage, is rather a disaffirmance.^ Accordingly a voidable deed may be confirmed by a recital in a subsequent deed with a design to ratify.'' This right of disaffirmance is a personal privilege of the infant only, and his privies in blood, and not his privies in estate.^ He can ratify by execution and redelivery of the mortgage, after majority, and the instrument relates back in its effects to the original delivery, and affects all intermediate sales except for a new and full consideration.' An infunt feme covert cannot relinquish her dower right by joining with her husband in a mortgage,^ and she may repu- diate her own mortgage on coming of age.^ It appears by some authorities that if the mortgage is in no way for the infant's benefit, it is void absolutely.^ Where a minor mortgages his land, and on coming of age conveys it to another person in fee, subject to the mortgage, which he recognizes in the second deed, it is held to be a rati- fication of the mortgage.^ So slight acts of assent on the in- fant's part, after coming of age, are held sufficient to confirm ' Salinas v. Bennett, 83 S. Car. 285 ; Roberts r. Wiggin, 1 N. H. 73 ; Henry V. Root, 33 N. Y. 526, 553; Kitchen v. Lee, 11 Paig3 (N. Y.), 107; Robbins w. Eaton, 10 N. H. 561 ; Badger v. Phinney, 15 IMass. 359 ; Callis v. Day, 38 Wis. ()43. 2 Allen V. Poole, 54 Miss. 323; Boston Bank v. Chamberlin, 15 ISIass. 220. » Phillips V. Green, 5 Mon. (Ky.) 344. * Nightingale v. Withington, 15 Mass. 272, 274 ; Chandler v. Simmons, 97 Mass. 508, 511 ; Austin i\ Charlestown Seminary, 8 Met. (Mass.) 196, 203 ; Mansfield v. Gordon, 14-i Mass. 168. ^Palmer v. INIiller, 25 Barb. (N. Y.) 399. Glenn r. Clark, 53 Md. 580. ' Dill V. Bowen, 54 Ind. 204 ; Walsh v. Young, 110 Mass. 396. »Cronise v. Clark, 4 Md.Ch. 403 ; Chandler r. MeKinney, 6 Mich. 217. 'Story V. Johnson, 2 You. & Call. Ex. 607 ; Phillips v. Green, 5 Mon. (Ky.) 355; Lynde v. Budd, 2 Paige (N. Y.),191. 372 NATURE AND REQUISITES OF THE CONTRACT. leases made by a guardian beyond the power of his authority.* And where a loan of money was made to an infant, for which he executed a bond and mortgage, and in a will made after he became of age directed the payment of " all his just debts," and died, it was held that the will confirmed the mortgage.^ The retention, after reaching majority, of the proceeds of land purchased and afterward sold by the person while an infant, is not, of itself, sufficient to render him liable upon his cove- nant to pay an outstanding mortgage upon the land which he had assumed as part of the consideration of his purchase.^ § 353. Married Woman's Mortgage. — Under the common law a married woman could not take a conveyance of real estate and give back a mortgage to secure the purchase-money,^ and a mortgage given for such a purpose and the deed together with the notes were void.^ But the common-law rule has been changed by statutory provisions, and now a married woman may mortgage as well as alienate her real estate by joining her husband in the con- veyance and making due acknowledgment, and this, too, though no consideration pass to her.'' But when her rights are not the same as a feme sole, a deed or mortgage by her, without joinder of her husband therein, is void as to her, though of her separate estate ; if, however, the mortgage be for purchase-money of the wife's separate estate, executed by her alone, it creates a lien enforceable in equity, against her and her grantees.^ She may create a valid power in the mortgage to sell in de- ' Smith V. Lowe, 1 Atk. 489. ^Merchants' Fire Ins. Co.r. Grant, 2 Edw. Ch. (N. Y.) 544. 3 Weed V. Beebe, 21 Vt.495. * Savage v. Holyoke, 59 Me. 345. *Newbegin t). Langley, 39 Me. 200. ^Moorew.Titman, 33 111. 358; Eaton v. Nason, 47 Me. 132; Swan ?^ Wia- wall, 15 Pick. (Mass.) 126; American, etc., Ins. Co. v. Owen, 15 Gray (Mass.), 491 ; Whiting v. Stevens, 4 Conn. 44 ; Siter v. McClanachan, 2 Gratt. (Va.) 280 ; Demarest v. Wynkoop, 3 Johns. Ch. (N. Y.) 144 ; Philbrooks v. McEwen, 29 Ind. 347 ; McFerrin v. White, G Cold. (Tenn.) 499. ' Thompson v. Scott, 1 111. App. 641. See, also, Roberts v. Jenks, 5 111. App. 484 ; Acts of 1861 and 1869. THE PARTIES TO TFE MORTGAGE. 373 fault of payment/ And in general she may convey upon con- dition and prescribe the terms.^ When the wife joins her husband in a mortgage of her own property to secure his debts or the payment of money loaned to him, she is merely the suret}^ of her husband, and is entitled to all the rights and privileges of a surety.^ In many States the wife's legal capacity is so enlarged that she is able to bind herself and her property as if she were sole} When her rights are the same as if she were feme sole, she is bound as principal when she makes a mortgage to secure her husband's debts, and not as surety.' In New Jersey a mortgage by a wife on her own property, to secure the debt, the husband not joining in the mortgage, is a nullity ; but equity will regard the bond as an acknowledg- ment of a debt which was created for the benefit of the property of the married woman, and the mortgage as an ap- pointment of the property described in it for the payment of that debt, and will decree the debt a charge upon the property thus appointed, and the property may be sold to pay it." So it does not become a lien upon the estate until made so by the decree of the court, a matter which might become very important in the case of a subsequent conveyance by the married woman and her husband, lawfully executed. § 354. Mortgaging Her Property To Secure Her Hus- band's Debts. — In many of the States the wife may mort- gage her estate to secure her husband's debts. Thus, a mort- gage given by a married woman, in which her husband ' Vartie v. Underwood, IS Barb. (N. Y.) 561. ^ Demarest v. Wynkoop, 3 Johns. Ch. (N. Y.) 129. ^Neimcewicz v. Gahn, 3 Paige (N. Y.), 614 ; Vartie v. Underwood, 18 Barb. (N. Y.) 561 ; Hawley r. Bradford, 9 Paige (N. Y.), 200. *Nourse v. Henshaw, 123 Mass. 96; Layman v. Shultz, 60 Ind. 541, 547; Thompson v. Scott, 1 111. App. 641 ; Edwards v. Schoeneman, 104 111. 278 ; Frickee v. Donner, 35 Mich. 151 ; Northwestern Mut. Life Ins. Co. v. AUis, 23 Minn. 337 ; Hawkins v. Taylor, 61 Ga. 171. * Alexander v. Bouton, 55 Cal. 15. «Perrine v. Newell (N. J.), 23 At. Rep. 492. 374 NATURE AND RECiUISITES OF THE CONTRACT. joins, is binding even wlien given as security for the debts of her husband/ So in Missouri as to her separate property, », married woman is to be regarded as a feme sole, and a court may decree foreclosure upon her land.^ And so in New Jersey a voluntary mortgage by wife of her lands, in which her husband joins, to secure her husband's debts is valid.^ Thus, a husband and wife signed a bond and secured it by a mortgage on the property of the wife for the husband's debts, and it was held valid.* So in Connecticut a mortgage given by a wife on her realty, with the consent of the husband, to secure the debt of the latter, is good, no attempt being made to hold the wife on the note,^ and, in some States, she may sell her separate estate to pay her hus- band's debts.'^ So in Florida she may with her husband make a valid mort- gage on land of which she is seized in fee to secure the prom- issory note of her husband.^ In South Carolina a mortgage on her separate estate to se- cure a debt of her husband's is invalid.^ But a mortgage given upon her own estate can be upheld so far as it was given to secure debts contracted for the benefit of her estate, and where a portion of the debt was contracted by the husband for himself, such amount must be deducted from the mort- gage in computing foreclosure.^ She can borrow money on her own estate for her debts, and when she borrows money Kxable's Appeal (Pa.), 7 At. Rep. 52. ^ Rosenheim v. Hartsock, 90 Mo. 357. 3 Campbell v. Tompkins, 32 N. J. Eq. 170; Conover w. Grover, 31 N.J. Eq. 539 ; Conway r. Wilson, 11 At. Rep. 607. 'Conway v. Wilson (N. J.), 11 At. Rep. 607. ''Stafford's Savings Bank v. Underwood, 54 Conn. 2. •'Scott V. Ward, 35 Ark. 480; Sellmeyer v. Welch, 47 Ark. 485. ' Dzialynski v. Bank, 23 Fla. 346. And see Collins v. Wassell, 34 Ark. 17, 33 ; Marlow v. Barlew, 53 Cal. 456 ; Bull v. Coe, 77 Cal. 54 ; Demarest v. Wyn- koop, 3 Johns. Ch. (N. Y.) 129, 144 ; Low v. Anderson, 41 Iowa, 476 ; Smith V. Osborn, 33 Mich. 410; Comegys v. Clarke, 44 Md. 108; Moore v. Fuller, 6 Ore. 272. ^Aultman v. Rush, 26 S. Car. 517; People's Nat. Bank v. Epstin, 44 Fed. Rep. 403. See, also, Carrigan v. Drake, 15 S. E. Rep. 339. « Brown v. Prevost, 28 S. Car. 123 ; Salinas v. Turner, 33 S. Car. 231 ; Law V. Lipscomb, 31 S. Car. 504. THE PARTIES TO THE MORTGAGE. 375 upon representation that it is for her own debt, and the lender knows nothing to the contrary, she is Hable for it.^ In Rhode Island a married woman can create a charge on her real estate by executor}'' contract, only by incorporating such contract in a deed executed jointly by herself and hus- band. She cannot bind her real estate by contract made directly with her husband.^ In Alabama a distinction is made between her equitable separate estate and her statutory estate. Her separate equitable estate she can mortgage for the debt of her husband or for her own debts as if she were a, feme sole? The wife's statutory estate cannot be mortgaged to secure a debt of husband and wife.* At one time it was the law of Alabama in reference to the married woman's law creating in the wife a statutory separate estate that a conveyance of lands from the husband to the wife, vested in the wife an equitable separate estate ; and this was the effect of the conveyance, not- withstanding the consideration was property, the corpus of her statutory estate, or indebtedness of the husband on account of money, the corpus of her statutory estate used and converted by him.^ But these authorities have been overruled, and the law now is that by no contract between husband and wife can her statutory separate estate be converted into an equit- able estate with power in the wife to charge it, which expressly and intentionally overrules the former decisions which hold to the contrary.^ In Mississippi the wife cannot bind her property to pay her husband's debts ^ beyond the amount of her income.* • Schmidt v. Dean, 31 S. Car. 498 ; Chambers v. Bookman, 32 S. Car. 445. See, also, Gleaton ;;. Gibson, 29 S. Car. 514 ; Grieg v. Smith, 29 S. Car. 426. " Fallon V. McAlonen, 15 R. I. 22.3 ; Angell v. McCullough, 12 R. I. 47. 2 Short I). Battle, 52 Ala. 456. * Gilbert v. Dupree, 63 Ak. 331 ; Lansden v. Bone, 90 Ala. 446. 5 Turner V. Kelly, 70 Ala. 85; Goodlett v. Hansell, 66 Ala. 161; Darden v. Gerson, 91 Ala. 323 ; McMillan v. Peacock, 57 Ala. 129. «Loeb V. McCullough, 78 Ala. 533; Jordan v. Smith, 83 Ala. 302; Parker V. Marks, 82 Ala. 548. ' Klein v. McNamara, 54 Miss. 90. *Code of 1871, sect. 1778 ; Reed v. Coleman, 51 Miss. 835. See, also, Allen 376 NATURE AND REQUISITES OP THE CONTRACT. In Illinois a wife may own and convey real estate as if sole/ but under act of 1861 she could not conveyor mortgage without her husband joining with her.^ Now a wife can mortgage her real estate on same terms as her husband may his.^ Prior to the act of 1874 a wife could not charge her realty by mortgage without joinder of her husband therein.* The acts of 1861 and 1869 permitted the wife to charge her separate estate for debts of her husband by mortgage, provided he joined in the execution of it.^ In Indiana, act of 1879, page 160, a married woman might mortgage her separate property acquired by purchase to secure her husband's debts.^ But such mortgage would be void if the property was ac- quired by descent, devise, or gift/ The act of 1881, sect. 5119, prohibits a married woman from incumbering her property as security. It is settled that when such a mortgage is upon real estate which she owns with her husband as tenants by entireties, it is voidable not only as to her but as to the husband also.* In Louisiana a wife cannot bind herself for her husband's debts.^ And such transfer by the wife does not operate to assign to the wife the demand against her husband so as to give validity to the conveyance.^'' In the District of Columbia a bond executed by husband and wife is void as to the latter, but valid as to the husband, and a V. Lenoir, 53 Miss. 321 ; Harmon v. Magee, 57 Miss. 410 ; Stephenson v. Miller, 57 Miss. 48. 1 Rev. Stat, ch. 68, sect. 9. * Lewis V. Graves, 84 111. 205. See Herdman v. Pace, 85 111. 345; Elder V. Jones, 85 111. 384. 3 Edwards v. Schoeneman, 104 111. 278. * Roberts v. Jenks, 5 111. A pp. 484. * Washburn v. Roesch, 13 111. App. 268. 'Gardner w. Case, 111 Ind.494. 'Orr V. White, 106 Ind. 341. «Dodse V. Kinzy, 101 Ind. 102; Bridges v. Blake, 106 Ind. 332; Warey v. Forst, 102 Ind. 205. "CivilCode, art. 2398. w Krouse v. Neal, 42 La. Ann. 950 ; Marchand v. Griffon, 140 U. S. 516. THE PARTIES TO THE MORTGAGE. 377 deed of trust upon her separate estate, executed by the wife to secure such bond is valid.^ And a joint note of a husband and wife is the note of the husband alone, and when it is secured upon the property of the wife her evidence w'ill be ad- missible to impeach it on the ground of usury w^henever it is sought to enforce a sale of her property to satisfy such mort- gage.' In Missouri a feme covert may with her husband execute a valid deed of trust of her legal real estate to secure her hus- band's debts,^ and the court may appoint a trustee to make sale of the property in default of payment of the debt se- cured/ Under the revised statutes of Missouri ^ a mortgage executed by a husband and wife on the latter's land not held to her separate use to secure a debt of the wife is valid, though the debt is evidenced by a void note of wife.*' A married woman when conforming to the requirements of the statute has the unquestioned power to make a valid mortgage upon her real estate, which is not held to her separate use, to secure her hus- band's debt.^ § 355. What CoxsiDERxiTiON Is Valid. — The rights of the wife are treated with great respect in the courts.* The property actually mortgaged by her, and not her prop- erty in general, is thus subject to the payment of her hus- band's debts.^ The granting of the original loan, or a subsequent extension of the time of payment of the debt, is a sufficient considera- ^Kleindienst v. Johnson, 7 Mackey (Dist. Col.), 356. 'Keifer v. Carusi, 7 Dist. Col. 156. 'Ferguson v. Soden (Mo.), 19 S. W. Rep. 727. *Rines v. INIansfield, 96 Mo. 394; Wilcox v. Todd, 64 Mo. 390; Hagerman V. Sutton, 91 ]\ro. 519. *Rev. Stat. 1889, sect. 2396. «Meads v. Hutchinson, 19 S. W. Rep. 1111. ' Hagerman v. Sutton, 91 Mo. 519 ; Rines v. Mansfield, 96 Mo. 394 ; Wilcox V. Todd, 64 Mo. 388. ^Bayler v. Commonwealth, 40 Pa. St. 37, 44. ' Wolf V. Van Metre, 23 Iowa, 397 ; Logan v. Thrift, 20 Ohio St. 62 ; Hobson V. Hobson, 8 Bush (Ky.), 665. 378 NATURE AND REQUISITES OF THE CONTRACT. tion for her mortgages.' And when a married woman asks to have such a mortgage set aside for fraud of her husband, the notary, and the mortgagee, the mortgage will not be set aside without the clearest proof of fraud.^ §356. The Wife's Equity of Exoneration. — The prin- ciple is that the wife, when she has not the rights of a feme sole, when mortgaging her property for her husband's debts, stands in the position of a surety, and therefore may claim indemnity from the principal for whose benefit her security was interposed.^ And, generally, she is entitled to have her estate exonerated out of the estate of her husband when practicable.* This rule of exoneration primarily throws the burden of the debt on the property of the principal or husband, and exhausts that fund in exoneration of the estate of the wife.^ Hence, the equity of the wife in this regard is paramount to the claims of creditors who have a general lien on the hus- band's property subject to mortgage.^ But it is not enough that it is known to the one loaning money that the mortgage is on the property of the wife, and that the security was given for money loaned to the husband ; for, as the money may have been obtained for the benefit of the wife's estate, or with a view of a gift to the husband, the fact of the suretyship must be affirmatively established.^ Where a feme covert ioins in a mortgage of her estate for a debt of her husband, or to raise money to pay his own debts, she will be entitled, after his death, to have her estate exoner- ated out of his assets ; and the same rule will apply to any advances of money to her husband, which is the separate ^ Low V. Anderson, 41 Iowa, 476. ^Spurgin v. Traub, 05 111. 170. 3 Wooton V. Hele, 2 Saund. 175 ; Robinson v. Gee, 1 Ves. Sr. 252. *Shinn v. Smith, 79 N. Car. 310 ; Wilcox v. Todd, 64 Mo. 388 ; Huntingdon V. Huntingdon, 2 Bro. P. C. 1. s John V. Reardon, 11 Md. 465 ; Story's Eq. Jur., sects. 642, 1373 ; Wright v. Austin, 56 Barb. (N. Y.) 13 ; Wilcox v. Todd, 64 Mo. 388. «Niemcewicz v. Gahn, 3 Paige (N. Y.), 614; John v. Reardon, 11 Md. 465; Loomer v. Wheelwright, 3 Sandf. Ch. (N. Y.) 135. ' Gahn v. Niemcewicz, 11 Wend. (N. Y.) 312. THE PARTIES TO THE MORTGAGE. 379 property of the wife, to pay his debts, unless it shall appear that the advances were made as a gift.' So, also, when a wife joins in a mortgage of real estate, partly her own and partly her husband's, to secure a debt due by the husband, she stands as a surety of her husband to. the mortgagee, and has a right to have the husband's interest first applied to pay the debt, in exoneration of her interest.^ If it appears that she intended to make a gift to her hus- band, she cannot then redeem.^ On the other hand, it is held in Kentucky that a married woman does not become a surety of her husband by executing a mortgage on her land in conjunction with her husband, to secure a note of his to which she was not a party. Such a mortgage operates as a security or pledge.* However, the general rule is, where the statute does not con- trol, that the equity of redemption remains in the wife and her heirs. So, when the marriage is dissolved by the death of the husband, the widow, or her heirs, may put this equity in operation. Thus, where an estate belonging to the wife was mortgaged, and the equity of redemption was in words reserved to the husband and his heirs, the court held that there was, nevertheless, a resulting trust for the wife and her heirs.^ And so, without a recital of special circumstances to show an intention to make a new settlement of the estate, the husband has the equity of redemption only jure uxoris.^ But the widow may waive her right of exoneration from the estate of her deceased husband, and her waiver will be in- ferred from circumstances.^ 1 Knight V. Whitehead, 26 Miss. 245 ; Pateriche v. Powlet, 2 Atk. 383 ; Clin- ton r. Hooper, 3 Bro. C. C. 201 ; Robinson v. Gee, 1 Ves. Sr. 252 ; Sheidle v. Weishlee, 16 Pa. St. 134 ; Weeks v. Haas, 3 W. & S. (Pa.) 520. * Johns V. Reardon, 11 Md. 465. And see Ayers v. Husted, 15 Conn. 503; Fitch r. Cotheal, 2 Sand. Ch. (N. Y.) 29. ^ Duffy V. Ins. Co., 8 W. & S. (Pa.) 413, 433 ; Demarestw. Wynkoop, 3 Johns. Ch. (N. Y.) 129. *Hobson V. Hobson, 8 Bush (Ky.), 665. *,Tackson v. Jones, 1 Bligh, 115. *Ruscombe v. Hare, 6 Dow.l. ' Clinton v. Hooper, 1 Ves. Jr. 188. But see Lancaster v. Evors, 10 Beav. 154. 380 NATURE AND REQUISITES OF THE CONTRACT. In New York, the widow's right of exoneration is expressly- admitted ; ^ and in most of the States the wife's right as surety, with reference to the debts of her deceased husband for which she has mortgaged her land, is generally recog- nized when not controlled by statute.^ § 357. The Husband Cannot Extend the Wife's Mort- gage Without Her Consent. — The husband cannot, under this rule, extend the time of a wife's mortgage without her legal consent. So when a wife joins with her husband in executing a mortgage on her land to secure his debts, the husband is not authorized to extend the time without her legal consent. If he does extend the time, her land will be discharged from the lien of the mortgage by this indulgence to the principal debtor.^ Thus, where a wife mortgages her land as a continuing security for a note, to be indorsed by her husband, or any renewals there- to, an agreement by the creditor to extend the time of payment for the debt due upon such note without her renewal thereto discharges her liability as surety.^ So where, without her con- sent, the creditor gives time to the principal debtor, those parts of the mortgaged premises of which she was seized in fee are released and discharged from the lien and operation of the mortgage.^ § 358. — Lex Rei Sit^ Governs. — The validity of a mort- gage by a married woman is determined by the law of the place where the property is situated. Thus, a mortgage exe- cuted in Ohio by a married woman, as security for another, upon land owned hy her in Indiana, is void under the law of Indiana of 1881. Her rights to mortgage her land in Indiana must be determined by the laws of the place where the land is situated.^ 1 Vartie v. Underwood, 18 Barb. (N. Y.) 5G1. ''Philbrook v. McEwen, 29 Ind. 347 ; Hetherington v. Hixon, 46 Ala. 297. »Bank v. Burns, 2 Lans. (N. Y.) 52. * Smith V. Townsend, 25 N. Y. 479. ^Gahn v. Niemcewicz, 11 Wend. (N. Y.) 312. « Swank v. Hufnagle, 111 Ind. 453. See, also, Post v. Bank, 138 111. 559; Dawson v. Hayden, 67 111. 52. THE PARTIES TO THE MORTGAGE, 381 § 359. Administrators and Executors. — An administra- tor or executor cannot borrow money upon a mortgage of the real estate of the decedent. Such note and mortgage are plainly invalid when not sanctioned by statutory provisions, and the^ mere fact of a benefit derived will not sustain them.' But when the law gives a court jurisdiction, which grants the ad- ministrator license to mortgage real estate of the decedent, the mortgage cannot be questioned in a mere collateral pro- ceeding. The parties claiming under such mortgage are protected without investigating the truth of the facts upon which it was granted.^ But where the mortgage is executed by the executor under a power in the will of the decedent, it will be held valid.'^ In general, the power of an executor, not derived from the will, to mortgage the land of the decedent is limited and purely statutory.* When the executor has full power to join with his testator's partner in the business, given by will, he may unite with such partner in a mortgage to cor- rect a mistake in a mortgage given by the partners in which the land conveyed was misdescribed.^ And when the execu- tor has full power to deal with the realty, he may mortgage a part of the real estate to raise money to satisfy pressing claims against the testator's estate.^ And when a legatee in possession, and also the executor of the estate, gives to a stranger a mortgage on personal property of the estate to secure his individual debt, the mortgage can- not be questioned by the mortgagee for want of title in the mortgagor, for, being a legatee in possession, he had an in- choate title, and none but persons interested in the estate could dispute his right as executor to give the mortgage.^ In New ' Smith wick v. Kelly, 79 Tex. 564 ; Black v. Dressell, 20 Kan. 153 ; Smith v. Hutchinson, 108 111. 662. ■•^Griffin v. Johnson, 37 Mich. 87. ' Starr v. Moulton, 97 111. 525. See, also, Wetherill v. Harris, 67 Ind. 452. * Merritt v. Simpson, 41 111. 391. See, also, 2 Spencer Eq. Jur. (4th Am. ed.) 425. * Brown v. Morrill, 45 Minn. 483. ®In re Jones, 59 Law J. Ch-.^Jl. See, also, Amea v. Holderbaum, 44 Fed. Rep. 224. ' Bocger v. Langenberg, 42 Mo. App. 7. 382 NATURE AND REQUISITES OF THE CONTRACT. Jersey the Chancellor may allow the trustee or executor to mortgage the estate.* When there is a direction in a will to pay debts or charges, nothing being said as to how the money shall be raised, it has been held that this implies not only a power to sell,^ but also a power to mortgage, if that method of raising money be more advantageous to the estate than a sale.^ But if the intention of the testator is clearly manifest upon the face of the will, it must be followed.* But it seems that a trust to sell the estate for the payment of debts will authorize a mortgage for that purpose, which is a conditional sale at common law, unless, indeed, it be a clear intention of the testator in directing the sale that his real es- tate shall be absolutely converted.^ Thus, when a will con- tains this clause, " If it should seem necessary at any time to dispose of a portion of my real estate for the payment of my debts, I hereby give my executors power to do so, either at public or private sale," and the estate included a large tract of land which it was difficult to sell to advantage, it was held that the will conferred a power to mortgage.® So where a power of sale is authorized, in the will, to raise a particular charge only, and this purpose can be answered better by mort- gage than by sale, and that method is not in conflict with the intention of the testator, the estate should be mortgaged.'^ Pennsylvania cases go further than this, and hold that a power to sell, even though not coupled with a trust to pay » Acts of 1891, ch. 20, sect. 31. 2 Hill Trustees (4th Am. ed.), 345; Perry Trusts (4th ed.), sect. 7GG. 3 Hill Trustees (4th Am. ed.), 355. *Halden])y v. Spofforth, 1 Beav. 390; Page v. Cooper, 16 Beav. 396; Devaynea v. Robinson, 24 Beav. 86. 5 Hill Trustees (4th Am. ed.), 355 ; Ball v. Harris, 4 Myl. & Cr. 264. « Loebenthal v. Raleigh, 36 N. J. Eq. 169. ^Fisher on Mort., sect. 435 ; Stroughill v. Anstey, 1 De G. M. & G. 635; Page V. Cooper, 16 Beav. 396 ; Ball v. Harris, 4 Myl. & Cr. 264 ; Kent v. Mor- rison, 153 Mass. 137; Waterman v. Baldwin, 68 Iowa, 255; overruling in effect, Hubbard v. German Catholic Cong., 34 Iowa, 31 ; Faulk v. Dashiell, 62 Tex. 642 ; Steifel v. Clark, 9 Baxt. (Tenn.) 466, distinguishing Head v. Temple, 4 Heisk. (Tenn.) 34. THE PARTIES TO THE MORTGAGE. 383 debts or raise charges, implies a power to mortgage, unless clearly opposed to the grantor's intention.^ But there are authorities that hold that a power to mortgage cannot be implied from a power to sell, though couj^led with a trust to pay the debts out of the proceeds.^ A discretionary power to sell is different from an imperative direction to sell.^ And a power to sell and dispose of prop- erty implies a power to make partition of it between the bene- ficiaries, even though there is a further direction to invest the proceeds.* When the executor has a right to mortgage the property of the decedent, his power to mortgage any particular tract is not exhausted by a single exercise of such power on such tract.^ § 360. Guardian. — The right of a guardian to borrow money on a mortgage of his w^ard's land is regulated by stat- ute, and he generally must petition the court and receive per- mission to execute the mortgage.'^ The statutorj'- j^rovisions must be closely followed. A mortgage given by a guardian upon the property of his ward is void where the court of com- petent jurisdiction nowhere in the course of the proceedings has specified or determined, as required by statute, the amount, rate of interest, or length of time for which the mortgage is authorized to be given.'' And so if a guardian executes a mortgage, unauthorized by the statute, it cannot be enforced.^ But such statutes do not oust jurisdiction of Federal courts >Zane v. Kennedy, 73 Pa. St. 182. ''Bloomer v. Waldron, 3 Hill (N. Y.), 361. Compare Mutual Life Ins. Co. v. Woods, 121 N. Y. 302 ; United States Trust Co. v. Roche, 116 N. Y. 120. See, also, lioyt v. Jaques, 129 Mass. 286 ; Tyson v. Latrobe, 42 Md. 325 ; Wilson v. Ins. Co., 60 Md. 150 ; Price v. Courtney, 87 Mo. 387 ; Stokes v. Payne, 58 Miss. 614 ; Green v. Claiborne, 83 Va. 386. '2 Perry Trust (4th ed.), sect. 507. ♦Phelps V. Harris, 101 U. S. 370. See, also, Frith v. Osborne, L. R. 3 Ch. Div. 618. ^lowa Loan & Trust Co. r. Holderbaum (Iowa), 52 N. W. Rep. 550. niorritt V. Simpson, 41 111. 3<)1 ; Lovelace v. Smith, 39 Ga. 130. 'Edwards v. Taliafero, 34 Mich. 13. "Mcrritt v. Simpson, 41 111. 391. r?84 NATURE AND REQUISITES OF THE CONTRACT. over foreclosure of these mortgages, where they would other- wise have jurisdiction.' It appears that courts of general equity jurisdiction in a suit brought in behalf of a ward by the guardian, can author- ize the latter to borrow money to improve the ward's real property, and give a mortgage to secure payment of the amount borrowed. Because the jurisdiction of the court of chancery to order the sale of the whole, or a portion of the estate of an infant, or to order it to be incumbered by mort- gage whenever the interest of the infant demands it, will not be denied, whether that interest be of a legal or equitable nature.^ So the jurisdiction of a court sitting in equity, in a suit brought in the name of the infant by his guardian, to order the sale of the minor's unimproved lands in Illinois, that the proceeds might be applied in removing incumbrances on his improved lands in Indiana, was sustained.^ The Illinois decisions hold that a court of chancery has power, in the absence of a statute, to direct a sale of a minor's real estate when it is necessary for his support ; ■* but it is be- lieved that this authority is to be exercised only under a pres- sure of a demonstrated necessity.^ It is generally held that a court of chancery has no power to authorize money to be borrowed for the purpose of erecting buildings, and the ward's estate to be mortgaged as security for repayment ; that such court had no such power at the common law.^ Under the statute of Illinois the guardian has authority to borrow moneys for the purpose of erecting buildings to be rented, or to mortgage the minor's property to secure the pay- ment of moneys borrowed for that or any other purpose, act- ' Davis V. James, lOBiss. C. C. 51. * Smith V. Sackett, 5 Gilm. (111.) 534, 545. ^Allman v. Taylor, 101 111. 185, 191; Smith v. Sackett, 5 Gilm. (111.) 534, 545. See, also, Frith v. Cameron, L. R. 12 Eq. 160. * Smith V. Sackett, 5 Gilm. (111.) 534, 545 ; Allman r. Taylor, 101 111. 185, 191. * Cummins v. Cummins, 15 111. 33. « Rogers i\ Dill, 6 Hill (N. Y.), 415 ; WiUiamsonr. Ball, 8 How. (U. S.) 566; Genet v. Tallmadge, 1 Johns. Ch. (N. Y.) 561 ; Taylor v. Philips, 2 Ves. Sr. 23. THE PARTIES TO THE MORTGAGE. 385 ing under the direction of the county court ; the indebtedness secured by the mortgage must arise out of, and have some necessary or appropriate connection with, the management of the ward's estate. Thus a mortgage executed by a guardian in IlHnois, with leave of the county court, to secure the pay- ment of bonds given by him for moneys borrowed to pay off existing incumbrances upon the ward's real property, and to improve such property by replacing thereon buildings that liad been destroyed by fire, is not invalid under the statute.^ The county court has power to authorize a guardian to borrow money for the purpose of erecting new and costly buildings upon unimproved real estate, and secure the payment by mort- gage upon the real estate.^ The validity of such mortgages may be questioned in a foreclosure proceeding.^ The county court will only authorize such mortgages when proof is offered, that such a course is necessary for the preserva- tion of the minor's estate or that the estate would be benefited thereby.* In case a mortgage is given, the time must not exceed the ward's minority. Interest is to be calculated, after the ward's majority, at the contract rate, and not at the legal rate, unless the ward immediately upon attaining full age, pays the debt, or, by agreement with the lender, obtains an extension of the time of maturity, and a less rate of interest. ^ §361. Partners. — As a general rule one partner cannot execute a deed, mortgage, or other sealed instrument in the partnership name so as to bind the other members of the firm. But he can bind them by such deed or mortgage if executed in their presence and by the express consent of such partners.^ 1 United States Mort. Co. r. Sperry, 138 U. S. 313, 334. ''Kingsbury v. Powers, 131 111. 182, 192. Compare Payne v. Stone, 7 Sm. & M. (Miss.) 367. ^Kingsbury v. Sperry, 119111. 279. *Loyd V. Malone, 23 111. 43 ; 74 Am. Dec. 179. * United States Mort. Co. v. Sperry, 138 U. S. 313, 351. See, also,Phinney r. Baldwin, 16 111. 108 ; Etnyre v. McDaniel, 28 111. 201. * Greer v. Ferguson (Ark.), 19 S. W. Rep. 966; Ferguson v. Hanauer (Ark.), VOL. r. — 25 386 NATURE AND REQUISITES OF THE CONTRACT. So it is generally held that the execution of a sealed instru- ment by one partner in the name of the firm under a prior tOiral authority, or such an act subsequently ratified by the other ipartners, is binding upon the firm/ An absent partner may be biound by a deed executed on behalf of the firm by one of the partnership, provided there be either a previous parol authority or a subsequent parol adoption of the act.^ And still other cases go further, and hold that one partner may exe- cute, in the name of the firm, an instrument under seal, nec- essary in the usual course of business, which will be binding upon the firm, provided the partner had previous authority for that purpose, and such authority need not be under seal, nor in writing, nor specially communicated for the specific purpose, but it may be inferred from the partnership itself and from the subsequent conduct of the copartners implying an assent to the act.' The stern doctrine of the common law, however, requires a prior authority under seal or a subsequent ratification under seal to make a sealed instrument, executed by one partner only, binding on ihe firm. This common-law doctrine has been upheld in Tennessee,* but in nearly all the States it has 19 S. W. Rep. 749 ; Wilson v.. Hunter, 14 Wis. 68.3 ; Cady v. Shepherd, 11 Pick. (Mass.) 400 ; Swan v. Stedmaia, 4 Met. (Mass.) 548 ; Smith v. Kerr, 3 N. Y. 144 ; Gerard v. Basse, 1 PaU. (U. S.) 119 ; Pierson v. Hooker, 3 Johns. (N. Y.) 68 ; McDonald v. Eggleston, 26 Vt. 154 ; United States v. Astley, 3 Wash. C. C. 508 ; Mackay v. Bloodgood, 9 Johns. (N. Y.) 285 ; Price v. Alexander, 2 Green (Iowa), 427 ; Massey v. Pike, 20 Ark. 92; Ruffner v. McConnel, 17111. 212. 1 Baldwin v. Richardson, 33 Tex. 16; Grady r. Robinson, 28 Ala. 289; Haynes v. Seachrest, 13 Iowa, 455 ; Shirley v. Fearne, 33 Miss. 653 ; Wilson r. Hunter, 14 Wis. 683 ; Drumright v. Philpot, 16 Ga. 424 ; Pike v. Bacon, 21 Me. 280 ; Johns v. Battin, 30 Pa. St. 84 ; Fox v. Norton, 9 Mich. 207 ; Smith r. Kerr, 3 N. Y. 144 ; Ball v. Dunsterville, 4 Term. R. 313 ; Williams v. Walsby, 4 Esp. 220; Steiglitz v. Egginton, 1 Holt, N. P. 141; Holbrook v. Chamberlin, 116 Mass. 155. ' Skinner v. Dayton, 19 Johns. (N. Y.) 513 ; Anderson v. Tompkins, 1 Brock. C. C. 462. 3 Gram V. Seton, 1 Hall (N. Y.), 262; Smith v. Kerr, 3 N. Y. 144, 150; Drumright v. Philpot, 16 Ga. 424 ; McDonald v. Eggleston, 26 Vt. 154. * Turbeville v. Ryan, 1 Humph. (Tean.) 113. See Sutlive v. Jones, 61 Ga. 676. THE PARTIES TO THE MORTGAGE. 387 been essentially relaxed by recent decisions, if not by the earlier adjudications. So one partner can execute a deed in bankruptcy when necessary in the proceedings.^ § 362. Real Estate Held by a Partnership. — Real estate held by a partnership is to be regarded as the property of the firm as to creditors and all persons dealing with it, when necessary to protect their rights. The partnership -in such a case holds only an interest in the stock or capital of the part- nership, which is personal property. But when the business of the partnership is closed, and its debts are paid, there are no equities in favor of third persons requiring real estate of the firm to be held subject to the rights of third parties ; the partners then, or their legal representatives, hold the direct interest, and, as between them, the real estate is to be regarded as such, subject to all rules applicable thereto. The conversion of real estate into personalty under this rule is a devise of equity in order to effectuate all settlements of partnerships, and to devote all their property to the payment of the firm debts, a result highly equitable, which the courts will never fail to attain. The reason of the rule ceases in the absence of creditors of the firm, or others having like equities.* § 303. Taking Mortgages in the Firm Name. — The rule is that a mere partnership name, or the name of an association as a grantee in a mortgage, is insufficient, unaided by a court of equity, to transfer title.^ That is, a grant to such association eo nomine, will pass no legal title.* The rules of equity, however, are applied, and the instru- ment is generally upheld. Thus, where the partnership name * Ex parte Hodgkinson, 19 Ves. 291. * Wilcox V. Wilcox, 13 Allen (Mass.), 252 ; Buchan v. Sumner, 2 Barb. Ch. (N. Y.) 165 ; Shearer v. Shearer, 98 Mass. 107 ; Collumb v. Read, 24 N. Y. 505 ; Coder v. Ruling, 27 Pa. St. 84 ; Jackson v. Stanford, 19 Ga. 14 ; Greene v. Graham, 5 Ohio, 264. ^German, etc., Asso. v. Scholler, 10 Minn. 331 ; Foster r. Johnson, 39 Minn. 378. * Jackson v. Cory, 8 Johns. (N. Y.) 385 ; Sloane v. McConahy, 4 Ohio, 157 ; Thomas v. Marshfield, 10 Pick. (Mass.) 364. 388 NATURE AND IlIiQUISITES OF THE CONTRACT. thus used contains the name or names of one or more of the partners, the mortgage will have legal effect as a conveyance or mortgage to the partner or partners thus named. ^ And re- sort may be had to facts for the purpose of applying the de- scription of the persons named to the persons so described.^ That a partnership may make contracts in its firm name is a matter of elementary law, and it may be a firm to deal in land, and make a valid contract therefor ; and if the firm can- not hold the legal title, the vendor will hold it in trust for the firm.'^ And it has been held that a conveyance to a firm is a conveyance to the members, as tenants in common, to hold the title in trust for the firm.* Hence, a mortgage upon real estate made by the owner to a partnership in its firm name, to secure an indebtedness to it, constitutes a valid lien upon the property in favor of the firm as a security for the indebted- ness,'^ on the principle that such grantor holds the title in trust for the partnership." § 364. Mortgage of Real Estate By One of the Firm. — If a member of a firm mortgages his apparent interest in part- nership lands as tenant in common of such land for a consid- eration at the time, the mortgagee having no notice of the character of the property in equity as partnership property, is entitled to hold it under his mortgage in preference to the partnership creditors.^ However, if the mortgage is given for a precedent debt, and the mortgagee parts with no new value, or if he has knowl- edge of the facts, he takes his mortgage with notice of the character that equity has impressed upon the property, and ^ Gille V. Hunt, 35 Minn. 357 ; Foster v. Johnson, 39 Minn. 378 ; Morse r. Carpenter, 19 Vt. 613 ; Beaman v. Whitney, 20 Me. 413 ; Sherry v. Gilmore, 58 Wis. 324 ; Jones v. Neale, 2 Pat. & H. (Va.) 339. * Morse v. Carpenter, 19 Vt. 613 ; Menage v. Burke, 43 Minn. 211. 3 Sherry v. Gilmore, 58 Wis. 324, 332. ^ Jones V. Neale, 2 Pat. & H. (Va.) 339; Beaman v. Whitney, 20 Me. 413. *New Vienna Bank v. .Johnson, 47 Ohio St. 306. * Lumber Co. v. Ashworth, 26 Kan. 212. 'Seeley r. Mitchell, 85 Ky. 508 ; Hewitt v. Rankin, 41 Iowa, 35 ; Hiscockt;. Phelps, 49 N. Y. 97. THE PARTIES TO THE MORTGAGE. 389 subject to the equity superior to his own of any and all per- sons' interests in the property.^ If the mortgagee has notice, his lien is subject to the pay- ment of partnership debts.^ And when he has notice there is no distinction between debts incurred prior to the mortgage and those subsequently made;^ §365, Rights of Mortgagee With Notice. — When one of a partnership mortgages his land or his interest in the land held by a partnership, and the mortgagee takes with notice, his lien is subordinate and he cannot have priority over the rights of the other partners/ So where a partner executes a mortgage it is valid against a party who with notice of it takes a subsequent mortgage of the same property.^ Such mortgagee cannot have a prior lien unless he is in the position of a bona fide purchaser without notice and paid a present consideration.^ If he has notice, a partners' lien prevails, as they have a better equity.^ A deed does not necessarily import notice of the rights and interests of others in the land mortgaged,^ and the fact that the deed describes the grantees as partners is not evidence that the property is partnership land.® But when partners are dealing in land as their business, the mortgagee will of necessity have notice,^" or where the lands have been purchased with partnership money which is known to the mortgagee." »Hiscock V. Phelps, 49 N. Y. 97. » Beecher v. Stevens, 4.3 Conn. 587 ; Seeley v. Mitchell, 85 Ky. 508. 'Lovejoy v. Bowers, 11 N. H. 404 ; Fargo v. Ames, 45 Iowa, 491. * Glynn v. Phetteplace, 26 Mich. 383 ; Place v. Sweetzer, 16 Ohio, 142 ; Dyer v. Clark, 5 Met. (Mass.) 562. * Wilson V. Hunter, 14 Wis. 683 ; Seaman v. Huffaker, 21 Kan. 254 ; French V. Lovejoy, 12 N. H. 458. «Hiscock V. Phelps, 49 N. Y. 97 ; Lewis v. Anderson, 20 Ohio St. 281 ; Mil- ler ?'. Proctor, 20 Ohio St. 442. ^Reeves v. Ayers, 38 111. 418. * Van Slyck v. Skinner, 41 Mich. 186. 'Reynolds v. Ruckman, 35 Mich. 80. '"Gaihraith i-.Gedcre, 16 B. Mon. (Ky.) 631. " Dyer v. Clark, 5 Met. (IMass.) 562. 390 NATURE AND REQUISITES OF THE CONTRACT. But where two persons hold an undivided interest in the same parcel of land by separate deeds of different dates and from different grantors, a party dealing in good faith with one of them with reference to his interest, is not bound with notice that the proj^erty is partnership propert}^ from the knowledge merely that the holders thereof are partners and make use of the premises for partnership purposes, where nothing on the record indicates partnership property.' § 366. One Partner May Become Surety for the Firm. — One partner may become surety for the firm. Thus, where a partner gives a mortgage upon his separate property to secure a partnership debt, he thereby becomes a surety for the firm, and is entitled to the rights and privileges of that character. His separate creditors succeed to his rights and privileges as such surety. He and his separate creditors there- fore have a right to insist that the partnership property, being primarily liable, be first applied toward the payment of a debt secured by such partner before resort is had for that purpose to the separate estate of the surety.^ § 367. After Dissolution of Partnership. — As between the personal representatives and the heirs-at-law of a deceased partner, his share of the surplus of the real estate of the part- nership, which remains after paying the debts of the partner- ship and adjusting all the equitable claims of the different members of the firm as between themselves, is to be considered and treated as real estate.^ The real estate, after dissolution, is to be converted into per- sonalty only when, and so far as necessary, to pay claims against the partnership which are in the nature of debts, in- cluding balances due to individual partners for advances to the firm or payments made in its behalf, and capital furnished by a partner, which it is to be repaid in specified sums ; and ' Reynolds v. Ruckman, 35 Mich. 80. ^ Averill v. Loucks, 6 Barb. (N. Y.) 470. » Buchan v. Sumner, 2 Barb. Ch. (N. Y.) 165 ; Tillinghast v. Chaplin, 4 R. I. 173-207 ; 1 Am. Lead. Cas. 494. THE PARTIES TO THE MORTGAGE. 391 equity will not interfere to counteract or modify the law of de- scent or distribution on the estate of a deceased partner, by converting into personalty, and dividing as such, any real estate or interest therein, which, after settlement of the part- nership affairs, remains to be divided between the representa- tives of a partner and the other partners.^ After the debts are paid, and no equities exist, the re- maining real estate will no longer be considered as person- alty. And if the partner survives, it will be regarded as real estate of the partner in favor of his individual creditors. The partners or their representatives hold a direct interest in the real estate, and it is subject to all the rules applicable thereto.^ And this is the general rule after settlement or dissolution of the partnership, that the partners or their representatives hold a direct interest in the real estate, and such interest is subject to all the rules applicable to realty,^ The weight of American authority is to the effect that real estate of a partnership will only be regarded as personalty so far as the partnership is concerned. If it becomes necessary to use the real estate in partnership business, it will be consid- ered as personal property. But if one partner dies, his heirs can claim such surplus of the real estate as may remain after settlement of all partnership affairs, subject to the right of dower if a widow survives the deceased partner.* §368. Corporations — Power to Mortgage Real Estate. — A corporation has power to borrow money for the transac- * Shearer v. Shearer, 98 Mass. 107. * Hewitt V. Rankin, 41 Iowa, 35 ; Goodwin v. Richardson, 11 Mass. 469 ; Peck V. Fisher, 7 Gush. (Mass.) 386 ; Collumb v. Read, 24 N. Y. 505 ; Ensign V. Briggs, 6 Gray (Mass.), 329 ; Jackson v. Stanford, 19 Ga. 14 ; Greene v. Gra- ham, 5 Ohio, 264; Whitman v. Boston, etc., R. R. Co., 3 Allen (Mass.), 133 Piatt V. Oliver, 3 McLean, C. C. 27; Wilcox ?'. Wilcox, 13 Allen (Mass.), 252^ 'Foster's Appeal, 74 Pa. St. 391. See, also, Burnside ?;. Merrick, 4 Met (Mass.) 537 ; Dyer v. Clark, 5 IVIet. (Mass.) 562. *Rice V. Barnard, 20 Vt. 479; Buckley v. Buckley, 11 Barb. (N. Y.) 43. Holland v. Fuller, 13 Ind. 195 ; Lang v. Waring, 25 Ala. 625; Collins v. War- ren, 29 Mo. 236 ; Scruggs v. Blair, 44 Miss. 406. 392 NATURE AND REQUISITES OF THE CONTRACT. tion of its legitimate business and to secure its payment by mortgage independent of statutory provisions.^ A corporation without special authority in its charter may dispose of lands or interest in the same, and in the course of its legitimate business may make a bond, mortgage, note, or draft.^ This principle is well settled that corporations have the power to sell their property, real or personal, and to mort- gage it for the security of their debts. This is incident to the power to acquire and hold it.^ This right to mortgage their property existed at common law.* They may borrow money when the power is not ex- plicitly granted by the charter when it is essential to the trans- actions of its ordinary affairs. It is then incidental.'^ It appears that a municipal corporation when not forbidden has power to receive as payee a note and mortgage for a debt lawfully due to such corporation. Hence, it has the right to execute a note and mortgage for a debt lawfully due. In short, it has been held a municipal corporation may lawfully take a note and mortgage when not in contravention of statutory law, and may assign these to a third person.^ This right of jus disponendi may be limited by statute and charters,^ but if 1 Burt V. Rattle, 31 Ohio St. 116 ; Nat. Bank r. Insurance Co., 41 Ohio St. 1 ; Shaw v. Bill, 95 U. S. 10 ; Pennock v. Coe, 23 How. (U. S.) 117 ; Phillips v. Winslow, 18 B. Mon. (Ky.) 431 ; Jones v. Guaranty and Indemnity Co., 101 U. S. 622; Aurora Agricultural and Hort. Soc. v. Paddock, 80 III. 263. nVhite Water Valley Canal Co. ?'. Valletta, 21 How. (U. S.) 414 ; Richard- son V. Sibley, 11 Allen (Mass.), 65; Gibson v. Goldthwaite, 7 Ala. 282. 3 Pierce v. Emery, 32 N. H. 503 ; Richards v. Railroad Co., 44 N. H. 135. ♦Fitch V. Lewiston Steam Mill Co., 80 INIc. 34. "Beers r. Phoenix Glass Co., 14 Barb. (N. Y.) 358 ; Smith v. Eureka Flour Mills, 6 Cal. 1 ; Smith v. Law, 21 N. Y. 296, 299 ; Clarke v. School District, etc., 3 R. I. 199 ; Frye v. Tucker, 24 111. 180 ; Rockwell v. Elkhorn Bank, 13 Wis. 653 ; Hardy v. Merriweather, 14 Ind. 203. « Commissioners v. Day, 19 Ind. 450; Bank v. Chapelle, 40 Mich. 447; Va- narsdall v. State, 65 Ind. 176 ; Alexander v. Knox, 6 Saw. C. C. 54. 'Mass. Stat. 1870, ch. 224, sect. 15, requires the written assent of a majority of the stockholders. New York, 2 Rev. Stat., p. 499, sect. 18, requires assent of two-thirds of the stockholders. Where no assent of the stockholders has been given, a mortgage is invalid and creates no valid lion upon the prop- erty : Vail V. Hamilton, 85 N. Y. 453. But where such mortgage has been executed without such assent, it is vali- THE PARTIES TO THE MORTGAGE. 393 not limited the power to mortgage exists in corporate bodies.^ When the president of a manufacturing corporation gives notes in its name and has the proceeds placed to his individual credit when the corporation has no bank account or books to enter such transaction, it will be presumed that he is acting for the corporation.^ Under the New York statute ^ forbidding insolvent corpora- tions to prefer creditors, a mortgage executed by the corpora- tion will not be held invalid when it does not appear that the corporation was insolvent.* Where one who as president of the corporation has executed a note and mortgage, and subsequently indorses the note in his individual capacity, he is bound by all the stii:)ulations in the mortgage.^ A mortgage by a corporation in violation of a temporary injunction granted in a suit by the creditors for the appoint- ment of a receiver, is an absolute nullity.^ The mortgage must be executed according to the provision of the statute governing the corporation. When notice is necessary to each director for a meeting to mortgage the prop- erty, it must be given to all the directors, and the omission to do this avoids the mortgage.^ dated by a subsequent assent when there are no intervening rights. Such assent makes the instrument as to the time it is given a valid mortgage : Rochester Savings Bank v. Averell, 96 N. Y. 467 ; Lord v. Yonkers, etc., Gas Co., 99 N. Y. 547. * Detroit V. Mutual, etc., Gas Light Co., 43 Mich. 594; Hopson v. Eatna, etc., Spring Co., 50 Conn. 597 ; Saunders v. Commonwealth, 3 Gratt. (Va.) 214 ; State v. Rice, 65 Ala. 83 ; Memphis, etc.. Railroad Co. v. Dow, 19 Fed. Rep. 388 ; Thompson v. Lambert, 44 Iowa, 239, 244. * Martin v. Niagara Falls Paper Co., 122 N. Y. 165, affirming 44 Hun (N. Y.), 130. »Rev. Stat., pt. 1, ch. 18, tit. 4, sect. 4. ^Everson v. Eddy, 59 Hun (N. Y.), 620. See, also, Rittenhouse v. Winch, 57 Hun (N. Y.), 587 ; Rollins v. Carriage Co., 80 Iowa, 380; Star Printing Co. V.Andrews, 58 Superior Ct. 188; Powell v. Blair, 133 Pa. St. 550; Lay r. Austin, 25 Fla. 933 ; 24 Am. L. Rev. 428. * Georgia Railroad & Banking Co. i-. Pendleton, 87 Ga. 751. 'Bissell V. Besson, 47 N. J. Eq. 580. ^Bank?'. McCarthy, 55 Ark. 473. , 394 NATURE AND REQUISITES OF THE CONTRACT. In some States the statutory law prohibits the holding of real estate in perpetuity. But a corporation authorized to lend money in such States may take a mortgage on real estate to secure the debt, and having purchased it at a foreclosure sale, may convey a valid title.^ The execution of a mortgage to a corporation is an admis- sion of its competency to take it, and a borrower from a foreign corporation is estopped in foreclosure proceedings from setting up its want of power to acquire title to real estate.^ Where a statute prohibits a foreign corporation from holding real estate it cannot evade this law by the purchase of the franchise of a local corporation authorized to hold land.^ But where a mortgage is considered as merely a lien, the taking of such security by a foreign corporation is not a violation of the statute, and a suit may be maintained to enforce it.'* So a foreign corporation having power under its charter to engage in mercantile transactions, make contracts, lend money, and the like, may take conveyances in satisfaction of debts,^ or as security,^ and may take title upon foreclosure.^ §369. Religious Corporations. — It has been held that where the law does not expressly prohibit, religious corpora- tions may also mortgage and create liens upon their real es- tate. If they have power to hold and enjoy real estate, as an incident, they have the power to mortgage it, unless pro- hibited.* ^ Stevens v. Pratt, 101 111. 206, overruling in part United States Mortg. Co. v. Gross, 93 111. 493. * Pancoast v. Ins. Co., 79 Ind. 172. 3 Commonwealth v. Railroad Co., 114 Pa. St. 340. *Leasure v. Ins. Co., 91 Pa. St., 491. See, also, Hards v. Ins. Co., 8 Biss. C. C. 234 ; Stevens v. Pratt, 101 111. 206 ; United States Mortg. Co. v. Gross, 93 111. 483. 5j;fp.^ York Dry Dock v. Hicks, 5 McLean, C. C. Ill; Lathrop v. Bank, 8 Dana (Ky.), 114. «I^banon Sav. Bank v. Hollenbeck, 29 Minn. 322; Stevens v. Pratt, 101 111. 206. ^ Elston V. Piggott, 94 Ind. 14 ; Lebanon Sav. Bank v. Hollenbeck, 29 Minn. 322. ^Walrath 'v. Campbell, 28 Mich. Ill; Methodist Episcopal Church v. THE PARTIES TO THE MORTGAGE. 395 Under the New York law/ authorizing religious corpora- tions, on leave of the Supreme Court, to mortgage their real estate " as shall be provided by the order of the court," the order granting leave to give a mortgage will direct the application of the proceeds.^ § 370. Corporate Franchises. — Without clear and explicit legislative authority, no corporation can mortgage its fran- chises ; ^ nor can a corporation sell its franchises.* A corporation's franchises cannot be alienated, and its powers and privileges conferred by its own act upon another person or body, from the fact of its own corporation. Such a franchise is not, in its own nature, transmissible. It can only be transferred by express legislative authority for it.^ How- ever, an unauthorized mortgage, or one defectively executed by a railroad company, may be subsequently confirmed by the legislature.® The mortgagees or purchasers under a trust deed cannot take up the road and dispose of the material so as to deprive the public of its use, whose sovereign powers have been exer- cised in the condemnation of private property for the con- struction of the road.^ But the railroad company may sell and convey whatever property it may hold, not acquired under the delegated right of eminent domain, or so connected with the franchise to operate Shulze, 61 Ind. 511 ; Madison Ave. Church v. Oliver St. Church, 41 N. Y. Su- perior Ct. 369. 1 Laws of 1890, ch. 424, sect. 1. »In re Church, 25 Abb. N. C. 354. ^Pullan v. Cincinnati, etc.. Railroad Co., 4 Biss. C. C. 35 ; Commonwealth v. Smith, 10 Allen (Mass.), 448; Susquehanna Bridge, etc., Co. v. General Ins. Co., 3 Md. 305; Richardson v. Sibley, 11 Allen (Mass.), 65; Atkinson v. Marietta, etc., R. R. Co., 15 Ohio St. 21 ; Coe v. Columbus, etc., R. R. Co., 10 Ohio St. 372. *Bank v. Bond, 1 Ohio St. 622; Commonwealth v. Smith, 10 Allen (Mass.), 448. * Commonwealth v. Smith, 10 Allen (Mass.), 448,455. *Chapin v. Vermont, etc., R. R. Co., 8 Gray (Mass.), 575 ; Shaw v. Norfolk, etc., R. R.Co., 5 Gray (Mass.), 162. V ' Pabner v. Forbes, 23 111. 301. 396 NATURE AND REQUISITES OP THE CONTRACT. and maintain a railroad that the ahenation would tend to dis- able the corporation from performing the public duties im- posed upon it, in consideration of which its chartered privi- leges have been conferred/ And in general a company cannot mortgage any franchise essentially corporate in its charter which could not be enjoyed by a natural person.^ So it may be considered as settled that a corporation cannot lease or alienate any franchise, or any property necessary to perform its obligations and duties to the State, without legislative au- thority.^ Where a railroad company has express authority to mortgage its property, a mortgage executed by it covering its property and franchises will not be void as to the property by the fact that there was no authority to mortgage the fran- chises.* And the stock that a railroad company owns in an elevator near the terminus of the railroad, which is used by it for the storage of grain, is not an appurtenant to the railroad, and does not pass under a mortgage of such railroad and its appurtenances.^ § 371. Validating Defective Mortgages — Source of Power to Mortgage. — The power to mortgage is lodged in the corporation — that is, in the stockholders. So, unless authorized by the stockholders, the directors have no authority to execute a mortgage. But where the stockholders sanction a contract in which moneys were loaned to a corporation by its directors, and its bonds therefor, secured by a mortgage given, and the moneys have been properly applied, the corpo- ration is estopped from setting up that the bonds and mortgage were void by reason of the trust relation which the directors 'Hendee v. Pinkerton, 14 Allen (Mass.), 381. * Joy V. Jackson, etc., Plank-Road Co., 11 Mich. 156. * Beman v. Rufford, 1 Sim. (N. S.) 550 ; Johnson v. Shrewsbury, etc.. Rail- road Co., 3 De G., Mac. & G. 91-t ; Shrewsbury, etc.. Railroad Co. v. North- western Railroad Co., 6 H. L. Cas. 113; Troy, etc.. Railroad Co. v. Kerr, 17 Barb. (N. Y.) GOl ; York, etc., Co. v. Winans, 17 How. (U. S.) 39 ; Black v. Delaware and Raritan Canal Co., 22 N. J. Eq., 130, 399. * Gloninger v. Pittsburgh, etc.. Railroad Co., 139 Pa. St. 13 ; 27 Week. N. Cas. 497. ^Humphreys v. McKissock, 140 U. S. 304. THE PARTIES TO THE MORTGAGE. 397 sustain to it. Having received the benefit, the corporation is estopped from denying tlie legality of the mortgage.^ So the corporation can validate a mortgage of the directors by issuing bonds and paying interest on them.^ Using the proceeds of such mortgage is a ratification.^ In short, any acts of the corporation showing that such mortgages of the directors have been accepted, is a sufficient ratification.^ Under a by-law authorizing the directors to act for the cor- poration, such mortgages are valid without ratification ; ^ but the by-law must be made in pursuance of its charter, if ex- pressed in terms,^ though the power to make by-laws is inci- dental to the very existence of a corporation.'' It is, however, seldom left to implication, but is usually conferred by express terms of the charter ; and such power given by the charter im- plies a negative, that corporations shall not make by-laws in any other cases, nor for any other purposes, than those specified.^ §372. Corporate Seal. — A seal is incident to every cor- poration.^ And in order to bind a corporation by specialty, the corporate seal should be affixed to the instrument ; the 1 Hotel Co. V. Wade. 97 U. S. 13 ; Stark v. Coffin, 105 Mass. 328 ; Credit Asso- ciation r. Coleman, L. Rep., 6 Ch. 558 ; Aurora Agr. & Hort. Soc. v. Paddock, 80 111. 205 ; Ottawa, etc., Road Co. v. Murray, 15 111. 336 ; Bradley v. Ballard, 55 111. 413 ; Troup's Case, 29 Beav. 353 ; Hoare's Case, 30 Beav. 225 ; Smith v. Lansin^^ 22 N. Y. 520 ; Busby v. Finn, 1 Ohio St. 409. ^McCurdy's Appeal, 05 Pa. St. 290. 3 Cooke V. Watson, 30 N. J. Eq. 345. *Holbrook v. Chamberlin, 116 Mass. 155. 'Hendee v. Pinkerton, 14 Allen (Mass.), 381 ; Saltmarsh v. Spaulding, 147 Mass. 224. See Hoyt v. Thompson, 19 N. Y. 207 ; Augusta Bank r. Hamblet, 35 Me. 491 ; Bank v. Rutland, etc., Railroad Co., .30 Vt. 159, 169 ; Sargent v. Webster, 13 Met. (Mass.) 497. 50:5 ; Miller v. Rutland, etc., Railroad Co., 36 Vt. 452, 474 ; Burrill v. Bank, 2 Met. (Mass.) 163 ; Forbes v. San Rafael Turnpike Co.. 50 Cal. 340. "Anacosta Tribe v. Murbach, 13 Md. 91; Cumminga ?>. AVebster, 43 Me. 192 ; Flint v. Pierce, 99 Mass. 68. ^City of London r. Vanackre, 1 Ld. Raym.496; Norris v. Staps, Ilob. 211. « Child r. Hudson's Bay Co., 2 P. Wm. 207 ; New Orleans v. Phillippi, 9 La. Ann. 44. * Porter v. Androscoggin, etc.. Railroad Co., 37 Me. .349; Everett r. United States. 6 Port. (Ala.) 166 ; Dam Foundry r. Hovey, 21 Pick. (Mass.) 417 ; Ransom r. Stonington, etc., Bank, 13 N. J. Eq.. 212. 398 NATURE AND REQUISITES OF THE CONTRACT. private seal of an agent, though fully authorized to make the contract, is not sufficient.^ And the corporate seal affixed to a contract or conveyance does not render the instrument a cor- porate act, unless it is affixed by an officer or agent duly au- thorized." But where the seal of a corporation is affixed to a deed by the president, it will be presumed that he was authorized to affix it, in the absence of proof to the contrary.^ And so if the president of a corporation, which has adopted no corporate seal, executes a mortgage, and the trustees adopt a seal that he affixes opposite to his name, as the seal of the corporation for the time being, such seal is sufficient.* And, generally, a cor- poration must execute a mortgage under its corporate seal.^ The ancient rule applied to corporations existing by the common law, that they could act only by their common seal, has no application to corporations created by statute.*' § 373. Execution by Attorneys in Fact. — If the power of attorney is to convey land requiring the execution of an in- strument under seal, the power must be executed and attested with the same formalities which the law requires in the execu- tion of the principal instrument. Where the power is special, and the authority limited, the attorney cannot bind his prin- cipal by any act in which he exceeds his authority. The authority of the attorney must be strictly construed, though it is to be taken to include all necessary means of executing it with effect. So when any act of agency is required to be done in the name of the principal, under seal, the authority to ' State V. Allis, 18 Ark. 2G9 ; Elwell v. Phaw, 16 Mass. 42 ; Haight v. Saliler, 30 Barb. (N. Y.) 218; Bank v. Patterson, 7 Cranch(U. S.), 304. •^ Koehler v. Black River Co., 2 Black (U. S.), 715 ; Jackson v. Campbell, 5 Wend. (N. Y.) 572 ; Bank v. Evans, 5 H. L. Cas. 389 ; 32 Eng, Law & Eq. 23. 3 Hopkins I'. Gallatin Turnpike Co., 4 Humph. (Tenn.) 403. * South Baptist Society v. Clapp, 18 Barb. (N. Y.) 36. * Eagle Woolen Mills Co. v. Monteith, 2 Ore. 277, 285 ; In re St. Helen Mill Co., 3 Saw. C. C. 88 ; Hendce v. Pinkerton, 14 Allen (Mass.), 381. ^ Curry v. Bank, 8 Port. (Ala) 361. A facsimile of a seal of a corporation printed with ink on the paper is not a valid seal, where a scroll is not a valid seal : Bates v. Boston, etc., Railroad Co., 10 Allen (Mass.), 251. ■ THE PARTIES TO THE MORTGAGE. 399 the attorney to perform the act must generally be conferred by an instrument under seal.^ The attorney must strictly follow his authority. Thus, if he is authorized to sell and convey real estate, he is not there- by empowered to mortgage it.^ And so a mortgage made under a power for a greater sum than is actually loaned may be repudiated by the principal.^ The two transactions of a sale and a mortgage are essentially different. So, a trust with a power to sell prima facie imports a power to sell, and will not authorize a mortgage, unless something in the power shows that the mortgage was within the intention of the principal.* The power of attorney to authorize an agent to lease or mortgage real estate for the purpose of procuring money in case he cannot sell the property, gives the agent the option of procuring the money either by lease or mortgage in the event he cannot make sale at a reasonable price ; ^ and where an agent adds something beyond his authority, this excess will not invalidate that which may well stand without it." And a power to mortgage includes a power to execute a mortgage containing a power to the mortgagee to sell the premises in default of payment ; it being one of the essential and lawful remedies given to the mortgagee, known to the law.'^ But it would be otherwise, if the law of the State did not permit such a sale, and it was not in general use.^ 'Worrall v. Munn, 5 N. Y. 229; Cooper r. Rankin, 5 Binn. (Pa.) 613; Rowe V. Ware, 30 Ga. 278 ; Shuetze v. Bailey, 40 Mo. 69 ; ]McNaughten v. Partridge, 11 Ohio, 223; Cummins v. Cassily, 5 B. Men. (Ky.) 75; Hibble- white I'. M'Morine, 6 Mees. & Wels. 200; Preston v. Hull, 23 Gratt. (Va.) COO. MVood V. Goodridge, 6 Cuph. (Mass.) 117 ; Bloomer v. Waldron, 3 Hill (N. Y.), 361 ; Morris v. Watson, 15 Minn. 212; Colesbury v. Dart, 61 Ga. 620; De Bouchout V. Goldsmid, 5 Ves. 211 ; Haldenby v. Spofforth, 1 Beav. 390 ; Stroughill V. Anstey, 1 De G., Mac. & G. 635. See section 359. ^ Cleveland Ins. Co. v. Reed, 1 Biss. C. C. 180, 183. * Ho>i; V. Jaques, 129 Mass. 286 ; Coutant v. Servoss, 3 Barb. (N. Y.) 128. ^Mylius V. Copes, 23 Kan. 617. *Jesup V. Bank, 14 Wis. 331. 'Wilson V. Troup, 7 Johns. Ch. (N. Y.) 25. * Jesup V. Bank, 14 Wis. 331. 400 NATURE AND REQUISITES OP THE CONTRACT. A power to charge an estate with the payment of money for the benefit of the children will authorize the disposition of the estate itself.^ So a power to sell for the purpose of raising money includes a power to mortgage.^ § 374. Mode of Executing the Authority. — An agent should, as a general rule, transact the business of the agency in the name of his principal.* Thus, when A. is the princi- pal and B. is the agent, the latter should execute the instru- ment by signing it A. by B., his agent or attorney-in-fact. This rule is most strictly enforced as to sealed instruments. So a sealed instrument when executed by one acting as an agent or attorney-in-fact, should be in the name of the princi- pal and purport to be sealed with his seal, or the person named as principal will not be bound by it.* If the contract or obligation be in the name of the principal the order of the words is not material, since the deed purports on its face to be the deed of the principal, and the intention is to. execute it in his name and as his deed. So a deed or mortgage will be sufficient if signed " For A. B." (the princi- pal), "CD." ^ If the instrument in the granting part of it be in the name of the agent only it will not become the deed of the 1 Long V. Long, 5 Ves. 445. 2 Mills V. Banks, 3 P. Wm. 1 ; Page v. Cooper, 16 Beav. 396 ; Ball v. Harris, 4 Myl. & C. 267. While the general rule is that a power to sell and convey real estate does not confer a power to mortgage, yet there are decisions to the contrary. See Lancaster v. Dolan, 1 Eawle (Pa.), 231 ; Zane v. Kennedy, 73 Pa. St. 182 ; Pa. Life Ins. Co. v. Austin, 42 Pa. St. 257. ' Dennison v. Story, 1 Ore. 272 ; Spencer v. Field, 10 Wend. (N. Y.) 87. *Townsend v. Hubbard, 4 Hill (N. Y.), 351 ; Clarke v. Courtney, 5 Pet. (U. S.) 319, 351 ; Elwell v. Shaw, 16 Mass. 42 ; Einstein v. Holt, 52 Mo. 340 ; Mar- tin V. Flowers, 8 Leigh (Va.), 158 ; Reed v. Latham, 40 Conn. 452 ; Skinner v. Gunn, 9 Port. (Ala.) 305 ; Brinley v. Mann, 2 Cush. (Mass.) 337 ; Grubles v. Wiley, 9 Sm. & M. (Miss.) 29 ; Fire Ins. Co. v. Doll, 35 Md. 89 ; Combe's Case, 9 Coke, 75 ; Copeland v. Mercantile Ins. Co., 6 Pick. (Mass.) 198. 5 Wilks V. Back, 2 East. 142 ; Mussey v. Scott, 7 Cush. (Mass.) 216; Martin V. Almond, 25 Mo. 313 ; Hunter v. Miller, 6 B. Mon. (Ky.) 612 ; Wilburn v. Larkin, 3 Blackf. (Ind.) 55. THE PARTIES TO THE MORTGAGE. 401 principal by being signed and sealed " C. D., attorney to A. B." ' If a mortgage of a corporation is executed by an attorney or an officer in his individual name, it does not bind the corpo- ration except in equity.' By the common law an agent of a corporation must be appointed under a corporate seal. At the present time it is held that an agent of a corporation may be bound without the use of seal whatever may be the purpose of the agency.^ §375. Joint Mortgagors. — Tenants in common may mort- gage their lands for their joint debt, and either of them may pay the mortgage debt, and then he has a claim against his co-tenant for contribution.* But where two unite to mortgage their lands in severalty, each is presumptively liable for half of the debt, and his land is primarily chargeable to that ex- tent.' Article 2. Classification and Competency of Grantees. § 376. Infants. § 380. Partners in Firm Name— Cor- ? 377. ]\Iarried Women. porations. I 378. Aliens. ? 381. National Banks. I 379. Receiver. ^ 382. Joint Mortgagees. § 376. Infants. — A mortgage may be made to an infant. If the mortgagor or his assignee would redeem, it is proper to join the infant and his guardian in a bill for that purpose, and the court will appoint some other disinterested person, who has no interest in the business, as guardian ad litem.^ And ^ Martin v. Flowers, 8 Leigh (Va.), 158 ; Copeland v. Mercantile Ins. Co., 6 Pick. (Mass.) 198, 203 ; Squier v. Norris, 1 Lans. (N. Y.) 282 ; Townsend v. Hubbard, 4 Hill (N. Y.), 351 ; Briggs v. Partridge, 7 Jones & Sp. (N. Y.) 339. ^ Love V. Sierra Nevada, etc., Co., 32 Cal. 639. See Fitch v. Lewiston Steam Mill Co., 80 Me. 34. 3 Bank v. Patterson, 7 Cranch (U. S.), 299 ; Fleckner v. Bank, 8 Wheat. (U. S.) 338 ; Despatch Line Co. v. Bellamy, etc., Co., 12 N. H. 231 ; Fitch v. Lewiston Steam Mill Co., 80 Me. 34. * McLaughlin v. Curts, 27 Wis. 644. * Hoj-t V. Doughty. 4 Sandf. (N. Y.) 462. ^ * Parker v. Lincoln, 12 Mass. 16. VOL. I.— 26 402 NATURE AND REQUISITES OF THE CONTRACT. whatever an infant is bound to do at law, the same shall bind him, although he does it without suit. Therefore, where an infant reconveys land which had been mortgaged to his father, the mortgage-money having been paid, the conveyance is valid.' So where a father had purchased land in the name of his infant son for the purpose of defrauding his creditors, and had afterward sold the land to a purchaser for a valuable consid- eration, and the infant had, at his father's instance, conveyed the title to the purchaser, it was held that he could not after age avoid his conveyance, because though the legal title was cast upon him by the fraudulent conduct of his father, he had no right to the land against a creditor or purchaser ; therefore, when conveyed to a purchaser from his father, he merely parted with a naked title, and only did that which a court of equity would have compelled him to do, and which, if dis- affimed, he would be compelled to do again.^ § 377. Married Women. — The status of a married woman as a mortgagee is now, in many States, controlled by statute. But at common law, while she might become a mortgagee, she could not enforce a foreclosure of the mortgage, the equity of redemption being held by the husband.^ In Illinois, a hus- band may convey or mortgage to his wife, if the transaction is in good faith.^ And a wife who has loaned her husband money stands precisely like any other creditor of the husband ; he may prefer her as creditor to the same extent as he may any other if in good faith.^ As the law now is in Illinois, a wife may mortgage her real estate on the same terms as a husband may his.^ ^Zouch V. Parsons, 3 Burr. 1794 ; 4 Greenl. Cruise on Real Prop., title 32, ch. 2, sect. 13 ; 2 Kent's Com. 234. "Elliott V. Horn, 10 Ala. 348; 1 Am. Lead. Cas. 249. See, also. Tucker v. Moreland, 10 Pet. (U. S.) 67 ; Jones v. Brewer, 1 Pick. (Mass.) 313 ; Prouty v. Edgar, 6 Iowa, 353. 3 Tucker v. Fenno, 110 Mass. 311. * McManus v. Mills, 19 111. App. 398. ■• * Rudershausen v. Atwood, 19 111. App. 58. ^Edwards v. Schoeneman, 104 111. 279. THE PARTIES TO THE MORTGAGE. 403 In Kentucky, a husband may borrow money from his wife and secure the payment thereof by executing a mortgage to her, but the title to the mortgage projierty would be in the husband as trustee.^ And in Wisconsin a mortgage from the husband to his wife is in equity valid and may be enforced.^ § 378. Aliens. — An alien may take a mortgage and enforce its foreclosure ; he may maintain a bill to have the debt paid by sale of the land which had been conveyed to him as se- curity therefor. And if the alien mortgagee, instead of seek- ing to obtain possession of the land, prefers to have his debt paid and the property pledged for its security sold, for the purpose of raising the money, the demand in reality is a per- sonal one, the debt being considered as the principal and the land merely as an incident ; the alienage of the mortgagee, if he be a friend, can, upon no principle of law or equity, be urged against him.^ So, also, the alienage of the mortgagor is no defense to a writ of entry by the mortgagee, to foreclose the right of redemption.* § 379. Receiver. — A receiver cannot become a mortgagee of property which he holds to secure a loan made by him to the owner of the property. The property is in the custody of the law. The court has the management and disposal of it in accordance with the rules of law, and to answer the ends of justice, and the receiver is its officer to execute its authority in the matter. He holds the property for whoever may establish a title to it, and the receiver has no power to make any con- tract regarding it, unless ratified by the court. Hence, a re- ceiver is forbidden from taking security upon the property in- trusted to his care, under the same principle that the law for- bids his becoming a purchaser of it.^ ' Campbell v. Galbreath, 12 Bush (Ky.), 459. ^ Wochoska v. Wochoska, 45 Wis. 423 ; Putnam v. Bicknell, 18 Wis. 333. 'Hughes V. Edwards, 9 Wheat. (U. S.) 489. See, also, Harden v. Fisher, 1 Wheat. (U. S.) 300 ; Orr v. Hodgson, 4 Wheat. (U. S.) 463. * Waugh V. Riley, 8 Met. (Mass.) 290. * Thompson v. Holladay, 15 Ore. 55. 404 NATURE AND REQUISITES OF THE CONTRACT. He occupies a fiduciary relation in this sense, that he cannot be allowed to purchase for his own benefit property connected with or forming a part of the subject-matter of his receiver- ship, or in his possession in that capacity/ § 380. Partners in Firm Name — Corporations. — A mort- gage to partners in the firm name is valid in equity. Where by the terms of the mortgagor's deed, he reserves a lien on the land as a security for the unpaid purchase-money, it operates as a mortgage. Hence, a mortgage to real estate, made by the owner to a partnership, in its firm name to secure an indebted- ness to it, duly executed and filed according to statute, consti- tutes a valid lien upon the property in favor of the firm as a security for the indebtedness to it. The objection made that a partnership, in its firm name, cannot hold the legal title to real estate is not material, because the mortgagor would hold the legal title in trust as security for the firm. And in such case there would be no need of a formal reformation, as the court in the exercise of its equity powers would treat that to be done which ought to have been done, and give effect to the instru- ment in a proceeding to foreclose the mortgage, by awarding to the mortgagee a lien upon the land for the satisfaction of the amount diie the partnership.^ Any corporation having authority to convey real estate may mortgage the same for the payment of its debts.^ So a county may take security from an ex-treasurer for moneys received by him and not accounted for; and may take the deed in the name of a trustee.* If a corporation has the right to loan its funds, then it neces- sarily follows that it has the right to take security for the re- payment of the moneys loaned.^ Thus, although the charter ' High on Receivers, sects. 193, 194. ''■ New Vienna Bank v. Johnson, 47 Ohio St. 306. 2 Jackson v. Brown, 5 AVend. (N. Y.) 590 ; Gordon v. Preston, 1 Watts (Pa.), 385. * Bank v. Chapelle, 40 Mich. 447. See, also, Alexander v. Knox, 6 Saw. C. C. 54 ; Vanarsdall v. Watson, 65 Ind. 176. 5 Bank v. North, 4 Johns. Ch. (N. Y.) 373. THE PARTIES TO THE MORTGAGE. 405 contains no express provision authorizing the taking of notes and mortgages or other security, yet by authorizing loans to be made, its charter clearly implies authority for security to be taken which is usually taken to secure loans.^ So a railroad company when not restricted or forbidden, tnay take mortgages of real estate securing notes or bonds given for the stock." And a corporation may take a mortgage of lands in another State where the instrument will be upheld, although the charter may not authorize the corporation to take such mortgage.^ But if a statute forbids foreign corporations to take mortgages in the State, such mortgages are void,* and such act is not in con- flict with the Federal constitution.^ Under such act mortgage of land to a foreign corporation is void, and sale under a power in the mortgage is void, and does not violate condition against alienation in insurance policy ; and an act subsequently passed, validating such mortgage, does not so far make such sale valid as to divest mortgagor's vested rights of action on policy. §381. National Banks. — National banks can take mort- gages on real estate to secure an indebtedness previously con- tracted, for which new notes are given by the debtor, and such transaction is not a violation of the national banking law.® ^ Massey v. Building Association, 22 Kan. 624 ; Bank v. Tallman, 17 "Wis. 530. ^ Clark V. Farrington, 11 Wis. 306 ; Blunt v. Walker, 11 Wis. 334 ; Lyon v. Ewings,' 17 Wis. 61. » Nat. Trust Co. v. Murphy, 30 N. J. Eq. 408 ; Leasure v. Union Mut. Life Ins. Co., 91 Pa. St. 491. * United States Mortar. Co. v. Gross, 93 111. 483. This act was repealed in 1875. =* Gross V. U. S. Mortg. Co., 108 U. S. 477. ® Farmers and Merchants' National Bank v. Wallace, 45 Ohio St. 152, 168, opinion by Dickman, J. ; Shinkle r. First Nat. Bank, 22 Ohio St. 516 ; Allen V. First Nat. Bank, 23 Ohio St. 97 ; Upton v. National Bank, 120 Mass. 153 ; Omn V. Merchants' Nat. Bank, 16 Kan. 341 ; Morse on Banking (2d ed.), 566. Section 5137 of the U. S. Rev. Stat, provides : A national banking association may purchase, hold, and convey real estate for the following purposes, and for no other : First, such as may be necessary for its immediate accommodation in the transaction of business. Second, such as shall be mortgaged to it in good faith by way of security for debts previously contracted. Third, such as shall be conveyed to it in satis- faction of debts previously contracted in the course of its dealings. Fourth, 406 NATURE AND REQUISITES OF THE CONTRACT. This is the doctrine announced by the United States Supreme Court, and must prevail. In the argument the court con- sidered the transaction in two aspects : First, as not being within the letter of the statute, because the deed of trust w\as not executed to the bank ; and, second, as a loan upon real estate security. Under the first head, the court held that as a mortgage the deed of trust was merely an incident to the note, and a right to its benefit, whether it was delivered or not with the note, passed with the transfer of the latter. If the loan had been upon the note alone, the benefit of the deed, as a mortgage, would have inured to the bank by operation of law. Of course that which the law would give independently of a direct transfer by the mortgage, the statute did not intend to defeat because such transfer was made. Under the second head, as a loan upon real estate security, the court said that, so treating it, the consequence insisted upon did not follow ; that the statute did not declare such security void, but was silent on the subject; that had Congress so intended, it would have been easy to say so, and it can hardly be presumed that this would not have been done, instead of leaving the question to be settled by the uncertain result of litigation and judicial decision. Hence, the prohibitory clause of the statute did not vitiate real estate securities taken for loans, and that a disregard of them only held the association open to proceedings by the government.^ And, hence, a mortgage to a bank, so far as the subsequent incumbrances are concerned, is to be regarded as a valid security for the future advances to the mortgagor.^ And whatever objection there may be to such prohibitory statutes, the objec- Buch as it shall purchase at sales under judgments, decrees, or mortgages held by the association, or shall purchase to secure debts to it. But no such association shall hold the possession of any real estate under mortgage, or the title and possession of any real estate purchased to secure any debts due to it for a longer period than five years : 13 Stat. 99. 1 Nat. Bank v. Matthews, 98 U. S. 621 ; Heath v. Bank, 70 Ind. 106 ; Scofleld V. Bank, 9 Nebr. 316 ; Thornton v. Bank, 71 Mo. 221 ; Bank v. Elmore, 52 Iowa, 541 ; Wroten v. Armat, 31 Gratt. (Va.) 228. ^ Nat. Bank v. Whitney, 103 U. S. 99. THE PARTIES TO THE MORTGAGE. 407 tion can only be urged by the government.^ And it is the general rule that when a corporation is incompetent, by its charter, to take a title to real estate, a conveyance to it is not void, but only voidable, and the sovereign alone can object. The conveyance is valid until assailed in a direct proceeding, instituted for that purpose, by the sovereign.^ § 382. JoixT Mortgagees. — Two or more mortgagees can take land jointly, and where land is so mortgaged for a joint debt, it is held in joint tenantcy.^ And a note to two mort- gagees may be paid by paying either, and when paid to either party, the mortgage to secure its payment is extinguished.^ Upon the death of one of the mortgagees the legal owmer- ship of the mortgage made to them vests in the survivor ex- clusively, and he alone is entitled to its possession, and to sue for and receive the money upon it. He is entitled to one-half of the money due upon it in his own right, and he takes the other half as trustee for the representative of the deceased co- tenant.^ But at common law, upon the death of one of the mortgagees, the estate in the land vests in the heir, while the debt vests in the administrator.® If a conveyance were made to two mortgagees in fee as tenants in common, as security for a joint debt, they would so hold it by the common law ; ^Fleckner v. Bank, 8 Wheat. (U. S.) 338, 355. 'Leasure ?;. Hillegas, 7 Serg. & R. (Pa.) 313; Goundie v. Northampton Water Co., 7 Pa. St. 233 ; Runyan v. Coster, 14 Pet. (U. S.) 122 ; The Banks v. Poitiaux, 3 Rand. (Va.) 136 ; Mclndoe v. City of St. Louis, 10 Mo. 577 ; Bank V. North, 4 Johns. Ch. (N Y.) 370. See, also, Baird v. Bank, 11 Serg. & R. (Pa.) 411 ; Graham v. Bank, 32 N. J. Eq. 804 ; Gold Min. Co. v. Bank, 96 U. S. 640. Before this question was settled by Nat. Bank v. Matthews, 98 U. S. 621, and Nat. Bank v. Whitney, 103 U. S. 99, several of the State courts passed upon the question, and some of their decisions hold a contrary doctrine. See Crocker v. Whitney, 71 N. Y. 161 ; Fowler v. Scully, 72 Pa. St. 456 ; Woods V. Bank, 83 Pa. St. 57 ; Kansas Valley Bank v. Rowelf, 2 Dill. C. C. 371 ; Rip- ley V. Harris, 3 Biss. C. C. 199 ; Bank v. Young, 37 Mo. 398. ' Appleton V. Boyd, 7 Mass. 131. Compare Randall v. Phillips, 3 Mas. 0. C. 378. * Wright V. Ware, 58 Ga. 150. * Mutual Life Ins. Co. v. Sturges, 32 N. J. Eq. 678 ; Appleton v. Boyd, 7 Mass. 131. "Petty V. Sly ward, 1 Ch. Rep. 31, 57. 408 NATURE AND REQUISITES OF THE CONTRACT. and upon the death of one, his share would descend to his heir, as tenant in common, and the survivor would hold the other moiety as tenant in common, and at the same time that the debt would vest solely in him by survivorship, for the purpose of the remedy.^ The survivor may enforce the debt,^ but to foreclose the mortgage he must make the representative of the deceased co-tenant a party also to the suit.^ Payment to either mortgagee extinguishes the debt.* And a mortgagee who is a creditor of the mortgagor accepting a mortgage as well for his own benefit as for the sureties of the mortgagor, is bound to appropriate the proceeds of the mort- gage estate pro rata to the debts secured.^ Where two instruments are executed at the same time, be- tween the same parties, relative to the same subject-matter, and to effectuate one object, they are to be taken together ; but where two deeds are given to different persons for different con- siderations, not executed at the same time, nor relative to the same subject-matter, nor to effectuate the same object, nor in pursuance of a contract made by the grantees jointly, they will be considered and taken as separate instruments.*' And an owner of land by mortgaging an individual half tliereof, and allowing the mortgagee to enter to foreclose before condi- tion broken, does not thereby become tenant in common with him.'^ But after the mortgage has been foreclosed, the mort- gagees hold the land as tenants in common.^ A mortgage given to two or more persons to secure their ' Randall r. Phillip?, 3 Mas. C. C. 379. Compare Appleton v. Boyd, 7 Mass, 131. '^ Blake v. Sanborn, 8 Gray (Mass.), 154 ; Webster v. Vanderwenter, 6 Gray (Mass.), 428. 3 Traders' Savings Bank v. Freese, 26 N. J. Eq. 453 ; Mutual Life Ins. Co. v. Sturges, 32 N. J. Eq. 678 ; Williams v. Hilton, 35 Me. 547. * Ruddock's Case, 6 Co. 25 ; Pierson v. Hooker, 3 Johns. (N. Y.) 68. See, also, Sherman v. Ballou, 8 Cow. (N. Y.) 304 ; Decker v. Livingston, 15 Johns. (N. Y.) 478. 5 Willis V. Caldwell, 10 B. Mon. (Ky.) 199; Adams v. Robertson, 37 111. 45. « Bates V. Coe, 10 Conn. 280, 293. ' Norcross v. Norcross, 105 Mass. 265. 8 Goodwin v. Richardson, 11 Mass. 469 ; Tyler v. Taylor, 8 Barb. (N. Y.) 585 ; THE PARTIES TO THE MORTGAGE. 409 several debts is several and not joint, and each mortgagee has a right to enforce only his claim/ But if there be a joint mortgage made to two, to secure a debt due to one of them, the legal estate vests in them as tenants in common, the one having no interest in the mortgage debt being trustee of the estate for the benefit of him who owes the debt.^ In a suit for contribution, by one of several mortgagees, against another, all the other mortgagees must also be made parties to the suit.^ It has been held that a mortgage being given to husband and wife, upon the death of the husband the mortgage vests in the wife.* But this doctrine is controlled by statute. Thus, in Illinois, a deed to husband and wife makes them tenants in common, and not tenants by the entirety.^ Donnels v. Edwards, 2 Pick. (Mass.) 617 ; Rigden v. Vallier, 2 Yes. Sr. 258 ; Burnett v. Burt, 22 Pick. (Mass.) 546, 555 ; Johnson r. Brown, 31 X. H. 405. 1 Brown v. Bates, 55 Me. 520; Gilson v. Gilson, 2 Allen (Mass.), 115, 117. 2 Root V. Bancroft, 10 Met. (Mass.) 44. 3 Carr v. Waldron, 44 Mo. .393. * Draper v. Jackson, 16 Mass. 480. ^ Cooper V. Cooper, 76 111. 57. But in Massachusetts mortgages are expressly excepted from the provis- ions of the statute that conveyances made to two or more persons shall be construed to create estates in common. Gen. Stat., ch. 89, sect. 14. In Maine a mortgage to two or more persons makes themjoint tenants unless otherwise expressed : Rev. Stat., ch. 73, sect. 13. CHAPTER XI. mortgagable interests. Article 1. Present Interests or Interests in Esse. I 383. General Statement. I 390. An Equitable Interest May be I 384. Contracts for Purchase. Mortgaged. § 385. Adverse Title. § 391. A Mortgage of a Building § 386. A Possibility not Coupled with Carries the Ground on an Interest. which it Stands. I 387. Remainders and Reversions. § 392. Erecting Buildings on the § 388. Trust Estates Cannot be Mort- Land of Another. gaged. § 393. Rents and Profits. I 389. Only the Mortgagor's Interest § 394. What Property Included— In Passes. General. § 383. General Statement. — Concisely stated, all kinds of property, real and personal, which are capable of absolute sale may be mortgaged.^ Therefore, rights in remainder and reversion, possibilities coupled with an interest, rents, and choses in action are capable of being mortgaged,^ and everything subject to contract or which may be assigned is capable of being mortgaged.^ So any estate in fee simple, fee tail, for life or years, in any lands, or in any rents or profits out of the same may be mort- So lands subject to pre-emption may be mortgaged,^ and also mining claims ; ® so, also, a certificate of stock in an unincor- porated company representing an interest in land ; ^ or the 1 Dorsay v. Hall, 7 Nebr. 460 ; 4 Kent's Com. 144. ''Wilson V. Ross, 17 Fla. 691 ; 2 Story's Eq. Jur., sect. 1021. 3 Bank v. Baumeister, 87 Ky. 6 ; Neiigh v. Michenor, 3 Stock. (N. J.) 539. * 1 Powell on Mort. 18; Miller v. Tipton, 6 Blackf. (Ind.) 238; Wilson v. Wilson, 32 Barb. (N. Y.) 328 ; In re John and Cherry Streets, 19 Wend. (N. Y.) 659. nVhitney v. Buckman, 13 Cal. 536 : Bush r. Marshall, 6 How. (U. S.) 284. ® Alexander v. Sherman (Ariz.), 16 Pac. Rep. 45. 'Durkee v. Stringham, 8 Wis. 1. 410 MORTGAGABLE INTERESTS. 411 interest of a holder of school land certificates so long as valid.^ So potential interests may be mortgaged.^ § 384. Contract for Purchase. — The interest of a con- tract for purchase of real estate can be mortgaged. Thus, pay- ing part of the purchase-money with a written contract of pur- chase, and having possession by consent of the vendor, create an interest which may be mortgaged.^ And one in possession under parol contract to purchase has a mortgagable interest.^ So has one who holds a title bond.^ So, a contract for an op- tion to purchase real estate at an agreed price, within a speci- fied time, upon a sufiicient consideration, creates an interest which may be mortgaged.^ But a transfer by a cestui que trust to his creditor of all his interest in the proceeds of land held in trust for himself and others does not constitute a mortgage of such land.^ A mort- gage of property executed by the owner of the legal title and the owner of the equitable interest is valid.* § 385. Adverse Title. — A mortgage of land in possession of another adverse to the mortgagor is good in equity, between the parties to it.^ The conveyance is only void as to a person holding adversely and those that subsequently come in under him ; as to all others the conveyance is valid and passes the title, or interest from the grantor or lessor to the grantee or lessee.^^ But a mortgage upon land executed by one having no ' Mowry v. Wood, 12 Wis. 413 ; Jarvis v. Butcher, 16 Wis. 307. ^ Grantham v. Hawley, 1 Hobart, 132. ^ Balen v. Mercier, 75 Mich. 42. * Sinclair v. Armitage, 12 N. J. Eq. 174 ; Hagar v. Brainerd, 44 Vt. 294 ; Bull r. Sykes, 7 Wis. 449. ^ Baker v. Bishop Hill Colony, 45 111. 264 ; Laughlin v. Braley, 25 Kan. 147 ; Houghton V. Allen, 75 Cal. 102 ; Smith r. Patton, 12 W. Va. 541 ; Crane v. T\irner, 7 Hun (N. Y.), 357 ; Farmers' Loan and Trust Co. v. Curtis, 7 N. Y. 466. *Bank v. Baumeister, 87 Ky. 6, opinion by Lewis, J. ' Hyman v. Bogue, 135 111. 9. « Brokaw v. Field, 33 111. App. 138. 9 Hall V. Westcott, 15 R. I. 373. '" University v. Joslyn, 21 Vt. 52, 61 ; Edwards v. Roys, 18 Vt. 473 ; Livings- ^ ton 1'. Peru Iron Co., 9 Wend. (N. Y.) 511,523; Wade v. Lindsay, 6 Met. (Mass.) 407 ; Stockton v. Williams, 1 Doug. (Mich.) 546 ; Betsey v. Torrance, 34 Miss. 132, 138. 412 NATURE AND REQUISITES OF THE CONTRACT. title of any kind thereto is void/ and it is not even a cloud upon the title.^ § 386. A Possibility not Coupled with an Interest. — A possibility is not mortgagable if not coupled with an interest. Thus, the right of pre-emjjtion of public lands is not mortga- gable.^ So when a party has neither title nor possession of the land, and the deed is held back subject to a payment of the purchase price there is no interest susceptible of a mort- gage.* And, in short, a mere possibility or expectancy, not coupled with an interest in or growing out of the estate, is not subject of a mortgage. Such an interest is not subject of sale and therefore not of mortgage.^ §387. Remainders and Reversions. — A vested interest in remainder may be mortgaged.^ And a possibility, coupled with an interest created by a devise to a designated person, upon a single contingency not remote or dependent upon the volition of another, can be bound or charged by a mort- gage.^ So a life tenant can mortgage whatever interest he has, though he cannot prejudice the rights of the remainderman.* And, in general, all remainders and reversions capable of as- signment may be the subject of mortgage.^ Where a certain undivided interest in real estate was be- queathed to a son, and a life interest in certain other real es- tate to the widow, with directions that after her death it be sold and a distributive share given the son, it was held that a mortgage executed by the son before the death of the widow, ' Pierce v. Emery, 32 N. H. 484 ; Cornish v. Frees, 74 Wis. 490. ^ Cornish v. Frees, 74 Wis. 490. 3 Penn v. Ott, 12 La. Ann. 233 ; Gilbert v. Penn, 12 La. Ann. 235. * Bright V. Buckman, 39 Fed. Rep. 243. * Low V. Pew, 108 Mass. 347 ; Skipper v. Stokes, 42 Ala. 255 ; Purcell v. Mather, 35 Ala. 570. 6 Flanders r. Greely, 64 N. H. 357 ; 3 Washb. Real Prop. 88-90, 301, 302. 'Jones V. Roe, 3 Term Rep. 88, 93 ; Wilson v. Wilson, 32 Barb. (N. Y.) 328, 343. Compare I^mpert's Case, 10 Rep. 46. 8 Hosmer r. Carter, (58 111. 98. » Curtis V. Root, 20 111. 520, 522. MOETGAGABLE INTERESTS. 413 embracing all the right, title, and interest in the property be- queathed to him by the father, did not embrace the property included in the widow's life estate.^ So the share of the grand- child of one of the daughters of the declarant, to which he was entitled as heir-at-law of his sister, under a certain declaration of uses, was held not to be embraced by the terms of a deed of mortgage from him to other parties where those terms were confined to " all the interest he may or will possess, either in his OMTi right, or as heir-at-law of his mother, by reason of all or any of the deeds, conveyances, and declaration of uses " mentioned in the deed of mortgage.^ Where the grant is a life estate to one and of a fee to another, and mortgage back is executed by the life tenant, the mort- gage attaches only to the life estate, and does not affect the fee. Judge Shope says that if by deed a life estate is conveyed to one and the fee to another, as part of the same transaction, and the life estate is mortgaged by the grantee to the grantor, the mortgage would attach to the life estate, and the life tenant would take subject t-o the lien, and the fee would pass unaffected by the mortgage.^ Under the Michigan statute * which provides that " no ex- pectant estate can be defeated or barred by any alienation or other act of the owner of the intermediate estate, nor by any destruction of such precedent estate," a mortgage of property by one whose estate therein by demise would go to other de- visees, in case of death before the termination of a life estate of another, is void on the death of the mortgagor during such life estate.^ §388. Trust Estates Cannot be Mortgaged. — The law is, if a trust is created for a specific purpose, and is so limited, if it is not repugnant to the rule against perpetuities, and is in other respects legal, neither the trustee nor the cestui que ' Hauft V. Duncan, 40 Iowa, 254. ' McPherson v. Snowden, 19 Md. 197. ^Lehndorf i;. Cope, 122 111. 317. * How. St., sect. 5548. , *L'Etourneau v. Henquenet (Mich.). 50 N. W. Rep. 1077. 414 NATURE AND REQUISITES OF THE CONTRACT. trust, nor his creditors or assigns can divert the property from the appointed purpose. Any conveyance, whether by the operation of law or by tlie act of any of the parties which dis- appoints the purpose of the settlor by diverting the property or the income from the purpose named, would be a breach of the trust. Therefore, it may be said that the power to create a trust for a specific purpose does, in some sort, impair the power to alienate property.^ So, where a beneficiary is entitled to a life support out of an estate held by a trustee, he has no power to mortgage the estate ; and a mortgage executed by such beneficiary and the remainderman is valid only as against the latter, except so far as it secures money used in paying debts resting on the estate.^ But a clause in a deed of trust, providing that the trustee, at the request of the cestui que trust and her heirs, may sell the estate conveyed, does not exclude the power to mortgage for the benefit of the cestuis que trustent? But a will of the testator, empowering the trustee to continue the business and to increase or diminish the real or personal estate therein, does not give the trustee power to create a paramount charge upon the real estate by mortgage to raise moneys for the dis- charge of debts incurred by him in carrying on the testator's business.* And a decree authorizing a mortgaging of a trust estate, does not give the trustee power to stipulate in the mort- gage for the payment of semi-annual interest on the loan, and that in default of payment of interest, taxes, or insur- ance, the whole debt shall become due and ten per cent, attor- ney's fees to be allowed for its collection by law.* A cestui que trust, entitled to the rents and profits of land for life can mortgage such interest.® ' Perry on Trusts and Trustees (2d ed.), sect. 386 a ; Rife v. Geyer, 59 Pa. St. 396. See, also, Keyser v. Mitchell, 67 Pa. St. 473 ; Perkins v. Hays, 3 Gray (Mass.), 405 ; Van Amee v. Jackson, 35 Vt. 173. '^ Barnes v. Dow, 59 Vt. 530. »Wood V. Kice, 103 Mo. 329. *In re Webb, 63 Law T. 545. See, also, Carr v. Branch, 85 Va. 597 ; In re Clarke's Estate, 59 Hun (N. Y.), 557. * Bolles V. Munnerlyn, 83 Ga. 727. «Perrine v. Newell (N. J.), 23 Atl. Rep. 492. MORTGAGABLE INTERESTS. 415 § 389. Only the Mortgagor's Interest Passes. — The inter- est of the mortgagor only passes. If he has no interest no es- tate is conveyed.^ Thus, a conveyance of an entire tract of land, embracing the homestead which could not be mortgaged by the husband alone, though void as to the homestead is valid as to the other lands.^ And a deed of trust executed by the holder of notes for the purchase-money of land, who con- veyed the land on which the notes are a vendor's lien, does not operate to transfer such notes, if there be no mention of them in the deed.^ But a mortgage of land which is subject to a right of home- stead, conveys the reversionary interest of the mortgagor after the expiration of the homestead estate.* And so a mortgage of land which the mortgagor had previously contracted to sell, passes only his interest.^ And so an imperfect title, claimed by virtue of a concession, and is by the law of the State sub- ject of sale, is subject of mortgage for a debt." A clause in a mortgage of certain tracts of land, " excepting therefrom so much of said tracts as have been conveyed by deed and to different individuals," does not reserve from the operation of the mortgage a portion of said lands conveyed by a prior un- recorded mortgage.^ And a deed of mortgage which conveys all of the land and right and claim of land which the grantor has in a certain town, does not include land therein to which he has only a possibility of reversion on the non-performance of a condition subsequent.^ And a mortgage of land passes the grantor's title, though it be only in mortgage,^ § 390. An Equitable Interest May be Mortgaged. — A mortgagor can mortgage only what interest he has in the 1 Pierce v. Emery, 32 N. H. 484 ; Cornish v. Frees, 74 Wis. 490. ^ McGuire v. Van Pelt, 55 Ala. 344. ^ Bell V. Blair, 65 Miss. 191. * Smith?). Provin, 4 Allen (Mass.), 516. ^ Laverty v. Moore, 33 N. Y. 658. « Massey v. Papin, 24 How. (U. S.) 362 ; Bissell v. Penrose, 8 How. (U. S.) 317 ; Landes v. Brant, 10 How. (U. S.) 348. ^ Eaton V. White, IS Wis. 517. ® Richardson r. Cambrid^-e, 2 Allen (Mass.), 118. ^Murdock v. Chapman, 9 Gray (Mass.), 156. 416 NATURE AND REQUISITES OF THE CONTRACT. land. Thus, a mortgage purporting to convey a fee simple title to real estate, the mortgagor having only an equitable title, is effective to pass such equity.' So when a party has a bond for a deed and land contract from the legal owner for payment of certain installments, is in possession of the land, and has paid interest on the purchase-money, he has an equit- able interest subject of mortgage.^ In like manner where a party erects improvements on real estate under a parol contract for the purchase of the land, he acquires an interest in the land to the extent of such improve- ments, and this interest is mortgagable.^ So a building erected under an agreement with the owner of the soil to buy the land at a certain price, within a limited time, becomes a fix- ture and constitutes a part of the realty, and is an equitable interest in the realty which is subject of mortgage by the vendee.* A mortgage by a tenant in common of a moiety of land, passes only his interest.^ A mortgage given by one not the owner of the land will not become valid unless he acquires the ownership ; and join- ing the owner who has promised to sell to the mortgagor in the sale of the property, is not an acquisition of the property, and does not give validity to the mortgage.® § 391. The Mortgage op a Building Carries the Ground ON Which it Stands. — Whenever a building is mortgaged, the land essential to the use of the building will pass by such mortgage, if it appears that such was the intention of the parties. Thus, a mortgage of a three-story brick building occupied as a store carries the land on which the store is situated.^ So a conveyance of a mill with appurtenances passes not the build- ' Lincoln Building and Saviners Association v. Hass, 10 Nebr. 581. '^ Jones V. Lapham, 15 Kan. 540; Lauglin v. Braley, 25 Kan. 147. 3 White V. Butt, 32 Iowa, 335. ^ Eastman v. Foster, 8 Met. (Mass.) 19, 26. ^Shirras v. Caig, 7 Cranch (U. S.), 34. ® Sample v. Scarborough, 43 La. Ann. 315. nVilson V. Hunter, 14 Wis. 683 ; Gibson v. Brockway, 8 N. H. 465. MORTGAGABLE INTERESTS. 417 ing merely but the land under and adjoining, which is neces- sary to the use and is actually used with it.^ So a mortgage, to secure advances to enable the mortgagor to erect a building of " all of his right, title, and interest which he now has in the foundation, or stone work of said building, which he may have and unto said building during its erection and comple- tion, and after it is completed," passes the land on which the building stands.^ § 392. Erecting Buildings on the Land of Another. — By erecting a house on the land of another it becomes a part of the realty, unless expressly agreed that it shall remain per- sonalty. So, where a party, by agreement to purchase the land, builds a house on it, he cannot give a valid mortgage on it until the conveyance of the land is made to him.^ So, if the assignee of the mortgagor removes fixtures from the land, though erected by him, the assignee of the mortgagee- may have an action of trespass against him for their value.* §393. Rents and Profits. — Notwithstanding the general rule, that the mortgagor, until some action by the mortgagee,^ is entitled to the earnings and profits of the mortgaged land^ yet it is lawful for the parties to agree that the earnings and profits shall be held in equity by the mortgagee ; and under such a contract, such income, whenever received, is operated upon by the mortgage, and the party receiving it holds it in trust for whoever in equity is entitled to it.^ So a mortgagee ' Whitney v. Olney, 3 Mas. C. C. 280 ; Esty v. Baker, 48 Me. 495 ; Maddox ". Goddard, 15 Me. 224; Forbush v. Lombard, 13 Met. (Mass.), 109; Moore v. Fletcher, IG Me. 66 ; Blake v. Clark, 6 Me. 436. 'Greenwood ?'. Murdock, 9 Gray (Mass.), 20. See, also, Cheshire v. Shutes- bim', 7Met. (Mass.) 566; Johnson v. Rayner, 6 Gray (Mass.), 110; Doyle v. Lord, 64 N. Y. 433, 436. 'Milton V. Colby, 5 Met. (Mass.) 78. ♦Smith ?'. Goodwin, 2 Me. 173; Frothingham v. McKusick, 24 Me. 403; Pettengell y. Evans, 5 N. H. 54; Smith v. Moore, 11 N. H. 55; Sanders r. "Reed, 12 N. H. 561 ; Hamlin r. Parsons, 12 Minn. 108. See, also, Peirce v. Goddard, 22 Pick. (Mass.) 559. ^ Pullan V. Cincinnati, etc., C. R. R. Co., 5 Biss. C. C. 237 ; Walthall v. Rives, 84 Ala. 96 ; Van Rensselaer r. Dennison, 35 N. Y. 393. VOL. I.— 27 418 NATURE AND REQUISITES OF THE CONTRACT. imay agree with the mortgagor for the rents and profits of a ditch for mining purposes.^ After condition broken, a mortgagor in possession may cut firewood and timber for repairs, for use upon the premises, and for ordinary purposes.^ And when the mortgage is paid, the timber which has been cut down is discharged and reverts to the mortgagor.^ § 394. What Property Included — In General. — A mort- gage of real *estate includes all articles essential to the use of the realty, which have been applied exclusively to use in con- nection with it, and are necessary for that purpose, and with- out which, or similar articles, the realty would cease to be val- uable.* Hence, a mortgage given on a ditch or flume in pro- cess of construction without any special provision, will include all improvements or fixtures then on the line located for the flume, as well as those which may hereafter be put on.^ An abstract of ,title to the mortgaged land goes to the mort- gagee until the debt is paid, and the lien therefore discharged.'' The mortgage covers all improvements subsequently made by the mortgagor or purchaser from him.^ A mortgage given to secure certain notes whereby it was made a lien on a mill and machinery in said mill, till the pay- ment of said notes, will embrace machinery placed in the building after the mortgage was given and before the notes were paid.^ A mortgagee may mortgage his interest in the property under his mortgage, whatever that is.' » Kidd V. Teeple, 22 Gal. 255. ''Hapgood V. Blood, 11 Gray (Mass.), 400. 3 Hutching v. King, 1 Wall. (U. S.) 53. *Hoyle V. Plattsburg, etc., R. R. Co., 51 Barb. (N. Y. ) 45 ; Bond v. Coke, 71 N. Car. 97. 2- Union Water Co. v. Murphy, etc., Co., 22 Oal. 620. 6 Holm V. Wiest, 11 Abb. Pr. N. S. (N. Y.) 113. 'Rice V. Dewey, 54 Barb. (N. Y.) 455 ; Martin v. Beatty, 54 111. 100 ; Whar- ton V. Moore, 84 N. Car. 479 ; Mitchell v. Black, 64 Me. 48. See, also, Griffin V. Marine Co., 52 111. 130. * Johnston v. Morrow, 60 Mo. 339. »Murdock v. Chapman, 9 Gray (Mass.), 156. MORTGAGABLE INTERESTS. 419 If a married woman, having the rights of a feme sole, has a mortgage upon her husband's real estate, and then joins him in a subsequent mortgage merely to release her dower and home- stead, she does not thereby subject her mortgage interest to the lien of the subsequent mortgage/ But if she had united with him, in a deed, in the granting part and in the covenants, she would thereby convey her mortgage interests.^ If a mortgagee mortgages his interest in the land and then acquires an absolute estate, his mortgagee, by foreclosing, takes an absolute title.^ A part of the heirs sold their interest to the other heirs, who gave back a mortgage describing the whole estate, and it was held that the mortgage covered the whole estate/ So the owners of land conveyed an undivided half of the property to the vendee ; about two years thereafter they conveyed the other undivided half, and the vendee gave back a mortgage for part of the purchase-money which described the whole tract, and it was held that the mortgage covered the entire land.^ Accretion from a river, after the mortgage is given, goes with the land.^ ' Kitchell V. Mudgett, 37 Mich. 81. * Gregory v. Gregory, 16 Ohio St. 560. 'Murdock v. Chapman, 9 Gray (Mass.), 156. * Potts V. Blanchard, 19 La. Ann. 167. 5 Carpenter v. Millard, 38 Vt. 9. See Shirras v. Caig, 7 Cranch (U. S.), 34. «Cruikshanks v. Wilmer (Ky.), 18 S. W. Rep. 1018. 420 NATURE AND REQUISITES OF THE CONTRACT. Article 2. Fixtures Subject to a Mortgage Lien. Annexation of Fixtures Before Execution of the Real Es^ tate Mortgage. Annexation of Fixtures After Execution of the Real Es- tate Mortgage. Machinery Loaned or Sold to Mortgagor on Condition. Things Useful and Ornamen- tal. Trade Fixtures. The Lessee's Right to Remove Fixtures. Estoppel of Lessee. Statutory Provisions. ? 395. Irremovable Character of Fix- ? 402. tures. ? 396. Elementary Rule as to Things Fixed to the Soil. § 403. § 397. Mutual Agreement — Express or Implied. § 398. How Far Can the Lien of a § 404. Chattel Mortgage be Pre- served after Annexation of ?. 405. ' Fixtures. § 399. The Real Estate Mortgage Cov- § 406. ers the Property in the Con- § 407. dition In Which It Comes to the Mortgagor's Hands. ? 408. 1 400. When Designed to be Perma- § 409. nent. ? 401. Buildings Erected on Mortgaged Realty. §395. Irremovable Character op Fixtures. — To deter- mine the irremovable character of fixtures, three things are, by the modern authorities, apphed : 1 . Actual annexation to the realty or something appurtenant thereto. 2. Application to the use or purpose to which that part of the realty, with which it is connected is appropriated. 3. The intention of the parties making the annexation to make a permanent accession to the freehold.^ The clear tendency of modern authority seems to give prominence to the question of intention to make the article a permanent accession to the freehold.^ It may be stated in the first place, that whether a thing, which may be a fixture, becomes a part of the realty by an- nexation, depends as a general proposition upon the inten- tion with which it was done.^ There seems to be a great unanimity in the authorities ' Tyler on Fixtures, 114. * Ewell on Fixtures, p. 22. 3 Washb. Real Prop., p. 8. MORTGAGABLE INTERESTS. 421 that things personal in their nature may retain their character of personalty by the express agreement of the parties, although attached to the realty in such a manner as that, without such agreement, they would lose that character, provided they are so attached that they may be removed without material injury to the article itself, or to the freehold. Of course it is not held that parties may, by contract, make personal property, realty or personalty at will, but where an article personal in its nature, is so attached to the realty that it can be removed without material injury to it or to the realty, the intention with which it is attached will govern ; and if there is an express agreement that it shall remain personal property, or if from the circumstances attending, it is evident or may be presumed that such was the intention of the parties, it will be held to have retained its personal character/ This intention can be inferred from the nature of the article affixed, the relation and situation of the party making the an- nexation, the structure and mode of annexation, and the pur- pose or use for which the annexation has been made.^ The intent and use have much to do in determining the character of a fixture.^ § 396. Elementary Rule as to Things Fixed to the Soil. — The elementary rule of the common law is quicquid plantatur solo, solo cedit. This is a rule of great antiquity, that whatever is affixed to the soil becomes, in contemplation of law, a part of it, and is, consequently, subjected to the same rights of property as the soil itself.* But it must be borne in mind that many exceptions have become engrafted upon this rule. Kent says the law of fixtures is in derogation of the 'Sword V. Low, 122 111. 487 ; Ford v. Cobb, 20 N. Y. 344 ; Eaves v. Estes, 10 Kan. 314; Richardson v. Copeland, 6 Gray (Mass.), 536; Haven v. Emery, 33 N. H. 66. 'TeaflFv. Hewitt, 1 Ohio St. 511, 530 ; Thomas v. Davis, 76 Mo. 72 ; 43 Am. Rep. 756; McRea v. Bank, 66 N. Y. 489, 496 ; Williamson v. Railroad Co., 29 N. J. Eq. 311, 329 ; Tillman v. De I^cy, 80 Ala. 103 ; Capen v. Peckham, 35 Conn. 88 ; Rogers v. Prattville Manuf. Co., 81 Ala. 483. ^Congregational Society v. Fleming, 11 Iowa, 533. ^ * Broom's Maxims, 268. 422 NATURE AND REQUISITES OF THE CONTRACT. original rule of common law, which subjected everything affixed to the freehold to the law governing the freehold ; and it has grown into a system of judicial legislation, so as almost to render the right of removal of fixtures a general rule, instead of being an exception.^ As between the tenant of a particular estate and those in reversion or remainder, it is held by a well-settled line of authorities that the intention of the tenant making the an- nexation is one of the three tests already named in ascertain- ing the nature of the property. It is equally well settled that, in instances aside from those, the mental attitude of the per- son making the annexation cannot modify the legal effect resulting from an incorporation into the realty of that which was personal property.^ Thus, a structure erected on the land of another will become the property of the owner of the land, although built with a view of enforcing an adverse right in the land.^ In Illinois chattels reals are embraced in real estate,^ and the statute^ provides that instruments in writing relat- ing to real estate, when filed for record, shall be notice to subsequent purchasers ; so when a grain elevator, perma- nent in its structure, is built on the right of way of a rail- road by a lessee, under a lease providing that the lessor might terminate the lease on sixty days' notice, and that the lessee might remove buildings erected thereon by him at any time before the expiration of the lease, a mortgagee need not take possession after two years from the date of the mortgage as required in case of a chattel mortgage " to retain priority of lien/ § 397. Mutual Agreement — Express or Implied. — An intent existing alone in the mind of him who makes the an- ' 2 Kent's Com. 343. 'Campbell v. Roddy, 44 N. J. Eq. 244. ^Sudbury v. Jones, 8 Cush. (Mass.) 184; Lee v. Risdon, 7 Taunt. 188; Wilde V. Waters, 16 C. B. 637 ; Overton v. Williston, 31 Pa. St. 155. *Rev. Stat., ch. 30, sect. 38. * Rev. Stat., ch. 30, sect. 31. «Rev. Stat, ch. 95, sect. 4. ' Knapp V. Jones (111.), 28 N. E. Rep. 820. MORTGAGABLE INTERESTS. 423 nexation, however, differs from another feature, which consists in the existence of a mutual agreement, express or implied, between the owner of the real estate and the chattel, in respect to the manner in which chattels shall be regarded after annex- ation. Such an agreement seems to be entirely efficacious in preserving the personal character of the annexed chattels as between the parties thereto.^ However, when this rule is applied to the rights of third persons, it becomes more difficult. It must then be settled how far such agreement can affect purchasers, mortgagees, or judgment creditors of the owner of the real estate on the one hand, or of the chattels on the other hand. Some of the courts hold that such an agreement is valid, not only against a prior mortgagee of the land, but also against a subsequent mortgagee or purchaser without notice. Neither a precedent nor a subsequent mortgagee of real estate can claim property which has been annexed to the mortgaged premises under an agreement between the owner of the fee and the owner of the chattels, to the effect that the latter shall remain personalty." And it was held in New York that a duly filed chattel mort- gage upon iron salt-kettles and an iron arch-piece preserved their character as chattels even against the subsequent pur- chaser of the land, to which land the owner had annexed the chattels.^ But in Massachusetts a different view prevails. A chattel mortgage was given on machinery which the mortgagee knew was to be annexed to real property, and after it had been an- nexed to real property, a mortgage was given on the realty, and it was held that the real estate mortgagee could hold the machinery as a part thereof.* And so a question arose in re- spect to the effect of such an agreement between the owner of iron rails and a railroad company which purchased them. The question was whether the agreement would preserve the 1 Pope r. Skinkle, 45 N. J. L. 39 ; Harlan v. Harlan, 20 Pa. St. 303 ; Ewell on Fix. 66. 'Tifili'. Horton, 53 N. Y. 377. 'Fordv. Cobb, 20 N. Y. 344. * Pierce v. Geoi^e, 108 Mass. 78. 424 NATURE AND REQUISITES OF THE CONTRACT. character of the rails as chattels, after they had been affixed to the road-bed, as against a previous mortgagee of the road or a subsequent purchaser without notice. It was held that the agreement to which they were not parties could atTect neither purchaser nor prior mortgagee, and, as to them, the rails be- came real estate.^ So in Iowa it was held that such an agree- ment would not affect the rights of a purchaser of real estate at a judicial sale.^ § 398. How Far Can the Lien of a Chattel Mortgage BE Preserved After Annexation of Fixtures. — In New York the cases on this question seem to be in confusion. The doctrine seems to be that the existence of a chattel mortgage upon the personalty at the time of the annexation by the mortgagor does not amount to an agreement.^ This is ap' parently recognized in another case * and left in doubt in a later decision.^ When there is no mutual agreement, the fact that the chattel has been mortgaged before annexation, seems to control some decisions that such mortgage carries the fixtures as against a mortgage of the realty already existing at the time of annexation.® Judge Reed very ably presents this question, and says : " As between lienor who consents to have the subject-matter of his lien transmitted into a shape by which subsequent purchasers and mortgagees are liable to be subjected to deceptive dealings, there seems to be no equitable ground upon which the lien should be recognized against an innocent subsequent purchaser or purchaser for value. The entire spirit of our registry acts is opposed to the notion that, in such a junction of affairs, the real estate purchaser would not be regarded as a bona fide pur- chaser against whom the chattel mortgage would be void. But, 1 Hunt V. Bay State Iron Co., 97 Ma.s8. 279. ' Stillman v. Flenniken, 58 Iowa, 450. « Voorhees v. McGinnis, 48 N. Y. 278. *Tim V. Horton, 53 N. Y. 377. » Sisson V. Hibbard, 75 N. Y. 542. «Tibbetts v. Moore, 23 Cal. 208; United States v. Railroad Co., 12 Wall. (U. S.) 362 ; Nat. Bank v. Elmore, 52 Iowa, 541 ; Henry v. Von Brandenstein, 12 Daly (N. Y.), 480; Hart v. Sheldon, 34 Hun (N. Y.), 38. MORTGAGABLE INTERESTS. 425 as already observed, the real estate mortgagees, in the present case, held their lien before the attachment to the realty of the chattels mortgaged. It is true that by force of the annexation they would become subjected to the lien of the real estate mortgage absolutely, unless the lien of the chattel mortgage intervenes. Any property belonging to the mortgagor, which he choose to annex to the mortgaged premises, becomes realty. But it is difficult to perceive any equitable ground upon which the property of another, which the mortgagor an- nexes to the mortgaged premises, should inure to the benefit of a prior mortgagee of the realty. The real estate mortgagee had no assurance at the time he took his mortgage that there would be any accession to the mortgaged property. He may have believed that there would be such an accession, but he obtained no right, by the terms of his mortgage, to a lien upon anything but the property as it was conditioned at the time of its execution. He could not compel the mortgagor to add anything to it. So long therefore as he is secured the full amount of the indemnity which he took, he has no ground for complaint. There is therefore no inequity toward the prior real estate mortgagee, and there is equity toward the mortgagee of the chattels, in protecting the lien of the latter to its full extent so far as it will not diminish the original security of the former. As already remarked, the real estate mortgagee is en- titled to any annexation made by his mortgagor of his own property, but is not entitled to the property of others." Therefore, when a vendor of an engine, boiler, and machinery, knowing that they were to be annexed to real estate, takes a chattel mortgage upon them for a part of the price, but fails to register, and the vendee or mortgagor of the chattels after- ward annexes them to real estate upon which he had already given a mortgage, the hen of the chattel mortgagee must be protected, so far as it will not diminish the security which the real estate mortgagee would have had if the annexation had not been made.^ That is, an existing mortgage of realty may have priority of V ' Campbell v. Roddy, 44 N. J. Eq. 244, 251. 426 NATURE AND REQUISITES OF THE CONTRACT. a chattel mortgage of machinery subsequently annexed, as a permanent accession, although the chattel mortgage be made at the time the articles were attached/ The current of authority is that the character of the prop- erty, as real or personal, may be fixed by contract with the owner of the real estate when the article is put into position ; but such contract cannot affect the rights of a mortgagee, or of an innocent purchaser, without notice of it.^ § 399. The Real Estate Mortgage Covers the Property IN the Condition in which it Comes to the Mortgagor's Hands. — The general doctrine is that the mortgage attaches itself to the property in the condition in which it comes to the mortgagor's hands. It only attaches to such interest as the mortgagor acquires ; thus, if he purchase property and give a mortgage back for the purchase-money, the deed which he re- ceives and the mortgage which he gives are regarded as one transaction, and a general lien impending over him, whether in the shape of a general mortgage, or judgment, or recognizance, cannot displace such mortgage for purchase-money.^ But there may be exceptions to this rule where the articles upon which the lien existed become incorporated into the realty. Thus, where the articles are of such a character that their detachment would involve the dismantling of an important feature of the realty, their annexation might well be regarded as an aban- donment of the lien by him who impliedly assented to the an- nexation. Shingles, lumber, or brick to be used in a building, railroad iron or ties to be used in the construction of a rail- road are apparent examples of such a class of chattels. The lien on the chattels must give way to the previous lien upon the real property in this degree as specified. If the detach- ' Brass Foundry v. Gallentine, 99 Ind. 525. >. 2 Hoi^ewell Mills v. Tanton Savings Bank, 150 Mass. 519 ; Case Manuf. Co. v. Garven, 45 Ohio St. 289 ; Southbridge Savings Bank v. Exeter Machine Works, 127 Mass. 542, 545 ; Brennan v. Whitaker, 15 Ohio St. 446 ; Hunt v. Bay State Iron Co., 97 Mass. 279 ; Thompson v. Vinton, 121 Mass. 139. Com- pare Ford V. Cobb, 20 N. Y. 344 ; Tibbetts v. Home, 65 N. H. 242. * United States v. New Orleans Railroad Co., 12 Wall. (U. S.) 362, opinion by Justice Bradley ; Fosdick v. Schall, 99 U. S. 235. MORTGAGABLE INTERESTS. 427 ment of the articles so annexed will occasion no damage to the realty, then the lien upon them can be enforced in the same degree as if they had remained chattels. If the detachment would result in the diminution in the value of the freehold, as it would have stood had the attachment not been made, then the better rule seems to be that the depreciation must first be made good to the real estate mortgagee before the right of the chattel mortgagee can be recognized.^ If the mortgage enumerates some fixtures and not others, which afterward come into dispute as to right of the two mort- gagees, it is to be supposed that those omitted do not pass by the mortgage deed.^ And where machinery for a saw-mill was sold on condition that it should remain the property of the vendor until paid for, and part is incorporated into the realty, which is mort- gaged, the part incorporated passed under the mortgage, but that yet lying in the yard did not come under the mortgage lien.^ So it must be understood that the intention has, within cer- tain limits, a controlling effect in determining whether the fix- ture has become permanent; as much so as the way and manner of its annexation.* § 400. When Designed to be Permanent. — ^Whatever is placed in a building subject to a mortgage, to carry out the purposes for which it was erected, and permanently to increase its value for occupation or use, although it may bo removed without injury, as between mortgagor and mortgagee, a mort- 1 Campbell v. Roddy, 44 N. J. Eq. 244, 253. *Trappes v. Harter, 2Cromp. & M. 153, 177. ^ Davenport v. Shants, 43 Vt. 546. And see Miller v. Wilson, 71 Iowa, 610. *Foote ('. Gooch, 96 N. Car. 265 ; Smith Paper Co. v. Servin, 1.30 Mass. 511 ; Quinby v. Manhattan Cloth & Paper Co., 24 N. J. Eq. 260 ; Rogers v. Pratt- ville Manufg. Co., 81 Ala. 483 ; McRea v. Bank, 66 N. Y. 489 ; Ottumway v. Woolen Mill Co., 44 Iowa, 57 ; ]\Ian waring v. Jenison, 61 Mich. 117 ; Harmony Build. Assn. v. Berger, 99 Pa. St. 320 ; Arnold v. Crowder, 81 111. 56 ; 25 Am. Rep. 260 ; Kelly v. Austin, 46 111. 156 ; Jones v. Ramsey, 3 111. App. 303 ; Taylor v. Collins, 51 Wis. 123; Hart v. Sheldon, 34 Hun (N. Y.), 38; Hill v. Went worth, 28 Vt. 428 ; Tilhnan r. De Lacy, 80 Ala. 103 ; Morris's Appeal, 88 ^ Pa. St. 368; Sullivan v. Toole, 26 Hun (N. Y.), 203. 428 NATURE AND REQUISITES OF THE CONTRACT. gagee cannot remove it or otherwise dispose of it wliile the mortgage is in force.' Being thus adapted to the building for use, clearly indicates that it was designed to be permanent.^ In regard to a hydraulic press placed in a factory, but not essential to the work, it was decided that if an intention was manifest that the chattel should remain fixed to the freehold, then it would be so held, but without such an appearing it would not be considered as a part of the realty.^ § 401. Buildings Erected on Mortgaged Realty. — Un- less there be a contract to the contrary all buildings erected by the mortgagor are parts of the realty and therefore subject to an existing mortgage.* And when the building is a chattel by agreement, fixtures include everything which would come under that definition had the building been real estate. Thus, a chattel mortgage covered a certain elevator, " with all the machinery therein, and all the fixtures thereto belong- ing." This elevator was on leased land and was a chattel, and a track scale was put in by permit of the lessor, by the lessee. The connection of the scale with the elevator by means of a hopper was open, visible, and could easily be kiiown by all. It was held that the elevator was a chattel, and the term " fixture " was used in law to signify something attached to real estate, yet, as the term was used in the mortgage, it in- cluded everything which would have been a fixture to the ^ Southbridge Savings Bank v. Mason, 147 ]Mass. 500 ; Smith Paper Co. v. Servin, 130 Mass. 511. * Equitable Trust Co. v. Christ, 2 Flipp. C. C. 599 ; Milliken v. Armstrong, 17 Ind. 456 ; Keve v. Paxton, 26 N. J. Eq. 107 ; Hoskin v. Woodward, 45 Pa. St. 42 ; Brennan v. Whitaker, 15 Ohio St. 446 ; Ex parte Montgomery, etc., 4 Irish Ch. 520 ; Tillman v. De Lacy, 80 Ala. 103 ; Quinby v. Manhattan Cloth & Paper Co., 24 N. J. Eq. 260. » Parsons v. Hind, 14 W. R. 860; Reg. v. Lee, L. R. 1 Q.B. 241. See, also, Phelan v. Boyd (Tex.), 14 S. W. Rep. 290 ; Padgett v. Cleveland, 33 S. Car. 339. ■*Dorr V. Dudderar, 88 111. 107; Baird v. Jackson, 98 111. 78; Wood v. Whelen, 93 111. 153 ; Matzon v. Griffin, 78 111. 477 ; Burnside v. Twitchell, 43 N. H. 390 ; Guernsey v. Wilson, 134 Mass. 482 ; New Orleans Nat. Bank v. Raymond, 29 La. Ann. 355 ; Frankland v. Moulton, 5 Wis. 1 ; Sweetzer v. Jones, 35 Vt. 317. See, also, Horn v. Indianapolis Nat. Bank, 125 Ind. 381. MORTGAGABLE INTERESTS. 429 elevator had it been real estate ; that the track scale, so located and adjusted for use with the elevator, was a fixture within the meaning of the mortgage, and must pass thereunder to the mortgagee.' If a building is erected for temporary use, either by agree- ment, or the manner of attachment to the real estate indicates this, it does not become subject to the mortgage.^ If, however, the building is erected for permanent use, as the erection of it for an office by the side of a mill, then it becomes incorjDorated with real estate and is a part of it.^ Where the mortgage is regarded as a conveyance of the legal title to the j)roperty, giving the mortgagee the right of possession, then his legal ownership and actual or construc- tive possession give him the right to follow and recover the property if severed from the realty. The principle applied is, that the property severed from the realty so as to become a chattel belongs to the legal owner of the land. But when the mortgage is regarded merely as a lien for security and the mortgagor has the right of possession until ejectment, or fore- closure, then the mortgagee has merely the right to restrain the removal of the property by injunction, to protect his lien ; or, after the removal, a right to recover damages for the wrongful diminution of his security. When the mortgagor moves a dwelling on an adjoining lot belonging to his wife, without the knowledge of the mortgagee, but with the knowledge of the wife, the lien will follow the house.^ But this case appeared to turn on the fact that the wife colluded with the husband. But when the buildings are incorporated with other realty, the mortgaged lien is lost. Thus, a petition was filed in equity to subject to the lien created by the mortgage a number of cottage buildings which had been removed to other land ' McGorrisk v. Dwyer, 78 Iowa, 279. See, also, Congregational Society v. Fleming, 11 Iowa, 533. ^ Kelly V. Austin, 46 111. 156. 'Wight V. Gray, 73 Me. 297; State Savings Bank v. Kercheval, 65 Mo. 682. See, also, Powers t-. Dennison, 30 Vt. 752. ' * Hamlin v. Parsons, 12 Minn. 108. 430 NATURE AND REQUISITES OF THE CONTRACT. and affixed, and it was held that when the buildings were severed from the mortgaged premises, and had become part of another freehold, the lien upon them was gone.^ And so when the materials of a dwelling-house on mort- gaged land were used in the construction of a house upon another lot of land, the right of the property vested in the grantee of that land.^ So where mill-stones were severed from the mill and sold by the mortgagor, they pass to the pur- chaser.^ Where a house subjected to a mortgage was floated off by a flood into the street, and was bought while in that position, the severance affected the right of the lien, and the purchaser held the property divested of the lien.* So if a mortgagor in possession removes a building to an- other lot of land, and sells the lot to a bona fide purchaser, the lien is lost and the remedy of the mortgagee is at law, for the removal of the building,* There is no difficulty in applying this rule while fixtures remain attached to the realty, and so long as the mortgagor continues in possession ; or when the property severed passes into the possession of a person in collusion with him to defeat the lien and security of the mortgagee, whether upon or off the mortgaged premises, it would seem that the right of the mortgagee would be unaffected. But when the property is severed and sold by a mortgagor in possession, having the legal title, to an innocent purchaser, the lien in equity is gone, and the remedy of the mortgagee is by an action at law against the mortgagor and those who act with him to impair or defeat the security of the mortgage. §402. Annexation of Fixtures Before Execution of THE Real Estate Mortgage. — Chattels annexed to the realty ^ Harris v. Bannon, 78 Ky. 568. * Peirce v. Goddard, 22 Pick. (Mass.) 559. ' Cooper V. Davis, 15 Conn. 556. *Buckout V. Swift, 27 Cal. 433. n^erner v. Betz, 46 N. J. Eq. 256. See, also, Clark v. Reyburn, 1 Kan. 281 ; Kimball v. Darling, 32 Wis. 684 ; Hutchins «. King, 1 Wall. (U. S.) 53 ; Gore V. Jenness, 19 Me. 53 ; Gooding v. Shea, 103 Mass. 360 ; Wilson v. Maltby, 59 N. Y. 126. Compare Hoskin v. Woodward, 45 Pa. St. 42. MORTGAGABLE INTERESTS. 431 prior to the execution of the mortgage on the real estate, and which are essential to its value and beneficial enjoyment, are passed by the deed, and will be covered by the vendor's and mortgagee's lien, although not mentioned in the deed or mort- gage. Judge Hines says it may be consistent that the rule is the same between the vendor and vendee and mortgagor and mortgagee in those States where a mortgage passes the legal title and in reference to articles attached to the realty at the time of the execution of the deed or mortgage ; but it does not follow that the rights of the mortgagee are, in reference to sub- sequent accessions made by the mortgagor, the same in those States where the legal title does not pass and the mortgage is a simple security for the debt.^ So machinery in a canning business, part of which is at- tached to the soil, and other parts are necessary to the use of the part attached, is a fixture, and comes under the lien of the mortgage. If the principal part becomes fixed by actual an- nexation to the soil, such part of it as may not be so physically annexed, but which, if removed, would leave the principal thing unfit for use, and would not of itself and standing alone be well adapted for general use, is constructively annexed.^ And as a general rule a mortgage of land passes all the fix- tures upon the land mortgaged without any special mention of them.^ Platform scales fastened to sills laid upon a brick wall set in the ground are fixtures.* The stones, tackling, and implements of a mill pass under a real estate mortgage.^ So the wires of an electric light company form an integral part of the machinery, and pass as fixtures to the mortgagee 'Clore V. Lambert, 78 Ky. 224, 228; Woolley v. Holt, 14 Bush (Ky.), 788. See, also. Union Bank v. Emerson, 15 Mass. 159 ; Hamilton v. Huntley, 78 Ind. 521 ; 41 Am. Rep. 593. » Dudley v. Hurst, 67 Md. 44. ' Burnside v. Twitchell, 43 N. H. 390 ; Morris's Appeal, 88 Pa. St. 368. * Arnold v. Crowder, 81 111. 56 ; 25 Am. Rep. 260 ; Bliss v. Whitney, 9 Allen (Mass.), 114. ^ Place V. Flagg, 4 Man. & R. 277 ; Citizens' Bank r. Knapp, 22 La. Ann. 117 ; Theuerer v. Nautre, 23 La. Ann. 749 ; Bond v. Coke, 71 N. Car. 97. 432 NATURE AND REQUISITES OF THE CONTRACT. when the whole plant is mortgaged/ So hop-poles of a farm are covered by a mortgage of the land.^ In order to exempt the machinery from the lien of the mort- gage, when it can be removed without injury, it must be so agreed in the instrument? So a kettle in a fulling-mill set in brickwork and used for dyeing cloth, passes by a mortgage of the land upon which the mill is situated.* And machinery fixed to a building is covered by the mortgage.^ § 403. Annexation of Fixtures After Execution of the Real Estate Mortgage. — Chattels attached to the freehold by the vendee or mortgagor subsequent to the execution of the deed or mortgage, and not mentioned therein, will not be subject to the lien of the vendor or mortgagee, unless they are so attached that they cannot be removed without detriment to the original contract lien of the vendor or mortgagee.^ If the article is attached for temporary use, with the intention of removing it, the mortgagee cannot interfere with its removal by the mort- gagor.'^ But if annexed for permanent use, it is part of the realty, and comes under the lien of the mortgage.^ So it is generally held that all articles annexed for temporary use, with the intention of being removed by the mortgagor cannot be interfered with or taken by the mortgagee. If they are placed on the realty for a permanent improvement of the freehold, they come under the mortgage lien.^ Thus, the motive power iFechet v. Drake (Ariz.), 12 Pac. Rep. 694. 2 Sullivan r'. Toole, 26 Hun (N. Y.), 203. nVaterfall v. Peniptone, 6 El. & Bl. 876. * Union Bank v. Emerson, 15 Mass. 159. Compare Hunt v. Mullanphy, 1 Mo. 508. See, also, Gale v. Ward, 14 Mass. 352, 356 ; Fullam v. Stearnes,. 30 Vt. 443 ; Frey v. Drahos, 6 Nebr. 1. ^Helmes v. Gilroy, 20 Ore. 517. See, also, Calumet Iron & Steel Co. v. Lathrop, 36 111. App. 249; Johnson v. Moser (Iowa), 47 N. W. Rep. 996; Hathaway v. Orient Ins. Co., 58 Hun (N. Y.), 602. «Clore V. Lambert, 78 Ky. 224, 229. ' Morris's Appeal, 88 Pa. St. 368. « Wood V. Wlielen, 93 111. 153 ; Wight v. Gray, 73 Me. 297 ; Bond r. Coke, 71 N. Car. 97 ; Hubbard v. Bagshaw, 4 Sim. 326. 8 Crane v. Brigham, 3 Stock. (N. J.) 29; Potter r. Cromwell, 40 N. Y. 296, MORTGAGABLE INTERESTS. 433 of a cotton mill, consisting of a boiler, engine, etc., passes to the mortgagee when placed upon land after a mortgage was executed/ Accordingly, the track of a railroad company, laid upon mortgaged lands, under an agreement with the mortgagor, with- out condemnation under the right of eminent domain, is sub- ject to a mortgage lien, and may be sold with the land under foreclosure.^ But the mortgagee of a stone quarry cannot claim as fix- tures railroad cars used in transportation of the stone from the quarry. But he is entitled to certain appliances, such as a steam boiler, engine, derrick, etc., which had been actually fastened to the ground by the owner of the fee, and were used directly in the carrying and shipping of stone, the purpose for which the land was valuable.^ A mortgage of a gas company of its real estate, with all the appurtenances thereto, its gas-mains, sewer-pipes, and meters, covers an improvement and extension of its work.* When it is a question of doubt whether the chattel is a fix- ture or not, it generally requires stronger evidence of intention that such article annexed to the realty after the execution of the mortgage, is actually a fixture, and therefore a part of the realty, than is required when the annexation was before the execution of the mortgage on the real estate.^ If the mortgagor improves his freehold, by erecting new machinery to enlarge his operation, and such improvements are permanent, he cannot remove them.^ Or if he mortgages his office furniture and fixtures, the lien 297 ; M'Rea v. Nat. Bank, 66 N. Y. 489 ; Ex parte Belcher, 4 Dea. & Chit. 703 ; Roberts v. Bank, 19 Pa. St. 71. ^ M'Kim V. Mason, 3 Md. Ch. 186. See, also, Winslow v. Merchants' Ins. Co., 4 Met. (Mass.) 306. * Price V. Weehawken Ferry Co., 31 N, J. Eq. 31. See, also, Meriam v. BrowTi, 128 Mass. 391. ^Speiden v. Parker, 46 N. J. Eq. 292. *Wood V. Whelen, 93 111. 153. * Tillman v. De Lacy, 80 Ala. 103 ; Gardner v. Finley, 19 Barb. (N. Y.) 317 ; Clorc r. Lambert, 78 K. 224. V «Foote V. Gooch, 96 N. Car. 265 ; Wood v. Whelen, 93 111. 153. VOL. I.— 28 434 NATURE AND REQUISITES OF THE CONTRACT. extends to additions made thereto from time to time, as the necessity of the work requires.^ But a portable saw mill is not annexed when placed upon land, it being moved from place to place, on the mortgagor's land and on other premises.^ § 404. Machinery Loaned or Sold to Mortgagor on Condition. — Where machiner}^ is sold to the mortgagor by a third party on condition that the title shall not pass until paid for, and the mortgagor incorporates it with the real es- tate, it does not thereby become realty. Because the owner of the machinery is not put upon inquiry as to the state of the mortgagor's title so as to be charged with constructive notice of the mortgage, and he does not, therefore, assent only in a qualified way that the machinery shall be annexed.^ So when boilers are put into a mill, after the execution of a mortgage upon the mill, under an agreement with the mortgagor that he should have the use of them at a certain rental, and that they should remain the property of the third person who rented them, and who had the privilege of removing them at will, they do not become a part of the realty, and, hence, are not subject to the mortgage.* Accordingly machinery put into a mill under like circum- stances, merely to exhibit it to the public by a third person, is not incorporated into the realty and is not subject to the mortgage lien,'^ and does not come under the mortgage lien, even if bought by one of the real estate mortgagors, if he does not intend to use it in connection with his business on the premises where exhibited.® But, in Massachusetts, it is held that a boiler placed in a machine shop by a third person, under an agreement that the owner of the machine shop should not have title until paid 1 Wood (;. Whelen, 93 111. 153. 2 Henkle v. Dillon, 15 Ore. 610 ; Taylor v. Watkins, 62 Ind. 511. 3 Cochran v. Flint, 57 N. H. 514. *Hill V. Sewald, 53 Pa. St. 271. ^Stell V. Paschal, 41 Tex. 640. estell V. Paschal, 41 Tex. 640. MORTGAGABLE INTERESTS. 435 for, does not bind a subsequent mortgagee without notice, when the boiler is so annexed to the realty as to become a part of it.^ But if the mortgagee agrees that a machine may be set up on the mortgaged premises, under a contract that the machine shall remain the vendor's until paid for, or if the mortgagee, being in possession, treats it as personalty, and consents to its removal, a subsequent assignee of the mortgage cannot in- sist that under it he became the owner of the machine, as property annexed to the realty by the mortgagor, because the agreement of the mortgagee supersedes the general law as to fixtures between mortgagor and mortgagee.^ So, also, this rule applies where a person places machinery upon land owned by another, under an agreement that he may remove it at any time, and afterward takes a mortgage of the land from the owner of it. The machinery never became the property of the mortgagor, or fixture to the land, and is not covered by the mortgage.^ § 405. Things Useful and Ornamental. — When a build- ing becomes a chattel, the same rule applies as to fixtures as if it was realty. Hence, track scales go with an elevator.* As to things useful and ornamental, the right of the tenant to re- move them was expressly denied in some of the old cases.^ But at the present time it is well settled that many ornamental and useful fixtures can be removed by the tenant, such as a hanging and looking-glass, when not made into the wall.^ When mirrors are not set in the walls, and put up after the house was erected, and capable of detachment without interfering with or injuring the walls, they are as much furniture as pictures hung in the usual way, and do not become subject to a real estate mortgage of the premises.^ But if the mirror-frames are ^Southbridge Savings Bank v. Exeter Machine Works, 127 Ma?9. 542; Southbridge Savings Bank v. Stevens Tool Co., 130 Mass. 547. ^ Bartholomew v. Hamilton, 105 Mass. 239 ; Frederick v. Devol, 15 Ind. 357^ See, also, Wight v. Gray, 73 Me. 297. 'Taft V. Stetson, 117 Mass. 471. *McGorrisk v. Dwyer, 78 Iowa, 279. *Herlakarden's Case, 4 Co. 64; Poole's Case, 1 Salk. 368. «Beck V. Rebow, 1 P. Wm. 94. ^McKeage v. Hanover Fire Ins. Co., 81 N. Y. 38. 436 Nature and requisites op the contract. actually annexed to the realty they become subject to such mortgage. Thus, the mirror-frames were so annexed during process of building, and as part of that process, and formed part of the structure. Those in the hall filled up and occupied a gap left in the wainscoting, and all such mirrors were an es- sential part of the inner surface. Those in the parlor fitted into a gap purposely left in the base-board. All were fastened to the walls with hooks and screws. Their removal would have left unfinished walls and require work upon the house to supply and repair their absence. Such mirrors became realty and could not be removed.^ Tapestry may be removed,^ wainscot,^ and ornamental chim- ney-pieces ; * stoves and grates annexed to the chimney with brickwork, and cupboards supported by hold-fasts, may be removed by the tenant;^ also cooking-coppers, mash-tubs, blinds, and the like.^ The mortgage of the realty covers the presses, cupboards, glazed doors, movable partitions, grates, ranges, and other like fixtures ; ^ also the windows and blinds, and door-keys.^ It covers a sun-dial erected on a permanent foundation.^ And a furnace placed in a house so that it cannot be removed without dis- turbing the brickwork of the house adjoining the furnace, and without probably causing a portion of the ceiling to fall, is a fixture, and passes with the realty.^** But a portable iron furnace standing in the cellar, and capable of being removed without injury, is not a fixture." If 1 Ward V. Kilpatrick, 85 N. Y. 413, 419. " Harvey v. Harvey, 1 Strange, 1141 ; Lee v. Risdon, 7 Taunt. 188. ^ Lawton v. Lawton, 3 Atk. 13. * Leach v. Thomas, 7 Car. & P. 328 ; Bishop v. Elliott, 11 Exch. 113. 5 Rex V. St. Dimstan, 4 Barn. & C. 686. ^ Colegrave v. Dias Santos, 2 Barn. & C. 76. ' Longstaff v. IMeagoe, 2 Ad. & El. GO. ^Liford'sCase, 11 Co. 50. »Snedeker r. Warring, 12 N. Y. 170. i»Main v. Schwarzwaelder, 4 E. D. Smith (N. Y.), 273 ; Stockwell r. Camp- bell, 39 Conn. 302. And see Colegrave v. Dias Santos, 2 Barn. & C. 76; Longstaff v. Meagoe, 2 Ad. & El. 60. " Rah way Sav. Inst. v. Irving St. Bap. Church, 36 N. J. Eq. 61. MORTGAGABLE INTERESTS. 437 set in brick, then it is a question of fact whether it is a part of the realty/ Lamps, chandeliers, candlesticks, candelabra, sconces, and the various contrivances for lighting a house by means of candles, oil, or other fluids, have never been considered as irre- movable fixtures, and as forming part of the freehold. Nor does it appear that the ordinary apparatus for lighting has ever been classed as fixtures.^ So it is well settled that gas- fixtures, although fastened to the building, are not fixtures, and may be removed ; ^ and so of a gasometer and apparatus for generating gas."^ Gas-stoves connected with gas-pipes are not fixtures.^ Water and gas-pipes laid in the ground are generally con- sidered fixtures, and as belonging to the realty.^ Articles of furniture movable in their nature are not fix- tures, although attached by screws, nails, or brackets. Such things are hangings, pier-glasses, chimney-glasses, book-cases, carpets, blinds, and curtains.'' The removal of gas-fixtures is analogous to the removal of a stove temporarily annexed to the floor and to the chimney, by means of the pipe, and which would not pass by convey- ance as part of the realty.^ A show-case with drawers and sash, fastened down by nails, is not a part of the realty.^ So a mortgage of a plantation will not cover the wagons and implements used upon it, or the stock and cattle, unless such property is expressly included.^" ^ Allen V. Mooney, 130 Mass. 155 ; Maguire v. Park, 140 Mass. 21. " Vaughen v. Haldeman, 33 Pa. St. 522. 'Lawrence v. Kemp, 1 Duer (N. Y.), 363 ; Shaw v. Lenke, 1 Daly (N. Y.), 487 ; Wall v. Hinds, 4 Gray (Mass.), 256 ; Montague v. Dent, 10 Rich. (S. Car.) 135; Jarechi v. Philliarmonic Society, 79 Pa. St. 403; Rogers v. Crow, 40 Mo. 91. *Hay8 V. Doane, 11 N. J. Eq. 84. ^Vaughen v. Haldeman, 33 Pa. St. 522. " Providence Gas Co. v. Thurber, 2 R. 1. 15 ; Philbrick v. Ewing, 97 Mass. 133. 'Walker v. Sherman, 20 AVend. (N. Y.) 645. *Freeland v. South worth, 24 Wend. (N. Y.) 191. 'Cross V. Marston, 17 Vt. 533. Wason V. Ball, 56 Ga. 268. 438 NATURE AND REQUISITES OF THE CONTRACT. It may be stated, however, that there are cases where the language of the mortgage may be such that upon its proper construction the mortgagor will be allowed to remove articles set for trade or other purposes/ § 406. Trade Fixtures. — The rule applicable to trade fix- tures is very liberal to the tenant, and he may remove whatever he places upon, or temporarily annexes to, the freehold.^ The tenant may remove them at the expiration of his term, when- ever the removal is not contrary to any settled custom, and the removal will not materially injure the realty.^ These fix- tures, after the term, if not removed, become a gift in law to him, the landlord, in the reversion, and are not removable.* And it is the general rule that articles put in merely as furniture, are removable, though more or less substantially fastened to the building. So machines not essential to the en- joyment and use of a building, occupied as a manufactory, nor especially adapted to be used in it, are removable, though fastened to the building, when it is clear that the purpose of fastening them is to steady them for use, and not to make them a permanent part or adjunct to the building.^ Although a building may be raised on a brick foundation and have a brick chimney, yet if the erection on such foundation is of wood and the building is used for the sole purpose of trade, the tenant may remove it at the end of the term.^ But if the building is of brick, with brick founda- ^ Waterfall v. Penistone, 6 El. & Bl. 876. See, also, Crippen v. Morrison, 13 Mich. 23 ; Burnside r. Twitchell, 43 N. H. 390 ; Crane v. Brigham, 3 Stockt. (N. J.) 30 ; Haley v. Hammersley, 3 De Gex, F. & J. 587 ; 9 W. R. 562. ^Climie v. Wood, L. R. 3 Exch. 257 ; Capen v. Peckham, 35 Conn. 88. * Coombes v. Beaumont, 5 Barn. & Ad. 38 ; Holbrook v. Chamberlin, 116 Mass. 155 ; Hawtry v. Butlin, L. R. 8 Q. B. 290 ; 21 W. R. 633 ; Day i-. Perkins, 2 Sandf. Ch. (N. Y.) 359 : Maples v. Millon, 31 Conn. 598. * Poole's Case, 1 Salk. 368. See, also, Weathersby v. Sleeper, 42 Miss. 732; Thomas v. Crout, 5 Bush. (Ky.) 37 ; Seeger v. Pettit, 77 Pa. St. 437 ; 18 Am. Rep. 452. Compare Treadway v. Sharon, 7 Nev. 37. "Winsloww. Merchants' Ins. Co., 4 Met. (Mass.) 306; Hellawell v. East- wood, 6 Exch. 295 ; The Queen v. Lee, L. R. 1 Q. B. 241 ; McConnell v. Blood, 123 Mass. 47. fiPenton v. Robart, 4 Esp. 33; O'Donnell v. Hitchcock, 118 Mass. 401. MORTGAGABLE INTERESTS. 439 tion, let into the soil, although erected for the sole purpose of trade, it cannot be removed by the tenant, while machinery, engines, vats, and utensils, with their accessories, may be re- moved/ So furnaces, cider mills, buildings resting on blocks, salt-pans, platform scales, factory machines, and other things of like nature, used in trade, are removable by the outgoing tenant.^ § 407. The Lessee's Right to Remove Fixtures. — The exercise of the right to remove trade fixtures is, however, re- stricted by the rule that the principal thing shall not be de- stroyed by the accessory.^ And if the tenant at will of the mortgagor add fixtures after a mortgage is executed on the realty, his right to remove them after an entry by the mort- gagee for the purpose of foreclosure, must be determined by the rule which prevails as between mortgagor and mortgagee, and not by that which prevails as between landlord and tenant.* The mortgagee may, if he chooses, disavow the tenancy and enter and evict the tenant who will not even be entitled to emblements.^ A mortgagor cannot make a lease which will be valid against the mortgagee ; and if the mortgagee enter, neither the mortgagor nor his lessee will be entitled to emble- ments.^ And it is not in the power of the mortgagor, by any agree- ment made with a third person, after the execution of the mortgage, to give to such person the right to hold anything to be attached to the freehold, which as between mortgagor and mortgagee, would become a part of the realty. The entry of the mortgagee would entitle him to the full enjoyment of the premises with all the additions and improvements made by nVhitehead v. Bennett, 27 L. J. Ch. 474. "^ Holmes V. Tremper, 20 Johns. (N. Y.) 29 ; Swift v. Thompson, 9 Conn. 63 ; Taffe V. Warnick, 3 Blackf. (Ind.) Ill ; Hayes v. N. Y. Min. Co., etc., 2 Colo. 273 ; Hanrahan v. O'Reilly, 102 Mass. 201 ; Graves v. Pierce, 53 Mo. 423 ; Lanphere v. Lowe, 3 Nebr. 131. 'Lawton v. Lawton, 3 Atk. 13. *Lynde v. Rowe, 12 Allen (Mass.), 100. 5 Mayo V. Fletcher, 14 Pick. (Mass.) 52.5 ; 1 Washb. Real Prop. 531, ' « Lane i-. King, 8 Wend. (N. Y.) 584. 440 NATURE AND REQUISITES OF THE CONTRACT. the mortgagor, or by his authority ; ^ but a tenant under a lease may redeem to protect his interest.^ Any temporary structure may be removed by the tenant during his term.^ Partnership trade fixtures may also be re- moved/ If the lessee subsequently purchases the reversion of the realty, machinery and other fixtures placed by him on the land, become subject to an existing mortgage.® But his fix- tures are not brought within a subsequent mortgage of the premises by his neglect to remove them on a renewal of his lease by a new landlord ; ^ and if he remains in possession after the expiration of his term, and performs all the condi- tions of the lease, it amounts to a renewal of the lease from year to year, and he would be entitled to remove the fixtures during the year.^ The law requires that the tenant shall remove his fixtures before the surrender of possession, and during the time that he has a right to regard himself as ocupying in the character of tenant.^ In Vermont the rule is that fixtures shall in all cases be substantially attached to the freehold, and it is not sufficient to make personal chattels a part of the freehold that they are attached to the building in which they are used in a manner adapted to keep them steady, or that they are essential to the occupation of the building for the business carried on in it ; ^ and while a steam boiler and boilers used in a marble mill are fixtures as between mortgagor and mortgagee, yet the saw- frames, though fastened to the building by bolts, are not such fixtures.^" 1 Clary v. Owen, 15 Gray (Mass.), 522. '^ Bacon v. Bowdoin, 22 Pick. (Mass.) 401 ; Preston v. Briggs, 16 Vt. 124. 3 Relly V. Austin, 46 111. 156 ; Early v. Burtis, 40 N. J. Eq. 501. * Robertson v. Corsett, 39 Mich. 777. 6 Jones V. Detroit Chair Co., 38 Mich. 92. ' Kerr v. Kingsbury, 39 Mich. 150. ' Davis V. Moss, 38 Pa. St. 346, 353. 8 Penton v. Robart, 2 East, 88 ; Weeton r. Woodcock, 7 Mees. & Wels. 14. 9 Hill V. Wentworth, 28 Vt. 429. '" Sweetzer v. Jones, 35 Vt. 317. See, also, Fullam v. Stearns, 30 Vt. 443 ; Bartlett v. Wood, 32 Vt. 372. Justice Bennett says that this rule may be regarded as an exception to the A MORTGAGABLE INTERESTS. 441 §408. Estoppel of Lessee. — A lessee who has erected a building upon mortgaged land, under an agreement with the mortgagor, by leasing the building to the mortgagee, after the latter has purchased the mortgage land upon foreclosure sale, is estopped from claiming title in himself.^ And when he erects a permanent building upon the mortgaged realty, he cannot remove it without the consent of the mortgagee.^ § 409. Statutory Provisions. — A few of the States have enacted laws concerning some classes of fixtures. Thus, in Connecticut, fixtures of a manufacturing or mechanical estab- lishment, or of a printing or publishing house, the furniture of a dwelling-house, and the hay in the barn, may be mort- gaged with the realty, when these articles are specifically named as included in the mortgage ; or separate from the realty if particularly described, and the deed be executed, acknowledged, and recorded in all respects as a mortgage of land.^ So in Vermont, machinery attached to or used in any shop, mill, printing office, or factory may be mortgaged, the deed to be executed, acknowledged, and recorded as deeds of real estate, and such mortgages may be assigned, discharged, or foreclosed like mortgages of real estate.* And in Rhode Island it is provided that the water-wheels, steam-engines, boilers, main belts, which first give motion to the shafting, all shafting, whether upright or horizontal, and hangers for the same, except such as are used to drive a special machine, all drums, pulleys, wheels, gearing, steam pipes, gas pipes and gas fixtures, water pipes and fixtures, kettles and vats set and used in any mechanical or manufacturing estab- lishment, shall be declared to be real estate, whenever the same belong to the owner of real estate to which they are attached. general doctrine, or else as cases where the things were mere incidents to the freehold, and became a part of it, and pass with it upon a principle different from that of their being fixtures : Hill r. Wentworth, 28 Vt. 429. 1 Betts V. Wurth, 32 N. J. Eq, 82. * Kelly V. Austin, 46 111. 156. ' Gen. Stat. 1888, sect. .3016. ' *Rev. Stat. 1880, sect. 1980. 442 NATURE AND REQUISITES OF THE CONTRACT. All other machinery, tools, and apparatus of every description, used and employed in any manufacturing establishment are declared to be personal estate, and as such shall be considered, in assignments of dower, in attachments, and in all cases whatsoever, except in the assessment and payment of taxes/ Article 3. Fixtures in Manufactories and Mills. I 410. The Rule Applicable. I 414. Illustrations Under the Mo- § 411. The Machinery that Supplies tive Power Rule. the Motive Power. I 415. Illustrations Embracing Sepa- § 412. Question of Intention. rate Articles, g 413. No Single Criterion Will Apply ^ 416. Bankrupts. to Every Case. § 417. Lex Rei Sitaj Governs. § 410. The Rule Applicable. — The rule in determining what are fixtures in a manufacturing establishment is, that where the machinery is permanent in its character, and essen- tial to the purpose for which the building is occupied, it must be regarded as realty and pass with the building ; and that whatever is essential to the purposes for which the building is used will be considered as a fixture, although the annexation between them be such that it may be severed without phys- ical or lasting injury to either.^ The permanent and habitual annexation control, and not the manner of fastening.^ In cases of this description, to require substantial or even nominal annexation, would exclude things absolutely essential to the enjoyment or use of the freehold, and include others which are comparatively unimportant. Therefore, whatever is essential to the purpose for which the building is used may iPub. Stat. 1882, eh. 171, sects. 1, 9. "" Green v. Phillips, 26 Gratt. (Va.) 752 ; 21 Am. Rep. 323 ; Farrar v. Chauf- fetete, 5 Denio (N. Y.), 527; Price v. Jenks, 14 Phil. (Pa.) 228; Sheldon v. Ficklin, 32 Gratt. (Va.) 727 ; Morris's Appeal, 88 Pa. St. 368 ; McConnell v. Blood, 123 Mass. 47 ; Keeler v. Keeler, 31 N. J. Eq. 181 ; Ferris v. Quimby,41 Mich. 202 ; Smith Paper Co. v. Servin, 130 Mass. 511. 3 Brennan v. Whitaker, 15 Ohio St. 446 ; Laflin v. Griffiths, 35 Barb. (N. Y.) 58 ; McRea v. Cent. Nat. Bank, 66 N. Y. 489 ; Pierce v. George, 108 Mass. 82; Parsons v. Copeland, 38 Me. 537. MORTGAGABLE INTERESTS. 443 be considered as a fixture, although the annexation between them is such that it may be severed without physical injury to either.^ Therefore, when a building is erected as a mill or manu- factory, and the water- works or the steam-works relied upon to move it are erected at the same time, and the machinery to be driven by them are essential parts of it, adapted to be used with it and in it, they are parts of it, and pass by a convey- ance, by attachment, or by mortgage.^ While there is not en- tire uniformity in the decisions on this question, the tendency of modern decisions is in favor of viewing everything as a fix- ture which has been held or employed, however slight or tem- porary the connection between the realty and it. This is undoubtedly required by the growth and extension of manu- facturing industries, that the requisites of physical attachment in or to the soil be relaxed to the extent that the question of fixtures vel non shall depend on the nature and character of the act by which the structure is put in place, the policy of the law connected with its purpose and the intention of those con- cerned in the act. Therefore, the permanency of the attach- ment does not depend on the strength, or force, or manner of the annexation to the freehold so much as upon its constancy, and upon the use to which the attached chattel is adapted, the purposes for which designed, and the intention of the party annexing it.^ §411. The Machinery That Supplies the Motive Power. — The machinery of a manufactory that supplies the motive power, as the engine, boiler, and their attachments, as ' Lawton v. Salmon, 1 H. Bl. 259. "^ Winslow V. Merchants' Ins. Co., 4 Met. (Mass.) 306 ; Yoorhees v. McGinnis, 48 N. Y. 278 ; Hill v. HiU, 43 Pa. St. 521 ; Citizens' Bank v. Knapp, 22 La. Ann. 117 ; M'Kim v. Mason, 3 :\Id. Ch. 186 ; Davenport v. Shants, 43 Vt. 546 ; Trull V. Fuller, 28 Me. 545 ; Burnside v. Twitchell, 43 N. H. 390 ; Rice r. Adams, 4 Harr. (Del.) 332 ; Cooper v. Romeyne, 4 McLean, C. C. 384. * Tillman v. De Lacy, 80 Ala. 103 ; Quimby v. Manhattan C. & C. Co., 24 N. J. Eq. 260 ; Meig's Appeal, 62 Pa. St. 28 ; Wight r. Gray, 73 Me. 297 ; Rogers V. Prattville Manf. Co., 81 Ala. 483 ; Maguire v. Park, 140 Mass. 21 ; Carpen- ter V. Walker, 140 Mass. 416. 444 NATURE AND REQUISITES OF THE CONTRACT. contradistiDguished from that propelled by it, where perma- nently annexed to foundations resting upon the freehold, is generally held to be a fixture, though susceptible of being re- moved without any material injury to the same or to the free- hold.^ In this case, Judge Minshall says that " it has gen- erally been held in this country that articles used in a factory for manufacturing purposes, only attached to the building to keep them steady in their places, so that they may be more serviceable when in use, and that may be removed without any essential injury to the freehold or the articles themselves, are personal property, and do not pass by a conveyance or mortgage of the freehold. " On the other hand, steam-engines and boilers with their ap- pliances, that supply the motive power of machinery, and, for purposes of use, are usually stably attached to the realty, pass by a conveyance or mortgage of the land." Judge Knowlton speaks of the conflict of authority in differ- ent jurisdictions, in regard to the question whether machines placed in a building become fixtures which pass with a con- veyance of the real estate, and says : " The character of the property, as real or personal, may be fixed by contract with the owner of the real estate when the article is put in position ; but such contract cannot aff'ect the rights of the mortgagee, or of an innocent purchaser without notice of it." ^ The machinery furnishing the motive power is generally more closely annexed to the freehold, and of a more perma- nent nature, as the power furnished by it may be adapted to the propulsion of the machinery of a variety of mills without any substantial change in the motive power itself, or in the building, other than by substituting one kind of machinery for another ; whilst the machinery that is propelled has more of the general character of personalty, is not as a rule so closely 1 Case Manuf. Co. v. Garven, 45 Ohio St. 289. See, also, 1 Sch. Per. Prop. 155 ; Ewell Fix. 290, 294 ; 1 Washb. Real Prop. 8. ^ Hopewell Mills v. Taunton Savings Bank, 150 Mass. 519 ; Hunt v. Bay State Iron Co., 97 Mass. 279 ; Thompson v. Vinton, 121 Mass. 139 ; South- bridge Savings Bank v. Exeter Mach. Works, 127 Mass. 542, 545 ; Case Manuf. Co. V. Gari^en, 45 Ohio St. 289. MOKTGAGABLE INTERESTS. 445 annexed to the freehold, and may be removed, and frequently is, from one mill to another, as any other article of personalty ; and is more properly accessory to the business carried on upon the realty than the realty itself/ Under this rule, carding-machines of a woolen factory, at- tached to the building by cleats to confine them to their proper places, and subject to removal whenever convenient or business required, are not fixtures, but chattels ; whilst the steam-engine and boiler, used to supply the motive power, per- manently fixed upon a foundation laid in the ground, are realty.^ Judge Minshall says that " the difficulty of prescribing a rule that may be applied to cases in general has been confessed both by courts and writers upon the subject; various tests have been adopted, none of which have been applied with any- thing like uniformity. It may, however, be admitted that the distinction between the motive power of a factory and the ma- chines driven by it is somewhat arbitrary, still it is one based upon a physical difference easily perceived, if not dictated, by any well-defined principle, and is no more illogical than many distinctions to be found in other branches of law. That which divides all property into real and personal is quite as wanting in anything like scientific classification ; but, from its general recognition wherever the common law prevails, is found to be very convenient in practice ; and it is such con- siderations that have always more or less influenced the adop- tion of definite rules of property." ^ This learned judge has enunciated the principle that should control. § 412. Question of Intention. — When no contract exists between the parties, a machine placed in a building is gen- erally found to be real estate or personal property from the external indications which show whether or not it belongs to the building as an article designed to become a part of it, and to be used with it to promote the object for which it was ' Fortman v. Goepper, 14 Ohio St. 567. ^Teaff ?-. Hewitt, 1 Ohio St. 511. ^Case Manuf. Co. v. Garven, 45 Ohio St. 289, 301. 446 NATURE AND REQUISITES OF THE CONTRACT. erected, or to which it has been adapted and devoted— an ar- ticle intended not to be taken out or used elsewhere, unless by reason of some unexpected change in the use of the building itself. The tendency of modern decisions is to make this a question of what was the intention with which the machine was put in place.' The intention to be sought is not the undisclosed purpose of the actor, but the intention implied and manifested by his act. This intention must settle his and others' rights. Others cannot know the secret purpose of the actor, and their rights depend not upon that but upon the inference to be drawn from what is external and visible. Every fact and circumstance should be considered which tend to show intention.^ Mere physical annexation is no longer the test.^ Whether the mortgagor's undisclosed intention can con- tinue their chattel nature after actual annexation is a question upon which the authorities do not agree. The affirmative has been held by the courts of some of the States.* Where parties so agree, such articles will retain their chattel nature, and to this end an agreement implied is as effective as one expressed. A custom obtains, in some localities, where a mortgagor puts articles upon the land for temporary use, that he can remove them when he desires, and then they do not be- come fixtures.® § 413. No Single Criterion Will Apply to Every Case. — Whether such an article belongs to the real estate is primarily and usually a question of mixed law and fact." The varying 1 Choate v. Kimball (Ark.), 19 S. W. Rep. 108 ; Ewell on Fixt., p. 22; Ot- tumwa Woolen Mill v. Hawley, 44 Iowa, 57 ; Hill v. Nat. Bank, 97 U. S. 450 ; Turner v. Wentworth, 119 Mass. 459 ; McRea v. Central Nat. Bank, 66 N. Y. 489 ; Maguire v. Park, 140 Mass. 21. ^ Hopewell Mills v. Taunton Savings Bank, 150 Mass. 519. 3 Vail V. Weaver, 132 Pa. St. 363 ; Doughty v. Owen (N. J.), 19 Atl. Rep. 540. *Tiffl V. Horton, 53 N. Y. 377 ; Clore v. Lambert, 78 Ky. 224. 5 Wolford V. Baxter, 33 Minn. 12 ; Choate v. Kimball (Ark.), 19 S. W. Rep. 108. "Turner v. Wentworth, 119 Mass. 459; Southbridge Savings Bank v. Ma- son, 147 Mass. 500. MORTGAGABLE INTERESTS. 447 circumstances of each case may have an immediate influence upon the determination of the courts. In doubtful cases the intention has a controlling influence.^ So it is obvious that in most cases there is no single crite- rion by which the question can be decided. The nature of the article and the object, the effect and the mode of its an- nexation are all to be considered. Hence, whatever is placed in a mill, subject to a mortgage, by a mortgagor or those claim- ing under him, to carry out the purpose for which it was erected, and permanently to increase its value for occupation or use, although it may be removed without injury to itself or the building, becomes part of the realty.^ The intention is gathered from the manner of annexation and the character of the improvement, and whether it is essential to the proper use of the realty.^ § 414. Illustrations Under the Motive Power Rule. — Whether the machinery in a cotton mill is a fixture or not, as between mortgagor and mortgagee, it was held where the facts showed that the machines, most of which were large and heavy, and were all procured for use in manufacturing cotton cloth ; where there were changes in the kinds of goods manu- factured, and the machines were not intended to be moved from place to place, but were intended to be put in position and there used with the building until they should be worn out, or until, from some unforeseen cause, the real estate should be put to a different use ; where the most of them were fastened 'Kelly V. Austin, 46 111. 156; Morris's Appeal, 88 Pa. St. 368; Smith Paper Co. v. Servin, 130 Mass. 511 ; Hopewell Mills v. Taunton Savings Bank, 150 Mass. 519. = Harlan v. Harlan, 15 Pa. St. 507; Roddy v. Brick, 42 N. J. Eq. 218, 225; Southbridge Savings Bank v. Mason, 147 Mass. 500 ; Parsons v. Copeland, 38 Me. 537 ; Holland v. Hodgson, L. R. 7 C. P. 328 ; Longbottom v. Berry, L. R. 5 Q. B. 123 ; Ottumwa Woolen Mill v. Hawley, 44 Iowa, 57 ; Hill v. Nat. Bank, 97 U. S. 450 ; Delaware, etc., Railroad Co. v. Oxford Iron Co., 36 N. J. Eq. 452 ; Pierce i'. George, 108 Mass. 78; Woodhan v. Bank (Minn.), 50 N. W. Rep. 1015 ; McRea v. Central Nat. Bank, 66 N. Y. 489. ^Tillman v. De Lacy, 80 Ala. 103 ; Rogers v. Prattville Manf. Co., 81 Ala. 483 ; Green v. Phillips, 26 Gratt. (Va.) 752 ; Shelton v. Ficklin, 32 Gratt. (Ya.) 727. 448 NATURE AND REQUISITES OF THE CONTRACT. to the floor for the purpose, among others, of steadying when in use ; where apparently they had been attached to the build- ing and connected with the motive power with a view of per- manence ; and where certain loom beams, which were laid upon the looms when in use, although not fastened thereto, were essential parts of the looms — that all the machines including the loom beams, were realty/ A mortgage of a woolen factory does not cover the looms, in New York, when merely fastened to the floor by screws to keep them in their places.^ And so it has been held in England that cotton looms are not fixtures.^ So in New Jersey spinning frames, twisting frames, and like machinery, though fastened to the floor by nails or screws, or held in position by cleats, are personal property.* A mortgage after describing the mill and other articles, in- cluded " and all other machinery and fixtures whatsoever there erected or set up, or to be thereafter, etc., upon the said land, plot of land, mill, and premises, with the appurtenances." It was decided that all the machinery placed in the mill, whether creating power or for being moved, was included in the mortgage.^ So a mortgage of an iron rolling mill passes the entire set of rolls used in the mill, whether in place and fixed for use or temporarily detached.^ § 415. Illustrations Embracing Separate Articles. — The wires of an electric company pass with a mortgage on ^ Hopewell Mills v. Taunton Savings Bank, 150 Mass. 519. Compare Van- derpool v. Van Allen, 10 Barb. (N. Y.) 157 ; Potter v. Cromwell, 40 N. Y. 287 ; Cresson v. Stout, 17 Johns. (N. Y.) 116. ^ Murdock v. Gifford, 18 N. Y. 28. Compare Murdock v. Harris, 20 Barb. (N. Y.) 407. 3 Hutchinson v. Kay, 23 Beav. 413. ^ Keeler v. Keeler, 31 N. J. Eq. 181. ° Haley v. Hammersley, 3 De Gex. F. & J. 587. See, also, Mather v. Fraser, 2 Kay & J. 536'; Walmsley v. Miln, 7 C. B. (N. S.) 115 ; Wiltshear v. Cottrell, 1 El. & B. 674. « Voorhis v. Freeman, 2 Watts & S. (Pa.) 116. And see Ex parte Astbury, L. R. 4 Ch. Ap. 630. MORTGAGABLE INTERESTS. 449 the plant/ The entire machinery of a fruit-canning factory passes under a mortgage, though some articles, such as crates, capping-machines, and work-tables, are not actually annexed to the soil.^ A shingle-machine in a mill is part of the realty.^ On the other hand, however, a shingle-machine not fastened to the floor, except so far as necessary to keep it in place, was held to be a chattel.^ Mill-saws in a saw-mill are a part of the mill.^ Machinery in a brewery is a part of the realty ; ^ so is heavy machinery for making paper fastened to the build- ing,^ and machinery in a nail factory is part of the realty.* Machines for making kegs pass under a mortgage of the keg factory.^ But stills set up in a furnace, in the usual manner, for making whiskey, are personalty ; ^'^ so is machinery for spinning flax and tow ; " and a stone for grinding bark,, affixed to a bark mill ; ^^ likewise a kettle or boiler put up in a tannery with brick and mortar ; ^^ also leather fastened to a bench by screws, grindstones resting upon frames standing upon the floor, anvils, vises, or a portable forge.^* So a molding-machine and a planing-machine, placed in a ' Fechet v. Drake (Ariz.), 12 Pac. Rep. 694. See, also, Regina v. North Staf- fordshire Railway Co., 3 El. & El. 392. ^ Dudley v. Hurst, 67 Md. 44. => Corliss V. McLagin, 29 Me. 115. See, also, Trull v. Fuller, 28 Me. 545. * Wells V. Maples, 15 Hun (N. Y.), 90. ^Burnside v. Twitchell, 43 N. H. 390. See, also, Coleman v. Stearns Manuf. Co., 38 Mich. 30 ; Robertson v. Corsett, 39 Mich. 777 ; Johnston v. Morrow, CO Mo. 339. «Scheifele v. Schmitz, 42 N. J. Eq. 700. Compare Wolford v. Baxter, 33 Minn. 12; 53 Am. Rep. 1. ' Quimby v. Manhattan Cloth & Paper Co., 24 N. J. Eq. 260. See, also. Fish V. N. Y. Water-Proof Co., 29 N. J. Eq. 16. * Delaware, etc., Railroad Co. v. Oxford Iron Co., 36 N. J, Eq. 452. ^Laflin v. Griffiths, 35 Barb. (N. Y.) 58. See, also, Snedeker v. Warring, 12 N. Y. 170, 174 ; Walker v. Sherman, 20 Wend. (N. Y.) 636, 639. '"Moore v. Smith, 24 111. 513 ; Burk v. Baxter, 3 Mo. 207 ; Terry v. Robins, 13 Miss. 291. Compare Bryan v. Lawrence, 5 Jones Law (N. Car.), 337; Feimster v. Johnson, 64 N. Car. 259. " Cresson v. Stout, 17 Johns. (N. Y.) 116. " Heermance v. Vernoy, 6 Johns. (N. Y.) 5. "Hunt V. Mullanphy, 1 Mo. 508. Compare Union Bank v. Emerson, 15 Mass. 1.59. ' " Pierce v. George, 108 Mass. 78 ; 11 Am. Rep. 310. VOL. I.— 29 450 NATURE AND REQUISITES OF THE CONTRACT. jsash and blind factory, one of which was bolted to the floor for jgreater firmness, and the other left standing without fasten- ing, are to be deemed personalty/ So machines used in a «hoe-shop, attached to the building by nails and bolts, are deemed personalty, and do not pass by a mortgage of the realty.^ And where the property was certain pieces of ma- chinery known as "jibs," placed in the building with other machinery, and which cannot be displaced without injury to themselves, may, by their mode of connection, be personalty.^ § 416. Bankrupts. — In case of bankruptcy, the right to re- move fixtures which belong to the tenant, passes to his assignee, and he will have the same rights against the landlord as the bankrupt himself had. If, however, the bankrupt has, previousl}'^ to his bankruptcy, parted with the house or build- ing, he has prima facie at least parted with the fixtures ; * and it can make no difference whether the conveyance is absolute or only by way of mortgage.^ Of course in settling these questions, the existing bank- ruptcy statutes must be consulted, but generally, the assignee of a bankrupt tenant would be entitled to whatever interest in the fixtures the bankrupt himself possessed.^ §417. Lex Rei Sit^e Governs. — Where personal property is sold in one State to a resident of another State for the pur- pose of being attached to the realty in the State of the vendee's residence, the question whether such property will pass by the conveyance of the realty where so attached, must be de- termined by the laws of the State where annexed, and not by the laws of the State where sold. Thus, a vendor sold per- ^ Blancke v. Rogers, 26 N. J. Eq. 563. See, also, Wells v. Maples, 15 Hun (N. Y.), 90. 2 McConnell v. Blood, 123 Mass. 47. ^ Davis V. Jones, 2 B. &. A. 165, 167. * Colegrave v. Dias Santos, 2 Barn. & C, 76. * Ex parte Barclay, 5 De Gex, M. & G. 403, 411. «Horn V. Baker, 9 East, 215 ; 3 Smith's Lead. Cas. 262 ; Ex parte Astbury, L. R. 4 Ch. App. 630 ; Ex parte King, 4 Jur. 510 ; Williams v. Evans, 23 Beav. 239. MORTGAGABLE INTERESTS. 451 sonalty in Vermont to a resident of New Hampshire, for the purpose of being annexed to the realty in the latter State, un- der a verbal lien that it should remain the property of the vendor. The question whether it will pass by a conveyance of the realty when so attached, must be determined by the laws of New Hampshire.' • Article 4. Rolling Stock of Railways. § 418. Rolling Stock. § 419. Constitutional and Statutory Provisions. §418. Rolling Stock. — Whether the rolling stock of a railway corporation, when used by a railroad company, is a fixture or not, is a question not uniformly answered by differ- ent courts. It is held, however, that the materials used in the construction of a railway become annexed to the soil in the process of construction, and a railroad track is, therefore, deemed a fixture.^ Thus, a marine railway, consisting of iron and wooden rails and sleepers, endless chain, gear, wheelers and ship cradle, and constructed in the usual manner, is a fixture.^ So a railroad track laid down upon the land, with a view to its permanent improvement or beneficial enjoyment is a fixture.* In New York the rolling stock of railroad companies is not a part of the realty, but retains the character of personalty. It does not become a part of the realty, so as to pass by a conveyance of the land as part thereof, and a chattel mortgage given on rolling stock is valid.* ' Buzzell V. Cummings, 61 Vt. 213. ^Strickland v. Parker, 54 Me. 263 ; North Cent. Railroad Co. v. Canton Co., 30 Md. 347 ; Turner v. Cameron, L. R. 5 Q. B. 306. 'Strickland V. Parker, 54 Me. 263. n^an Keuren v. Cent. Railroad Co., 38 N. J. L. 165. *Hoyle V. Plattsburg, etc., R. R. Co., 54 N. Y. 314 ; 13 Am. Rep. 595 ; Ran- dall V. Elwell, 52 N. Y. 521 ; 11 Am. Rep. 747 ; Stevens v. Buffalo, etc., R. R, Co., 31 Barb. (N, Y.) 590. 452 NATURE AND REQUISITES OF THE CONTRACT. In New Hampshire it has been held that the locomotive engines and freight and passenger cars of a railroad company are liable to attachment, when not in general use, like other personal property,^ thus classing them with personal chattels. So, it is the rule of New Jersey, that a mortgage by a railroad company on its road-bed, together with its engines, cars, and rolling stock, so far as regards the latter class of property, is a chattel mortgage ; that the engines, cars, and rolling stock must be regarded as chattels, which have not lost their dis- tinctive character as personalty by being affixed to and made part of the realty.^ And this is tlie view taken by the majority of the courts when not controlled by the constitution ; that where the question has been directly presented, rolling stock is person- alty,^ and must be mortgaged as such. On the other hand, rolling stock is declared a part of the realty.^ §419. Constitutional and Statutory Provisions. — Whether rolling stock is personalty or part of the realty, has been regulated in some of the States by constitutional and stat- utory provisions. This question has been settled in New York by statute, excepting from the operation of the chattel mort- gage act, mortgages by railroad companies on real and personal property which have been recorded as mortgages of real estate.* And the act of 1876 made similar provisions.® 1 Boston, etc., Railroad Co. v. Gilmore, 37 N. H. 410. 2 Williamson v. N. J. South R. R. Co., 29 N. J. Eq. 311 ; State v. Somerville, etc., R. R. Co., 4 Dutch. (N. J.) 21. 3 Stevens v. Buffalo, etc., R. R. Co., 31 Barb. (N. Y.) 590; Randall v. Elwell, 52 N. Y. 521 ; Hoyle v. Plattsburg, etc., R. R. Co., 54 N. Y. 314 ; Chicago, etc.. Railroad Co. v. Ft. Howard, 21 Wis. 44 ; Boston, etc., R. R. Co. v. Gilmore, 37 N. H. 410 ; Coe v. Columbus, etc., Railroad Co., 10 Ohio St. 372 ; City of Du- buque V. 111. Cent. R. R. Co., 39 Iowa, 56. * Meyer v. Johnston, 53 Ala. 237, 332 ; Youngman v. Elmira, etc., Railroad Co., 65 Pa. St. 278 ; Coney v. Pittsburgh, etc., R. R. Co., 3 Phila. (Pa.) 173 ; Mor- rill V. Noyes, 56 Me. 458 ; State v. North Cent. R. R. Co., 18 Md. 193 ; Phillips V. Winslow, 18 B. Mon. (Ky.) 431 ; Douglass v. Cline, 12 Bush (Ky.), 608, 630; Pierce v. Emery, 32 N. H. 484. See, also, Pullan v. Cincinnati, etc., R. R. Co., 4 Biss. C. C. 35 ; Galveston R. R. Co. v. Cowdry, 11 Wall. (U. S.) 459. ■ ^ N. Y. Stat. 1868, ch. 779 ; Rev. Stat. 1875, p. 555, sect. 115. «N. Y. Laws of 1876, p. 307, sect. 4. MORTGAGABLE INTERESTS. 453 Rolling stock is declared to be personal property in Ala- bama, Arkansas, Illinois, Missouri, Nebraska, Texas, and West Virginia/ But in Wisconsin rolling stock is declared to be fixtures.^ So in Florida,^ and in Iowa.* The same is enacted in Montana.'^ The recording act does not embrace mortgages of personal property of railway corporations used with its realty for rail- way purposes.® Article 5. Accessions to Mortgaged Realty. § 420. Crops. § 422. Trees and Shrubs. I 421. Manure and Stock. § 420. Crops. — The landlord has no such interest in, or title to, crops grown on the rented lands as can be made the sub- ject of mortgage.' A mortgage of "growing grain " does not cover grain already cut or severed from the ground.^ In some of the States statutory provisions have been made as regards the stage of growth when crops may be mortgaged.^ A mortgage of growing timber may be made — the timber to be cut and removed.''* ' See Wood on Railroads, 1625. ^ Laws of 1872, ch. 119, sects. 39, 40 ; Laws of 1877, eh. 144, sect. 1. ^ Acts of 1874, ch. 1987. * Code of 1873, sects. 1284, 1285. *Lawsof 1873, p. 102. * Hammock v. Loan & Trust Co., 105 U. S. 77 ; Cooper v. Corbin, 105 111. 224. See, also, Fosdick v. Schall. 99 U. S. 235 ; Fosdick v. Car Co., 99 U. S. 256 ; Huidekoper v. Locomotive Works, 99 U. S. 258. Compare Hervey v. Rhode Island Locomotive Works, 93 U. S. 664. See, also, 24 Am. L. Rev. 428. ' Broughton v. Powell, 52 Ala. 123. * Ford V. Sutherlin, 2 Mont. 440. ' Arkansas, act of 1875, p. 149 ; New Hampshire, Gen. Laws, 1878, ch. 137, pect. 1 ; Nevada, act of 1885, ch. 54 ; Washington, Code, sect. 1986 ; Cook v. Steel, 42 Tex. 53 ; may be mortgaged in New Mexico after harvested : Com. Laws, sect. 1586 ; in Mississippi mortgages may be made on growing crops, or crops to be grown within fifteen months from making of the mortgage, I>aws of 1876, pp. 100, 113 ; in Pennsylvania a mortgage of a growing crop is fraudulent : Lynch v. Welsh, 3 Pa. St. 294. ' '"Boykin v. Rosenfield, 69 Tex, 115; Claflin v. Carpenter, 4 Met. (Mass.) 454 NATURE AND REQUISITES OF THE CONTRACT. Crops are vested in the mortgagee only after default, when lie is entitled to them as part of the security.' § 421. Manure and Stock. — In general manure made in course of husbandry upon a farm, is so attached to and con- nected with the realty that, in the absence of any express stipulation or understanding to the contrary, it passes as ap- purtenant to the land. This principle is applied in the case of manure taken from the barnyard of a homestead, and piled upon the land though not broken up, nor rotten, nor in a fit state of incorporation with the soil.^ The same rule has been applied in cases between landlord and tenant ; ^ and also be- tween vendor and vendee.* The manure passes as appurtenant to the farm, and is ap- plicable to a mortgagor in possession. He has no right when evicted from the premises to remove or sell such manure, for the title thereto is vested in the mortgagee as the owner of the freehold.^ But stock or cattle, or the increase thereof, or plan- tation tools subsequently bought, unless expressly stipulated to the contrary, are not covered by a mortgage of the realty,^ § 422. Trees and Shrubs. — Trees and shrubs planted in a nursery for the temporary purpose of cultivation and growth, until they become sufficiently matured to be fit for the market, and then to be taken up and sold, pass by the mortgage of the land on which they are planted, so that the mortgagor, or his assigns, cannot remove them as personal chattels.^ 580; Sheldon v. Conner, 48 Me. 584; Wood v. Lester, 29 Barb. (N. Y.) 145; Cudworth V. Scott, 41 N. H. 456. 1 Gihnan r. Wills, Q6 Me. 273 ; Reed v. Elwell, 46 Me. 270. 2 Fay V. Muzzey, 13 Gray (Mass.), 53, 55. 3 Lassell v. Reed, 6 Me. 222 ; Daniels v. Pond, 21 Pick. (Mass.) 367. * Kittredge v. Woods, 3 N. H. 503. ^ Chase v. Wingate, 68 Me. 204. See, also, Middlebrook v. Corwin, 15 Wend. (N. Y.) 169 ; Plumer v. Plumer, 30 N. H. 558 ; Perry v. Carr, 44 N. H. 118 ; Lewis v. Jones, 17 Pa. St. 262; Wetherbee v. Ellison, 19 Vt. 379. « Vason V. Ball, 56 Ga. 268. ^Maples V. Millon, 31 Conn. 598. See, also, Batterman v. Albright, 122 N. Y. 484. Between landlord and tenant this rule is different, and the ten- ant can remove them during the term. MORTGAGABLE INTERESTS. 455 Accordingly nursery trees planted by the owner of realty become part of the realty, and pass as such to the purchaser in a foreclosure of the mortgage, executed by such owner of the real estate, notwithstanding the owner may have executed a chattel mortgage upon the trees, which was recorded prior to the judicial sale.^ So plants and shrubs, the growth of cut- tings from plants and shrubs mortgaged, pass to the mort- gagee by accession.^ However, a tenant who has set out wine plants during his tenancy, may mortgage them by a chattel mortgage, and the mortgagee will take preference to the vendee of the land.' Growing grass is a part of the realty ; yet, where it is owned by one who does not own the land it is personal property, and may be mortgaged as such.* Article 6. Enforcement of Lien. 1 423. Foreclosure of Mortgage. I 425. Trespass and Replevin. 1 424. Injunction against Mortgagor. 1 426. Damages, Measure of. § 423. Foreclosure of Mortgage. — Courts of equity in many cases interpose their aid by means of injunction to pre- vent the removal of fixtures, when it is made to appear that the mortgagor has the intention to remove them.^ Mortgagees are entitled to everything that is a fixture.^ So whenever the mortgagor endeavors to remove the fixtures or improvements upon the mortgaged property, he may be enjoined, or the creditor may have his choice of an action for damages, or re- > Adams v. Beadle, 47 Iowa, 439. See, also, Price v. Brayton, 19 Iowa, 309 ; Bank v. Crary, 1 Barb. (N. Y.) 542 ; King v. Wilcomb, 7 Barb. (N. Y.) 263. ''Bryant v. Pennell, 61 Me. 108. MVintermute v. Light, 46 Barb. (N. Y.) 278. * Smith V. Jenks, 1 Denio (N. Y.), 580 ; 1 N. Y. 90. Between vendor and vendee, wine plants growing will pass to the vendee : Wintermute v. Light, 46 Barb. (N. Y.) 278. See, also, Smith v. Price, 39 111. 28 ; Bishop v. Bishop, 11 N. Y. 123. * Gibson v. Smith, 2 Atk. 183; Hanson v. Gardiner, 7 Ves. 309; Keogh v. Daniell, 12 Wis. 163. V « ^^'alm8ley v. Milne, 7 C. B. (N. S.) 115 ; Millikin v. Armstrong, 17 Ind. 456 ; M'Kim v. Mason, 3 Md. Ch. 186. 456 NATURE AND REQUISITES OP THE CONTRACT. plevin after he has become the purchaser of the property at sheriff's sale.^ And it is the undoubted right of the mortga- gee, on foreclosure, not only to sell the real estate and fixtures but also any improvements, and personal property perma- nently annexed to the realty in such a way as to make it a fixture.^ And the execution creditor of the mortgagor may be enjoined from taking the fixtures, by the purchaser at a foreclosure sale.^ Or where one takes possession of the mort- gaged realty under an agreement with the mortgagor, and makes improvements by substituting new machinery, and makes additions and repairs with a view of becoming the owner of the land, such additions, substitutions, and repairs pass with the real estate under foreclosure/ But a mortgagee cannot convey at a foreclosure sale only the title to the realty with the fixtures, which, of course, are a part of the real estate ; he can convey no title to mere chattels on the land.* § 424. Injunction against Mortgagor. — Whenever the mortgagor endeavors to remove fixtures or improvements upon the mortgaged land, he may be enjoined,® when the right of the mortgagee rests upon the claim to the protection of the entire security unimpaired during the life of the mortgage,'^ and when, as between mortgagor and mortgagee, the latter is deemed the owner of the fee, and as such entitled to protection.^ But where the mortgagee is not deemed the owner of the fee, he is entitled to the protection of equity against the destruc- tion of the security.^ Thus, where the mortgage is deemed ^Dutro V. Kennedy, 9 Mont. 101. ^ Sands v. Pfeiffer, 10 Cal. 259; Merritt v. Judd, 14 Cal. 59; Hoskin v. Woodward, 45 Pa. St. 42. 3 Doughty V. Owen (N. J.), 19 Atl. Rep. 540. See, also. Usher v. Martin, L. R., 24 Q. B. Div. 272. * McFadden v. Allen, 50 Hun (N. Y.), 361. "Buzzell V. Cummings, 61 Vt. 213. *Dutro V. Kennedy, 9 Mont. 101. 'Nelson v. Pinegar, 30 111. 473. "Nelson v. Pinegar, 30 111. 473. 9 Brady v. Waldron, 2 Johns. Ch. (N. Y.) 148. 1 MORTGAGABLE INTERESTS. 457 only a security, relief will be allowed to prevent tlie destruc- tion of the security.' The remedy of the mortgagee in some States is by injunction to restrain the commission of waste.^ An injunction is the proper remedy on behalf of a vendee in possession to restrain the vendor from the removal of fruit trees and ornamental shrubbery, notwithstanding vendor claims the right to such removal under a verbal reservation.^ § 425. Trespass and Replevin. — In those States where the mortgagee has the legal title to the property, he may maintain replevin for fixtures removed from the realty.* And the mort- gagee, whether in possession of the premises or not, may sue for the recovery of removed fixtures in an action of replevin,^ or may sue, in an action of trover to recover their value, or may sue in trespass for damages done the freehold." But if the mortgagee is not in actual possession, and has not entered to foreclose, he cannot maintain trespass against the owner of the equity of redemption for cutting grass on the land.^ In New Jersey, however, where the mortgagee has the legal title for the purpose of asserting and maintaining his possession, after default, he is not allowed to maintain replevin for fix- tures wrongfully removed,^ but he may maintain an action of trespass on the case for the injury to his security.* In some States where a mortgage is a mere lien, the mortgagee cannot recover the fixtures from the purchaser, because, by the re- moval, he has lost the right to the property, though he may have an action for the waste.'** •Cooper I'. Davis, 15 Conn. 561 ; Murdock's Case, 2 Bland (Md.), 461 ; Sal- mon V. Cla^ett, 3 Bland (Md.), 126. ' Vanderslice v. Knapp, 20 Kan. 647. 'Smiths. Price, 39 111. 28. * Carpenter v. Allen, 150 Mass. 281 ; Matzon v. Griffin, 78 111. 477. *Laflin v. Griffiths, 35 Barb. (N. Y.) 58 ; Harlan v. Harlan, 15 Pa. St. 507. *Hitchman v. Walton, 4 Meea. & Wes. 409 ; Burnside v. Twitchell, 43 N. H. 390; Holland v. Hodgson, L. R. 7 C. P. 328. 'Woodward v. Pickett, 8 Gray (Mass.), 617. *Kircher v. Schalk, 39 N. J. L. 335. V 'Jackson v. Turrell, 39 N. J. L. 329. "Clark V. Reyburn, 1 Kan. 281 ; Harris v. Bannon, 78 Ky. 568 ; Woehler v. Endter,46 Wis. 301 ; Citizens' Bank v. Knapp, 22 La. Ann. 117. 458 NATURE AND REQUISITES OF THE CONTRACT. § 426. Damages, Measure of. — Where the mortgagee has the legal title, he is entitled to the full benefit of the entire mortgaged property for the payment of his debt.^ But in those jurisdictions where a mortgage is a mere lien and not a title to the land, an action by the mortgagee for any injury to the land must be based not upon the injury to the premises, but upon the loss occasioned to him by impairing his security ; hence, his damages are limited to the loss he may sustain upon his security.^ The mortgagee's damages under this rule would be limited to the amount of injury to the mortgage security, however great the injury to the land might be.^ Judge Van Syckel says that the mortgagee's action must rest upon proof that, before the alleged injury, the mortgaged premises were of sufficient value to pay the mortgage debt or a part of it, and that, by the reason of such injury, the mort- gaged realty is inadequate for that purpose. " In that view the extent of the loss can be approximately computed. This, in my opinion, is the better rule, and one which, in its prac- tical application, will not be attended with any serious diffi- culty." " In Wisconsin after foreclosure, the mortgagee may maintain an action for an injury done the mortgaged premises, provided the security be thereby impaired and the mortgagor be in- solvent.^ ' Byrom v. Chapin, 113 Mass. 308. 2 Van Pelt v. McGraw, 4 N. Y. 110 ; Schalk v. Kingsley, 42 N. J. L. 32. See, also, Gardner v. Heartt, 3 Denio (N. Y.), 232; Lane v. Hitchcock, 14 Johns. (N. Y.) 213. 3 Van Pelt v. McGraw, 4 N. Y. 110. * Schalk V. Kinp;sley, 42 N. J. L. 32. ^ Jones V. Costigan, 12 Wis. 677. i CHAPTER XII. after-acquired property. Article 1. Potential Interests. 2 427. At Common Law. § 428. Potential Interests. § 427. At Common Law. — At common law a mortgage could only operate on property in esse at the time of its execution, and which actually belonged to the mortgagor, or potentially belonging to him as an incident of other property then in existence, and belonging to him. So, under the common law, all mortgages of property which the mortgagor does not own at the time of the execution of the mortgage, though he acquires it afterward, are void as to third per- sons.^ To constitute a valid sale or mortgage at law, the vendor or mortgagor must have the present property either actually or potentially in the thing sold.^ In case of chattels, if the instrument be so framed as to give the mortgagee a power of seizing such future chattels of the grantor as they should be acquired by him and brought upon the premises, they will pass, after such seizure, where there is already a foundation of interest in the grantor. This is an old rule in the law, and rests, to some extent, upon a maxim stated by Lord Bacon : " Though the grant of a fu- ture interest is invalid, yet a declarative precedent may be ' Borden v. Croak, 131 111. 68 ; Jones v. Richardson, 10 Met. (Mass.) 481 ; Looker v. Peckwell, 38 N. J. L. 253 ; "Wilson v. Wilson, 37 Md. 1 ; Hamilton v. Rogers, 8 Md. 301 ; Smithurst v. Edmunds, 14 N. J. Eq. 408 ; Amonett v. Amis, 16 La. Ann. 225; Ross v. Wilson, 7 Bush (Ky.), 29. 'Looker v. Peckwell, 38 N. J. L. 253 ; Gale v. Burnell, 7 Ad. & El. 850 ; Low y. Pew, 108 Mass. 347 ; Van Hoozer v. Cory, 34 Barb. (N. Y.) 9 ; Head v. Good- win, 37 Me. 181. 459 460 NATURE AND REQUISITES OF THE CONTRACT. made which will take effect on the intervention of some new act." ' As an enunciation of the rules governing courts of law, this statement must be regarded as correct.^ The general idea running through the decisions of courts of law is that the executory agreement operates as a license, au- thority, or power, revocable in its nature, until the creditor is either put into possession of the chattels at the time or after they come into existence or are vested in the debtor. As soon as that new act has intervened, the lien of the creditor becomes perfect, and in the absence of statutory regulation prevails over the liens of subsequent executions. Thus, a license to search for and raise metals, and also to carry them away, operates not merely as a license, but as a grant, and passes an interest to the grantee, which is capable of being assigned by him.^ And a grant of the future produce of land actually in possession of the grantor at the time of the grant passes an interest in such future crop as soon as it comes into existence.* § 428. Potential Interests. — Lord Hobart says : " Land is the mother and root of all fruit. Therefore, he that hath it may grant all fruits that may arise upon it after, and the property shall pass as soon as the fruits are extant. A person may grant all the tithe- wool that he shall have in such a year, yet perhaps he shall have none ; but a man cannot grant all the wool that he shall grow upon his sheep that he shall buy hereafter, for then he hath it neither actually or potentially. He may, therefore, sell or mortgage the natural and expected products, growth or increase of his own property ; but he can- not sell or mortgage the crops to grow upon the land of an- ^" Licet disposUio de inter esse futuro sit mutilis, tamen potest fieri declaratio prsecedens quae sortiaiur effectum, interveniente novo adu." 2 Congreve v. Evetts, 10 Exch. 298 ; Carr v. AUatt, 3 Hurl. & Norm. 964 ; Hope V. Hayley, 5 Ell. & Black. 830 ; Chidell v. Galsworthy, G C. B. (N. S.) 471 ; Baker v. Gray, 17 C. B. 462 ; Moody v. Wright, 13 Met. (Mass.) 29 ; Chapman V. Weimer, 4 Ohio St. 481. 'Wood V. Leadbitter, 13 Mees. & W. 838 ; Wickham v. Hawker, 7 Meea. & Wes. 63. * Grantham v. Hawley, Hob. 132. AFTER-ACQUIRED PROPERTY. 461 other, or the wool to grow upon another's sheep, or upon sheep that he may thereafter buy." ^ " Leases for years, be they present or future, wardships of tenants in capiie, or by knight's service, trees, oxen, horses, plate, household stuff and the like ;. also trees, grass, and corn growing and standing upon the- ground, fruit upon the trees, wool upon the sheep's back, are grantable." ^ The doctrine of Lord Hobart, so far as the mortgaging of unplanted crops is concerned, does not find support in all of the English cases. Thus, when a party transfers by deed all his household goods, farming stock, crops, and personal estate on his farm, as a security, crops to be planted do not pass un- less taken possession of, after being planted by the mortgagor.^ So, under a bill of sale, growing crops passed on the execution of the deed, but future crops did not ; the mortgagee would have no legal or equitable title to crops not sown at the execu- tion of the instrument/ But this principle of potential inter- est was recognized in another case. A tenant for years of a farm, being indebted to his landlord, assigned to his landlord, by deed, " all his household goods and all his tenant right and interest, yet to come and unexpired, in and to the farm and premises." Under this agreement, it was held that the ten- ant's interest in crops grown in future years of the term passed to the landlord.* * Grantham v. Hawley, 1 Hobart, 132. '^Shep. Touch. 241. ' Hope V. Hayley, 5 El. & Bl. 830. * Congreve v. Evetts, 10 Exch. 298. See, also, Gale v. Burnell, 7 Ad. & El. 850. * Fetch V. Tutin, 15 Mees. & Wes. 110. 462 nature and requisites of the contract. Article 2, Unplanted and Growing Orops. § 429. Crops not Sown. ^ 441. New Hampshire. ^ 430. Alabama. § 442. New Mexico. ^ 431. Arkansas. § 443. New York. I 432. California. § 444. North Carolina. I 433. Kansas. ^ 445. North Dakota. I 434. Kentucky. I 446. South Dakota. § 435. Illinois. ? 447. Tennessee. § 436. Iowa. ? 448. Texas. § 437. Minnesota. § 449. Wisconsin. § 438. Mississippi. ? 450. Growing Crops. § 439. Nebraska. § 451. Growing Timber. § 440. Nevada. § 452. Growing Grass. § 429. Crops Not Sown. — Whether a party can make a valid mortgage of an unsown crop is a question not decided the same by all courts. Some authorities hold that the owner of the soil may make a valid mortgage of a crop to be grown/ and others hold that it must be sown before it can mortgaged as a crop.^ Many of the States, however, have regulated this question by statutory provisions. After sowing grain upon shares with the owner of the land, the tenant may make a valid mortgage of his share.^ § 430. Alabama. — In Alabama, though a mortgage on an unplanted crop creates only an equity, unless possession is taken or received after it is planted, or there is some new act effectual to pass the legal title, yet the mortgagee may maintain an action on the case against a stranger who has converted or disposed of the crop with notice of the mort- gage.* Such a mortgage does not convey the legal title on which ^ Butt V. Ellett, 19 Wall. (U. S.) 544 ; Apperson v. Moore, 30 Ark. 56 ; Arques t'. Wasson, 51 Cal. 620 ; Lehman v. Marshall, 47 Ala. 362 ; Jones v. Webster, 48 Ala. 109. ''Stowell !'. Bair, 5 111. App. 104; Gittings v. Nelson, 86 111. 591 ; Millimanr. Neher, 20 Barb. (N. Y.) 37. 'Shuart v. Taylor, 7 How. Pr. (N. Y.) 251 ; McGee v. Fitzer, 37 Tex. 27. * Eees V. Coats, 65 Ala. 256. AFTER-ACQUIRED PROPERTY. 463 the mortgagee may maintain an action of trover for the conver- sion of the crop, unless he has acquired possession.* It is essential to the creation of such incumbrance that the subject-matter should have a potential existence, as distin- guished from a mere possibility or expectancy on the part of the contracting parties that it will come into being. While the being itself need not have identity or separate entity, yet it must, at least be a product, or growth, or increase of property which has at the time a corporeal existence, and in which the mortgagor has a present interest — not a mere belief, hope, or expectation that he will, in future, acquire such an interest.^ § 431. Arkansas. — A mortgage of unplanted crops execu- ted prior to the act of Feb. 11, 1875, was void in law.^ But a lien attached in equity as soon as the subject of the mortgage came into existence.* The statute provides that mortgages may be made on crops already planted, or to be planted, and are binding upon such crops and their products. A laborer may mortgage his interest in a crop for supplies furnished to him.* § 432. California. — The court holds that the general rule undoubtedly is, that a person cannot convey a thing not in esse, or in which he has no present interest. But if the thing has a potential interest, it may be mortgaged or hypothecated. So a lessee or owner of land in possession of the same may, before he has planted a crop, execute a valid mortgage on the crop to be raised by him the coming cropping season.® § 433. Kansas. — In this State where a mortgage is given on an unplanted crop, which is afterward planted and grown, but before possession is taken thereof by the mortgagee, a creditor 'Whittloshoffer v. Strauss, 83 Ala. 517; Marks v. Robinson, 82 Ala. 69; Leslie ik Hinson, 83 Ala. 266. ' Paden v. Bellenger, 87 Ala. 575. ^Tomilson v. Greenfield, 31 Ark. 557. * Apperson v. Moore, 30 Ark. 56. * Dig. of Stat. 1884, sect. 4747. "^Arquea v. Wasson, 51 Cal. 620. 464 NATURE AND REQUISITES OF THE CONTRACT. of the mortgagor causes an execution to be levied thereon, the execution will take precedence. The mortgage being void, and the property subject to an execution, it can be properly- levied upon. A valid mortgage can only be given upon prox)erty which has an actual or potential existence ; a crop not planted has neither an actual or potential life, and cannot therefore be legally transferred.^ § 434. Kentucky. — A mortgage of a crop to be raised on a farm during a certain term passes no title in the crop not sown when the mortgage was executed, and the mortgagee has no claim against a purchaser of the crop for it or its value.^ § 435. Illinois. — Crops to be raised in the future by the in- dustry of the mortgagor, the seed not being in the ground at the time of the execution of the mortgage, have no potential existence and do not pass under the mortgage ; and the mort- gagee without taking possession, cannot hold them as against an execution creditor.^ But a mortgage of " all the wheat and other crops now growing " on certain land, the wheat hav- ing been sown the fall before, is valid, because the wheat at the time of giving the mortgage, had a potential existence.* § 436. Iowa. — A mortgage of crops to be grown in the future, is valid.^ Such mortgage attaches to the crop when it comes into existence, and imports notice of the lien of the mortgage." The rule is, however, that a mortgage will not be deemed to cover after-acquired property, unless the intention that it should is clearly expressed.^ § 437. Minnesota. — A mortgage on crops to be grown by the mortgagor on land owned or possessed by him is valid. 1 Long V. Hines, 40 Kan. 220. 2 Hutchinson v. Ford, 9 Bush, 318. 5 Stowell r. Bair, 5 111. App. 104. ♦Hansen v. Dennison, 7 111. App. 73. ^Norris v. Hix, 74 Iowa, 524. « Wheeler v. Becker, 68 Iowa, 723. ^Lormer r. Allyn, 64 Iowa, 725; Mc.\rthur ?'. Garman, 71 Iowa, 34. AFTER-ACQUIRED PROPERTY. 465 The common-law rule that no interest could pass by the as- signment of a chattel not in esse does not apply to crops to be raised by the assignor, on land then owned by him or in his possession/ So where parties by their contract in clear terms express an intention to create a mortgage lien upon chattels not then owned but to be subsequently acquired by the mortgagor, whether in being or not, the mortgage attaches as a lien on the property as soon as the mortgagor acquires it, as against him and all claiming under him with notice of all voluntary con- veyances, the same as if the property had belonged to him when the mortgage was created, and precisely as if the property had been in being and belonged to the mortgagor when the mortgage was executed.^ § 438. Mississippi. — A lessee or owner of land may execute a mortgage conveying crops to be grown by him in future years, though the subject of the mortgage be a chattel not in esse, but a future acquisition. He has acquired such an in- terest in the soil as will enable him to mortgage fruits of it to- be afterward produced.^ This is on the doctrine that one may make a present sale or mortgage of all things having a poten- tial existence ; an unplanted crop has such potential existence.* § 439. Nebraska. — As a question of law, the lien of a mort- gage on an unplanted crop, at the time of the execution of the instrument, will not attach to the crop when it comes into ex- istence, unless taken possession of by the mortgagee. Until the mortgagee has taken possession of the crop after coming into existence, it gives a mere license only to go upon the land, and conveys neither a lien nor a right of property which the mortgagee can assert against a purchaser or execu- tion creditor of the mortgagor.' ' Minnesota Linseed Oil Co. r. Maginnis, 32 Minn. 193 ; Miller v. McCor- mick Harvest Mach. Co., 35 Minn. 399. 'Ludlum ?'. Rothschild, 41 Minn. 218. ' Evemian v. Robb, 52 INIiss. 653. * ]McCo\vn ;;. IMayer, 65 Mi.«s. 537 ; Stadeker v. Loeb, 67 Miss. 200. ^ Cole V. Kerr, 19 Nebr. 553. VOL. I.— 30 466 NATURE AND REQUISITES OF THE CONTRACT. :§ 440. Nevada. — In this State it is provided that growint^ OFops may be mortgaged, and the mortgage may be executed aipon sx growing crop as well before as after the crop has been planted.^ •§441. New Hampshire. — In this State, crops to be sown cannot be mortgaged. But crops already sown, as fall rye, may be mortgaged the following January, and hay to be grown during the year,^ § 442. New Mexico. — In this Territory, growing crops can- not be mortgaged separate from the land. This is regulated by statutory provisions. After being severed from the soil, the crop can be mortgaged.^ § 443. New York. — A mortgage of crops to be grown will not pass title at law, yet the mortgagee has a license, under such a mortgage, to seize such property, and after such seizure the title passes ; in equity,, such mortgage transfers the bene- ficial interest without the intervention of any new act, which attached immediately upon coming into existence, or the ac- quisition of the property ; and crops subsequently raised upon the farm are covered by such mortgage.* § 444. North Carolina. — Frudus industriales are chattels ; and a conveyance of one's entire crop, whether growing or un- planted, is valid, and a mortgage can be made on the same, even if the crop is to be planted in the future.* And under the rule that one may grant a thing not in esse, of which he has a potential interest, a valid mortgage, at common law, may be made by the owner of land of crops sown but not yet growing.^ 'Laws of 1885, ch. 54. « Cudworth v. Scott, 41 N. H. 456. See Gen. Stat. 1878, ch. 137, sect. 1, p. 328. ^ Gen. Laws, sect. 1586. ♦McCaffrey v. Woodin, 65 N. Y. 459. * Robinson v. Ezzell, 72 N. Car. 231. « Gotten V. Willoughby, 83 N. Car. 75. AFTER- ACQUIRED PROPERTY. 467 § 445. North Dakota. — A mortgage of unplanted crops is valid. Such a mortgage is valid against a bona fide purchasoi' for value, if recorded when given, and need not be again filod for record after the crops come into existence. Under the law the original contract, ipso facto, immediately upon the acqui- sition or creation of such property, awakens and brings into life the lien agreed upon.^ § 446. South Dakota. — By statutory provisions an agree- ment may be made to create a lien on property not yet In existence, in which case the lien attaches when the party agreeing to give it, acquires an interest in the property. Hence, a mortgage of unplanted crops is valid, made by the owner or lessee of the land.^ § 447. Tennessee. — In this State a mortgage of an ui;i- planted crop is valid, even as against creditors of the mort- gagor or other third persons.^ § 448. Texas. — A growing crop planted before the date of the contract can be mortgaged. Such crop is subject to mort- gage regardless of itg growth toward maturity. The time of its planting may be recited in the instrument* § 449, Wisconsin. — A mortgage can have no valid opera- tion upon a crop of grain given at or about the time of plant- ing the same, and before it is up or has any appearance of a growing crop ; because the property attempted to be mortgaged in such case cannot be, said to be in existence. The subject- matter not being in existence, there is nothing for it to operate upon.^ § 450. Growing Crops. — In some of the States statutory provisions are made as regards the stage of growth when crops 'Grand Forks Nat. Bank v. Minneapolis & N. Elev. Co., 6 Dak. 357. This regulated by the Code, sect. 4330, 4331. * Com. Laws, sects. 4330, 4331 ; Grand Forks Nat. Bank v. Minneapolis & N. Elev. Co., 6 Dak. 357. ^Watkins v. Wyatt, 9 Baxt. 250. *Cookv. Steel, 42 Tex. 53. * Comstock V. Scalep, ,7 Wis. 159 ; Lamson v. Moffat, 61 Wis. 153. 468 NATURE AND REQUISITES OF THE CONTRACT. ma}^ be mortgaged.' And generally a crop is " a growing crop," so that it can be mortgaged, giving a lien or title to the mortgagee from the time the seed is deposited in the ground.^ It is the rule of the common law that growing crops are per- sonal property, but pass by a conveyance as appurtenant to the land, unless severed by reservation or exception. And a party may show by parol evidence that the growing crops were reserved on sale of the land, although there be no exception in the deed. A different rule controls, undoubtedly, in regard to the natural products of the earth, which grow spontaneously, without the culture of man's hands, such as trees, grass, and the like, and a continuous right to enter and cut, would require to be reserved by an instrument, in writing.^ § 451. Growing Timber. — When growing trees are mort- gaged to be removed, they are constructively severed from the realty, and become personalty. Thus, a mortgage of pine logs is valid where part had already been cut and rafted, and the re- mainder was to be cut and placed in rafts within a certain time, from lands which were designated ; and this is a sufficient severance, and all the logs become personalty.^ So a party may buy growing timber and give a valid mort- gage of the same before actually severed from the realty ; such mortgage will be effectual as soon as the trees are cut down.^ § 452. Growing Grass. — Growing grass, trees, and other natural products of the earth are parcels of the land. They are within the statute of frauds, and can only be sold, as a general rule, by an agreement in writing.^ ^ Washington Code, sect. 1986 ; Arkansas, Acts of 1875, p. 149 ; New Hamp- shire, Gen. Laws of 1878, ch. 137, sect. 1 ; Nevada, Acts of 1885, ch. 54. nVilkinson V. Ketler, 69 Ala. 4.35; Cook v. Steel, 42 Tex. 53; Hansen v. Dennison, 7 111. App. 73 ; Cotten v. Willoughby, 83 N. Car. 75. ^Backenstoss v. Stahler, 33 Pa. St. 251. *Boykin v. Rosenfield, 69 Tex. 115. *Claflin V. Carpenter, 4 Met. (Mass.) 580; Sheldon v. Conner, 48 Me. 584; Wood V. Lester, 29 Barb. (N. Y.) 145 ; Cook v. Stearns, 11 Mass. 533 ; Doug- las V. Shumway, 13 Gray (Mass.), 498; Nelson v. Nelson, 6 Gray (Mass.), 385; Cndworth v. Scott, 41 N. H. 456 ; Erskine v. Plummer, 7 Me. 447. * Green f. Armstrong, 1 Denio (N. Y.), 550; Wintermute v. Light, 46 Barb. AFTER-ACQUIRED PROPERTY. 469 A writing would be necessary to give the vendee the right to enter and cut tliem.' But grain and vegetables are annual products of the earth, and may be mortgaged by parol.^ Where the mortgagor of grass owns both the land and the grass or trees, and he fails to fulfill the conditions of the mort- gage, then there is a severance in contemplation of law, and the grass becomes a chattel belonging to the mortgagee.^ When the grass is owned by one not the owner of the realty, then it is not considered a parcel of the land/ Article 3. In Equity. §453. In Equity. H55. Priority. 2 454. The Prevailing Doctrine in Equity. § 453. In Equity. — At common law no title passed to the mortgagee of after-acquired property. In equity, a mortgage of property in essS and after-acquired, creates an equitable interest in that after-acquired. Whenever the parties by their contract intend to create a positive lien or charge, either upon real or personal property, whether then owned by the mort- gagor or not, or, if personal property, whether it be in esse or not, it attaches in equity as a lien or charge upon the particu- lar property, as soon as the mortgagor or contractor acquires a title thereto against the latter, and all persons asserting a claim thereto under him, either voluntarily or with notice, or in bankruptcy.* In equity, such a mortgage is effectual to charge the property, when acquired, with an equitable lien, or (N. Y.) 278 ; Rodwell v. Phillips, 9 Mees. & Wes. 501 ; Carrington v. Roots, 2 Mees. & Wes. 248 ; Crosby v. Wadsworth, 6 East, 602. ' Backenstoss v. Stahler, 33 Pa. St. 251. * Robinson v. Ezzell, 72 N. Car. 231 ; Jones v. Flint, 10 Ad. & E. 753; Par- ker V. Staniland, 11 East, 362. "Bank v. Crary, 1 Barb. (N. Y.) 542. * Smith V. Jenks, 1 Denio (N. Y.), 580; 1 N. Y. 90 ; Green v. Armstrong, 1 Dgnio (N. Y.), 550. ^MitcheU v. Winslow, 2 Story, C. C. 630. 470 NATURE AND REQUISITES OF TlHE CONTRACT. i/y create an equitable title to it in favor of the mortgagee against the mortgagor.' Many decisions hold that though the mortgage per se is in- operative to transfer the legal title, possession so given or taken ttnder it transfers the legal title to the mortgagee, being the ihiovus actus interveniens, as stated by Lord Bacon, to give effect to the mortgage as a declaratio prsecedens.^ The rule in equity was settled in a leading case.' This case was twice argued. One Taylor was the owner of certain machinery in a mill. It was purchased by Holroyd, but not removed by him, Taylor continuing in possession. He, how- ever, executed a deed by which it was declared that the ma- chinery was the property of Holroyd ; that Taylor desired to repurchase it for £5,000, but had not the money to pay for it, wherefore it was conveyed to B. in trust when Taylor should pay the money to transfer to him, and, if he did not pay, to hold the property for Holroyd. There was a covenant that all the machinery which should be placed in the mill, in addition to or in substitution for the original machinery, should be sub- ject to the same trusts, but nothing was done by or on behalf of Holroyd to take possession of the newly-purchased machinery. On April 2, 1860, Holroyd served Taylor with notice of de- mand for payment of £5,000. An execution was afterward fevied by a creditor. This state of facts distinctly raised the point whether the rule that there must be " some new act in- tervening " in order to create the lien, prevails in equity. Lord Westbury said that though the contract as to the future ac- quired property passed no title, yet that if a vendor or mort- gagor agreed to sell or mortgage property of which he is not possessed at the time, and receives a consideration, and after- ward becomes possessed of property answering the description ' Borden r-. Croak, 131 111. 68 ; McCaffrey v. Woodin, 65 N. Y. 459 ; Wood v. U\adbitter, 13 Mees. & Wes. 838 ; Sillera v. Lester, 48 Miss. 513 ; Pennock v, Coe, 23 How. (U. S.) 117 ; Phelps v. Murray, 2 Tenn. Ch. 740 ; EUett v. Butt, 1 Woods, C. C. 214. - Hope r. Hayley, 5 El. & B. 830 ; Congreve v. Evetts, 10 Exch. 298 ; Baker V. Gray, 17 C. B. 462 ; Lanjrton v. Morton, 1 Hare, 549. * Holroyd v. Marshall, 10 H. L. Cas. 191. AFTER-ACQUIRED PROPERTY. 471 in the contract, that will in equity transfer the beneficial in- terest to the mortgagee or purchaser immediately out of the property being acquired. Because there was a trust imposed on the fund by the force of the contract, and that the inca- pacity to perform it at the time of its execution is no answer when the means of doing so are afterward obtained. Accord- ingly it followed that as soon as the new machinery and effects were placed in the mill they became subject in equity to the operation of the contract, and passed to the mortgagee, to whom Taylor was bound to make a legal conveyance, and for whom he was in the meantime a trustee of the property in question. Lord Chelmsford said, in speaking of the distinction between the rule in law and in equity, that in the former there must be a new intervening act ; a mere license is not sufficient unless acted upon. In equity the estate attaches as soon as the prop- erty is acquired by the debtor. At law, property not existing, but to be acquired at a future time, is not assignable; in equity, it is transferable. At law, though a power is given in a deed of assignment to take possession of after-acquired prop- erty, no interest is transferred, even as between the parties themselves, unless possession is actually taken. In equity, it is not disputed that the moment the property comes into pos- session the deed operates upon it. The court also distinguished some cases that have been sup- posed to be opposed to this view of the doctrine. It declares that Langton v. Horton ^ does not impugn the general principle. It admits the transaction to pass the title between the parties, while it departs from the rule in failing to apply it to third parties as creditors. The dicta in Mogg v. Baker,^ to the effect that no equitable title passes without " the new intervening act," are disapproved, and Lord Wensleydale, who, as Baron Parke, wrote the opinion in that case, admits, when participating in the decision of this ' 1 Hare, 549. '3Mees. &. W. 198. 472 NATURE AND REQUISITES OF THE CONTRACT. case/ that he was mistaken so far as he stated in Mogg v. Baker a rule to be appUed in equity. So a mortgage of future-acquired property will bind both real and personal estate, when acquired, as to the parties them- selves and all persons claiming under them with notice. ^ § 454. The Prevailing Doctrine in Equity. — Lord West- bury says that a contract as to future-acquired property passes no title, yet that if the vendor or mortgagor agrees to sell or mortgage property of which he is not possessed at the time, and receives a consideration, and afterward becomes pos- sessed of the property answering the description of the con- tract, that will, in equity, transfer the beneficial interest to the mortgagee or purchaser immediately out of the j)roperty being acquired ; thr.t a trust is imposed on the property by force of the contract, and that the incapacity to perform it at the time of the contract is no answer when the means of doing so after- ward are obtained.^ In this case Lord Chelmsford distinguishes the rule of law and equity. He says that in equity the estate attaches as soon as the property is acquired by the debtor. At law, property not existing but to be acquired at a future time, is not assign- able ; in equity it is transferable. At law, though a power is given in a deed of assignment to take possession of after-ac- quired property, no interest is transferred, even as between the parties themselves, unless possession is actually taken. In equity it is not disputed that the moment the property comes into possession the deed operates upon it. This doctrine is in accord with the weight of American decisions.* ' Holroyd v. Marshall, 10 H. L. Cas. 191. « Sniithurst v. Edmunds, 14 N. J. Eq. 408 ; Mitchell v. Winslow, 2 Story, C. C. 630. » Holroyd v. Marshall, 10 H. L. Cas. 191. *Smithurst V.Edmunds, 14 N. J. Eq. 408; Borden v. Croak, 131 111. 68; McCaffrey v. Woodin, 65 N. Y. 459 ; Rowan v. Sharp's Rifle Manuf. Co., 29 Conn. 282 ; Walker v. Vaughn, 33 Conn. 577 ; Gevers v. Wright, 18 N. J. Eq. 330 ; Williamson v. New Jersey S. R. R. Co., 29 N. J. Eq. 311 ; Mitchell v. W^inslow, 2 Story, C. C. 630 ; Beall v. White, 94 U. S. 382 ; Cook v. Corthell, 11 R. I. 482 ; WiUiams v. Briggs, 11 R. I. 476. fli AFTER- ACQUIRED PROPERTY. 473 § 455. Priority. — A mortgage of property thereafter ac- quired takes effect as a valid lien immediately when the prop- erty is acquired by the mortgagor ; and as between successive mortgages of after-acquired property, priority of lien is gen- erally determined by priority of time, the mortgage first in point of time being the senior lien.* Courts of equity will permit the conveyance to take effect upon the property when it is acquired in fulfillment of an express agreement if founded upon a valid consideration, and it appears no rule of law is in- fringed, and the rights of third persons are not prejudiced. However, to reconcile the decisions on this subject would be difficult if not impossible.^ In equity, the moment the property comes into possession of the mortgagor the deed operates upon it. Such mortgage will bind future-acquired real property when acquired as to third persons, and all parties claiming under them, with notice.^ Article 4. Railroad Property. ? 456. Extent of a Eailroad Mort- Enjoyment of the Franchise gage. is Included. § 457. Property Not Within the § 460. The Subsequent Property Must Terms of the Mortgage. Be Indispensable. I 458. After- Acquired Rolling Stock § 461. Mortgage of Future Net Earn- Included. ings. \ 459. Everything Necessary to the § 462. Priorities. § 456. Extent of a Railroad Mortgage. — A railroad mortgage covers the things in esse, when executed, and also such as shall be obtained or added during the existence of the debt. Thus, a mortgage of a railroad, its lands, property, franchises, rights, and appurtenances, with the buildings, struc- tures, and improvements, comprehends not only the property in esse forming part of the organism or structural arrangements, 'Boston Safe Deposit and Trust Co. v. Bankers', etc., Co., 36 Fed. Rep. 288. » Beall V. White, 94 U. S. 382. ' McCaffrey v. Woodin, 65 N. Y. 459. See, also, Holroyd v. Marshall, 10 H. L. Cas. 191. 474 NATURE AND REQUISITES OF THE CONTRACT. or the machinery and apparatus for the construction, main- tenance, or operation of the railroad, whether movable or im- movable, but also such as shall be obtained or added during the existence of the debt.^ Such mortgage covers property afterward acquired, which is contemplated by the parties as set forth in the instrument.^ So a mortgage of a railroad, its tolls and revenues, covers all the rolling stock and fixtures, whether movable or immovable, essential to the production of tolls and revenues.^ So a mort- gage on a railroad with its engines, depots, and shops then owned by the company, or which it might thereafter acquire, " with the superstructure, rails, and other materials used there- on," covers wood provided for the use of the road.^ So a mortgage of " all the present and future to be acquired property of the company, including the right of way and land occupied, and all rails and other materials used therein or procured therefor," covers the rolling stock of the railroad.^ In general such articles are included in a railroad mortgage as are essential to the use of the realty, and which have been applied to the use in connection with it and are necessary for that purpose, and without which, or similar articles, the realty would cease to be of value.® So a mortgage executed by a railroad company upon its road, with the lands, tracks, build- ings, privileges, and franchises " together with all the locomo- tives, tenders, cars, carriages, tools, and machinery, owned or thereafter to be owned by the company, or in any way belong- ing or appertaining to said road, and to be used thereon," 1 Bell V. Railroad Co., 34 La. Ann. 785 ; Calhoun v. Memphis, etc., R. R. Co., 2 Flip. C. C. 442, 447. "^ Thompson v. White Water Valley R. R. Co., 132 U. S. 68 ; Wellink v. Morris Canal & Banking Co., 3 Green. Ch. (N. J.) 377, 402 ; Fidelity Ins., Trust and Safe Deposit Co. v. Railroad Co., 33 W. Va. 7G1. ^ » State V. Northern Cent. R. R. Co., 18 Md. 193. * Coe V. McBrown, 22 Ind. 252. spuUan ('. Cincinnati & Chi. Air Line R. R. Co., 4 Biss. C. C. 35. See, also, Emerson v. European, etc.. Railroad Co., 67 Me. 387 ; Christy v. Dana, 34 Cal. 548. « Hoyle V. Plattsburg, etc., R. R. Co., 51 Barb. (N. Y.) 45 ; Bond v. Coke, 71 N. C. 97. AFTER-ACQUIRED PROPERTY. 475 is valid in equity, in respect to subsequently acquired prop- erty.^ So a mortgage of " all the present and future to be acquired property of the company, including the right of way and land occupied, and all rails and other materials used therein or procured therefor," includes the rolling stock of the road.^ Accordingly, a mortgage upon an existing railroad may be extended to rolling stock to be subsequently acquired, if an intent to acquire such stock and to hold it subject to the mort- gage is sufficiently expressed.^ In many cases, mortgages by such companies upon their roads and appurtenances have been executed for the purpose of raising the necessary means to construct the roads ; and, often, when the lines of such roads had only been surveyed. In one case there were several deeds of trust, which in terms covered after-acquired property, and it was decided that they estopped the company and all persons claiming under them, and in privity with them, from asserting that the deeds did not cover all the property and rights which they professed to cover. " Had there been but one deed of trust, and had that been given before a shovel had been put into the ground to- ward cbnstructing the railroad, yet if it assumed to convey and mortgage the railroad which the company was authorized by law to build, together with its superstructure, appurte- nances, fixtures, and rolling stock, these several items of property, as they came into existence, would become instantly attached to and covered by the deed, and would have fed the estoppel created thereby. No other rational or equitable rule can be adopted for such cases." * In speaking of Galveston Railroad v. Cowdry,' Justice Field * Benjamin v. Elmira, etc., R. R. Co., 49 Barb. (N. Y.) 441 ; Philadelphia, etc., R. R. Co. V. Woelpper, 64 Pa. St. .366 ; 3 Am. Rep. 596. 'PuUan V. Cincinnati, etc., R. R. Co., 4 Biss. C. C. 35 ; Hoyle v. Plattsburg, etc., R. R. Co., 51 Barb. (N. Y.) 45. ^Morrill v. Noyes, 56 Me. 4-58; Weetjen v. St. Paul, etc., R. R. Co., 4 Hun (N. Y.), 529 ; Pierce v. Milwaukee, etc., R. R. Co., 24 Wis. 551 ; 1 Am. Rep. 203. ♦Galveston Railroad v. Cowdry, 11 Wall. (U. S.) 459, 481. See, also, Por- ter V. Pittsburgh Bessemer Steel Co., 122 U. S. 267, 283. »llWall. (U.S.) 459,481. 476 NATURE AND REQUISITES OP THE CONTRACT. says : " In the case cited it was contended that priority should be given to the last creditor for aiding to conserve the road. But the court answered that this rule had never been intro- duced into our laws, except in maritime cases, which stand on a particular reason ; that by the common law whatever is affixed to the freehold becomes part of the realty, except cer- tain fixtures erected by tenants, which do not affect the ques- tion ; and that the rails put down upon the company's road become a part of the road." ' So the rails and all permanent fixtures which are essential to the successful operation of the road become a part of the property of the company, though sub- sequently annexed and are covered by the existing mortgage. The doctrine that a vendor not taking security for the price of realty sold by him holds in equity a lien upon the property for such price is not controverted by this rule, because it has no application to such cases.^ Rails and other articles which become affixed to and a part of a railroad covered by a prior mortgage will be held by the lien of such mortgage in favor of bona fide creditors, as against any contract between the furnisher of the property and the railroad company, and notice of such a contract to a purchaser of bonds covered by such mortgage will not affect his rights if he purchased the bonds from those who were bona fide hold- ers of them, free from any such notice.^ § 457. Property not within the Terms of the Mort- gage. — Property not within the terms of the mortgage as con- trolled by the charter is not covered by it, nor can it cover property contrary to the statute. Thus, a railroad company mortgaged the whole of its line in the State of Louisiana ; "also all real and personal estate within the State owned by the company at the date of this mortgage, or which may be acquired by it thereafter, appurtenant or necessary for the operation of said line." ^Thompson v. White Water Valley Railroad Co., 132 U. S. 68, 74. * Thompson v. AVhite Water Valley Railroad Co., 132 U. S. 68, 74. 'Porter v. Pittsburgh Besseraer Steel Co., 122 U. S. 267. AFTER-ACQUIRED PROPERTY. 477 The special authority to mortgage given to the company by its charter did not authorize it to mortgage an after-acquired land grant. The statute provided that " future property can never be the subject of a conventional mortgage." It was held that said mortgage did not cover land thereafter granted to the company to aid in the construction of the road. Judge Pardee says that the land grant could not be con- sidered an appurtenant of said railroad, and the language of the mortgage was not intended to cover the after-acquired land grant. As the general law of the State did not author- ize a mortgage of an after-acquired land grant, as the special authority to mortgage granted to the railroad company did not contemplate or authorize the mortgage of such after- acquired grant, and as the language of the mortgage itself did not describe nor include any such after-acquired grant, the mortgage could not be made to affect, by any lien or otherwise, the after-acquired land.^ It can only mortgage such property as it has power by law to acquire. So a mortgage of a land grant, which the company had no power to accept by its charter or by the general law, is invalid.^ A mortgage of a railroad company of its road and appur- tenances, and of lands afterward acquired for stations, shops, and the like uses, does not cover a tract of woodland afterward acquired, situate seven miles from the road, because no apt words in the mortgage describe this tract, and cannot be used for any specific purpose mentioned in the mortgage.^ But a mortgage of a railroad company embracing all property which it may subsequently acquire when not contrary to statute, in- cludes a lease it takes afterward of another railroad.* But if the after-acquired property is not embraced within the terms of the mortgage, it is not included. Thus, a mort- ' New Orleans, etc., R. R. Co. v. Union Trust Co., 41 Fed. Rep. 717. 'Meyer v. Johnston, 53 Ala. 237, 331. ^Dinsmore v. Racine, etc., R. R. Co., 12 Wis. 649. * Barnard v. Norwich & Worcester R. R. Co., 14 N. Bank Reg. 560. See, also, Walsh v. Barton, 24 Ohio St. 28 ; Campbell v. Texas & New Orleans R. tl. Co., 2 Woods. C. C. 263. 478 NATURE AND REQUISITES OF THE CX)NTRACT. gage conveying the railroad with its superstructure, track, and all other appurtenances, made or to be made ; also railroad furniture, including engines, tenders, cars of every description, tools, materials, machinery, and every kind of personal property which shall be used for operating said railroad, does not include certain railroad chairs, afterward acquired by the company, never used in the construction of the road.^ So a mortgage covering " all other personal property belonging to said com- pany, as the same now in use by said company, or as the same may be hereafter changed or renewed by said company," does not include certain machinery for " burnetizing " ties and timber so as to render them more desirable, which machinery was not in existence at the time of the mortgage, and took the place of nothing that was therein specified, but was constructed by the railroad company.^ § 458. After-acquired Rolling Stock Included. — A mortgage of a railroad includes the rolling stock. Thus, a mortgage of " all their road, property, rights, liberties, privi- leges, corporate franchises, income, tolls, and receipts then held or thereafter acquired," " in trust for the use, benefit, and security of the holders " of certains bonds therein described, covers engines, rolling stock in actual use by the company and required for the transaction of its business, whether owned at the date of the mortgage or afterward acquired.^ Thus, where second mortgagees and holders of bonds of a second issue brought suit upon these bonds, recovered judg- ment, issued execution, and levied it upon a part of the rolling stock, which was not in existence when the first mortgage was given, their judgment liens must be postponed to the claims of the first mortgagees.* ' Farmers' Loan and Trust Co. v. Bank, 11 Wis. 207 ; Dinsmore v. Racine, etc., Railroad Co., 12 Wis. 649. ^ Brainerd v. Peck, .34 Vt. 496. ' Philadelphia, etc., R. R. Co. v. Woelpper, 64 Pa. St. 366 ; Covey r. Pittsburgh, etc., R. R. Co., 3 Phila. (Pa.) 173. ^Pennock v. Coe, 23 How. (U. S.) 117. See, also, Galveston, etc., R. R. Co. IK Cowdry, 11 Wall. (U. S.) 459, 481 ; Dunham v. Cincinnati, etc., R. R. Co., 1 Wall. (U. S.) 254 ; IMorrill v. Noyes, 56 Me. 458 ; Pierce v. Milwaukee, etc., AFTER- ACQUIRED PROPERTY. 479 So, whenever a mortgage is made by a railroad company, and it includes all present and after-required property, as soon as the property is acquired, the mortgage operates upon it, and the mortgagees, under such circumstances, have a prior equity to the claims of creditors obtaining judgments and execu- tions after the property is thus acquired and placed in posses- sion of the mortgagor/ It is the settled law generally that all property that is acquired under such mortgages which expressly declare that they are given for all the property then in possession of the railroads, or thereafter to be acquired, is covered by the mort- gages, and the mortgagees have a superior equity as against all parties who, at the time that any after-acquired property came into possession of the railroad company, had not an inchoate or perfect lien upon the same.^ § 459. Everything Necessary to the Enjoyment of the Franchise is Included. — The power to mortgage a railroad implies as incident thereto the power to mortgage everything that may be necessary to the enjoyment of the franchise. Thus a mortgage of a railroad includes cars, wheels, firewood obtained for the use of the engine, and coal for the use of the machine-shop as things incident and indispensable to the use and enjoyment of the thing conveyed.'^ So lands subsequently purchased for depot grounds will come under the lien of the mortgage.* And one court holds that the trustees under such a mortgage hold subsequently-acquired property as incident to the franchise mortgaged, and as an accession to the subject mortgaged.^ R. R. Co., 24 Wis. 551 ; Howe v. Wolf, 15 Ohio St. 523 ; Phillips v. Winslow, 18 B. Men. (Ky.) 431 ; Noel v. Bewley, 3 Sim. 103 ; Foreman v. Proctor, 9 B. Mon. (Ky.) 124; Jenckea v. Goffe, 1 R. I. 511. ' Scott V. Clinton, etc., R. R. Co., 6 Bis?. C. C. 529. * Dunham v. Cincinnati, etc., R. R. Co., 1 Wall. (U. S.) 254 ; Galveston R. R. Co.r. Cowdry, 11 Wall. (U. S.) 459. 'Phillips V. Winslow, 18 B. Mon. (Ky.) 431. * Farmers' Loan and Trust Co. v. Fisher, 17 Wis. 114. See, also. Chew v. Bamet, 11 S. & R. (Pa.) 389. , ^Pierce v. Emery, 32 N. H. 484. See, also, Dinsmore v. Racine, etc.. Rail- road Co., 12 Wis. 649 ; Farmers' Loan and Trust Co. v. Bank, 11 Wis. 207. 480 nature and requisites of the contract. § 460. The Subsequent Property Must Be Indispensable. — The property purchased must be incident and indispens- abl}^ necessary to the enjoyment of its franchise in order to come under the mortgage lien. Thus, town lots do not pass at a foreclosure sale " with its corporate privileges and ap- purtenance," unless directly appurtenant to the railroad and indispensably necessary to the enjoyment of its franchises.^ So a canal-boat run in connection with the railroad does not come under a mortgage of all the property of the road.^ But such a mortgage does not ojjerate to exempt such prop- ert}^ in its nature personal and while it remains in possession of the corporation, from being levied upon by a judgment creditor of the company.^ The mortgagee can take only the property mortgaged. He is not authorized to detach portions not covered by the lien.^ The office furniture used in the office is covered by the mortgage of the entire property of the corporation;'' and chairs can be held under materials and pass with the mortgage ; ® but if it appears that the chairs are not appurtenant to the corpus they cannot be included in the mortgage.'' It may be regarded as settled that in equity a mortgage of a railroad will be held to apply to after-acquired rolling stock and other personal property, if the terms of the mortgage cover such future acquisitions, with the qualification, however, that the mortgage will attach to such property subject to the liens ex- isting upon it when it comes into the hands of the mortgagor.* § 461. Mortgage of Future Net Earnings. — A railroad corporation may mortgage its property including the tolls, in- ^ Shaniokin Valley R. R. Co. v. Livermore, 47 Pa. St. 465. ^ Parish v. Wheeler, 22 N. Y. 494. 3 Coe V. Columbus, etc., R. R. Co., 10 Ohio St. 372. *Coe V. Peacock, 14 Ohio St. 187. s Raymond r. Clark, 46 Conn. 129. ^ Farmers' Loan and Trust Co. v. Commercial Bank, 15 Wis. 424. "^ Farmers' Loan and Trust Co. v. Commercial Bank, 11 Wis. 207. See, also, Benjamin v. Elmira, etc., R. R. Co., 49 Barb. (N. Y.) 441 ; 54 N. Y. 675. * Hamlin v. Jerrard, 72 Me. 62 ; Morrill v. Noyes, 56 Me. 458 ; Meyr v. Johnston, 64 Ala. 603. AFTER-ACQUIRED PROPERTY. 481 come, rents, issues, and profits. This conveys only the net in- come of the road after the payment of the expenses ; ^ this may be done to secure prompt payment of interest accru- ing on its construction bonds.^ A railway mortgage, from the very nature of the property mortgaged, differs from other mortgages in this, that a railway mortgagor, before default, in possession of mortgaged premises, has less power over the usufruct of the mortgaged premises than other mortgagors in possession. And a correlative propo- sition is that a mortgagee of a railway corporation can secure the tolls, and even the railway corpus, only upon certain con- ditions, none of which are usually expressed iii this class of mortgages, and some of which are at variance with the terms of the writings between the railway mortgagor and its mort- gagee.' Some classes of indebtedness, created by the mortgagor subsequent to the lien of a railway, will, without consent of the mortgage creditors, be paid out of the corpus, as well as out of the tolls of the mortgaged railway, before the creditors are paid.* This doctrine has no reference to receiverships of any class of corporations other than railway corporations.^ Debts incurred in the course of the original construction of a railway are not entitled to any preference over the lien of the mortgage.® It has been said " that the railway mortgage is a prior lien only upon the net earnings of the road, after the payment of all the operating expenses, while the road is in the possession of the company." ' Undoubtedly the court intended to say that the railway mortgage is a prior lien upon the net earn- ings of the road only after the payment of all the operating expenses while the road is in the possession of the company. ^ Parkhurst v. Northern, etc., E. R. Co., 19 Md. 472. * Jessup V. Bridge, 11 Iowa. 572; Dunham v. Isett, 15 Iowa, 284. " See Fosdick v. Schall, 99 U. S. 235. * Barton v. Barbour, 104 U. S. 126. » Wood V. Guarantee Trust Co., 128 U. S. 416. "Wood V. Guarantee Trust Co., 128 U. S. 416. ' ^ Hale V. Frost, 99 U. S. 389. VOL. I. — 31 482 NATURE AND REQUISITES OF THE CONTRACT. Mortgages of tolls, real estate, and fixtures of trade made by a railroad, stand on a different ground from the mortgage made by some other private corporations. The rules appertaining to mere mortgages of real estate, by private individuals, have a limited application to a corpo- rate railway mortgage of its realty and appurtenances there- to, though the Suj)reme Court at first refused to make the distinction.^ Net earnings while the railroad is in the hands of a re- ceiver appointed by the court, may be applied to the payment of claims having superior equities to that of the bond-holdera These claims are confined to outstanding debts for labor, sup- plies, equipments, or permanent improvements of the mort- gaged property as may, under the circumstances of the par- ticular case, appear to be reasonable." And under certain circumstances, and for proper purposes, receiver's certificates may be accorded priority over debts secured by mortgage.^ § 462. Priorities. — A mortgage intended to cover after- acquired property can only attach itself to such property in the condition in which it comes into the mortgagor's hands. If that property is already subject to mortgages or other liens, the general mortgage does not displace them, though they may be junior to it in point of time. It only attaches to such interests as the mortgagor acquires. If a company purchase property and give a mortgage for the purchase-money, the deed which is given and the mortgage back are re- garded as one transaction, and such lien is not displaced by the general mortgage. This rule fiiils, how;ever, when the property purchased is annexed to a subject already covered 1 See Dunham v. Eailway Co., 1 Wall. (U. S.) 268. ' Fosdick ?;. Schall, 99 U. S. 235; Addison v. Lewis,' 75 Ya. 701; Fidelity Ins. and Safe Deposit Co. v. Railroad Co., 33 W. Va. 761, 788 ; Finance Co. v. Railway Co., 48 Fed. Rep. 188. ^ Beach Rec, sect. 379 d seq. ; Wallace v. Loomis, 97 U. S. 146; Union Trust Co. V. Illinois, etc., R. R. Co., 117 U. S. 434 ; Miltenberojer v. Railroad Co., 106 U. S. 286 ; Fidelity Ins. and Safe Deposit Co. v. Railroad Co., 33 W. Ya. 761, 788. AFTER-ACQUIRED PROPERTY. 483 by the general mortgage, and becomes a part of the rail- road.^ When loose property is susceptible of separate ownership and separate liens, such liens, if binding on the railroad company itself, are unaflfected by a prior general mortgage given by the corporation, and paramount thereto.^ A mortgage of its road and franchises does not convey its corporate existence, or its general corporate powers, but only its franchise necessary to make the conveyance beneficial to the grantees.^ And a power to mortgage a railroad and its franchises, con- ferred by the legislature, does not give the mortgagee any greater rights than the mortgagor had.* A mortgage of the entire property and also all property ap- pertaining to the road which the railroad company might afterward acquire is valid as to such after-acquired property, and the bonds issued under it are a prior incumbrance on a part of the chartered line constructed, after the funds realized from the mortgaged bonds have been exhausted, out of moneys subsequently furnished by jDarties who took from the company a special lien upon the rents and profits of the section so con- structed with their mone3^^ Justice Blatchford says : " What- ever is the rule applicable to locomotives and cars, and loose property susceptible of separate ownership and of separate liens, and to real estate not used for railroad purposes, as to their being unaffected by a prior mortgage given by the rail- road company, covering after-acquired property, it is well set- tled, in the decisions of this court, that rails and other articles which become affixed to and a part of a railroad covered by a prior mortgage will be held by the lien of such mortgage in favor of bona fide creditors, as against any contract between ' Galveston, etc., R. R. Co. r. Cowdry, 11 Wall. (U. S.) 459. = United States v. New Orleans Railroad, 12 Wall. (U. S.) 362 ; Williamson V. N. J. South R. R. Co., 28 N. J. Eq. 277. 3 Meyer v. Johnston, 53 Ala. 237, 325 ; Eldridge v. Smith, 34 Vt. 484 ; Miller V. Rutland, etc., R. R. Co., 36 Vt. 452, 498. / Attorney-Gen. v. Chicago, etc., R. R. Co., 35 Wis. 425. 5 Thompson v. White Water Valley Railroad Co., 132 U. S. 68. 484 NATURE AND REQUISITES OF THE CONTRACT. ihe furnisher of the property and the railroad company con- taining stipulations " that the title to the property shall not pass till the property is paid for, and reserving to the vendor the right to remove the property/ This is the well-settled doctrine of the United States Supreme Court.^ ' Porter v. Pittsburgh Bessemer Steel Co., 122 U. S. 267, 283. ' Durham v. Kailroad Co., 1 Wall. (U. S.) 254 ; Galveston Eailroad Co. v. Cowdry, 11 Wall. (U. S.) 459, 480, 482 ; United States v. New Orleans Railroad, 12 Wall. (U. S.) 362, 365 ; Dillon v, Barnard, 21 Wall. (U. S.) 430, 440 ; Fos- dick V. Schall, 99 U. S. 235, 251. I I I CHAPTER XIII. the debt secured. Article 1. Identification and Description of the Debt. 1 463. Description of the Debt. § 473. The Two Instruments Must be § 464. The Amount of the Indebted- Construed Together. ness. 2474. Several Mortgages Upon Sep- § 465. TVTiat Indebtedness Secured. arate Pieces of Realty. ? 466. Unliquidated Indebtedness. § 475. The Mortgage Is Security Only 1 467. The Description of the Note for the Debt Specified. Given with the Mortgage. § 476. The Doctrine of Tacking. § 468. What the Condition Should Set 1 477. The Doctrine of Tacking in Forth. England. 1 469. It Is Not Necessary to Have § 478. Re\nval of Mortgage. Collateral or Personal Se- § 479. Increasing the Eate of Interest curity. by Subsequent Agreement. 2 470. Clerical Mistakes and Inaccura- 1 480. Expenses for Collecting. cies. §481. Solicitor's Fees. H71. Admissibility of Parol Evidence. H82. Taxes. 2 472. Substitution of New Notes. § 463. Description of the Debt. — No formal and exact description of the debt is essential, provided there is a debt be- tween the parties capable of being enforced against the mort- gagor or the property mortgaged.* Literal exactness is not re- quired. If enough be said to direct the attention of parties subsequently dealing with the property to a source where they can obtain full and correct information, it is sufficient, pro- vided that they be not deceived or misled by the language used.^ Thus, where the condition of the mortgage recites that the grantor was indebted to the mortgagee for moneys loaned, and ^RusseU v. Southard, 12 How. (U. S.) 139; Smith v. Bank, 24 Me. 185; Brown v. Dewey, 1 Sand. Ch. (N. Y.) 56 ; Rice v. Rice, 4 Pick. (Mass.) 349. "Shirras v. Caig, 7 Cranch (U.S.), 34; Conard v. Ins. Co., 1 Pet. (U.S.) 448 ; Ricketson v. Richardson, 19 Cal. 330 ; Paine v. Benton, 32 Wis. 491 ; Oilman v. Moody, 43 N. H. 239. 485 486 NATURE AND REQUISITES OP THE CONTRACT. his liability on divers bills of exchange and promissory notes, and it provides that if the mortgagor discharge them within six months the mortgage shall be void, it will be a sufficient description of the debt, since it is capable of being made cer- tain by parol evidence/ So a mortgage which provides for the payment of future- accruing accounts which may become due from the mortgagor to the mortgagee is not void as between the parties, nor as to purchasers or mortgagees.^ In general, all that is required is that the debt shall be described with such convenient certainty as the case demands.^ In some jurisdictions, however, it has been held that the debt must either be described in the con- dition so that its identity can be traced, or some intimation given where such information may be obtained upon inquiry/ But it is obvious that this doctrine is now regarded as the sound rule upon the subject. All that is now required is that the mortgage shall describe, in general terms, all that the mortgagor owes or may thereafter owe the mortgagee.^ § 464. The Amount op the Indebtedness. — If the mortgage contains a general description sufficient to i embrace the liability intended to be secured, so as to direct a person examining the record to the proper source for more minute and particular information of the amount of the incumbrance, it is all that is necessary.^ Though usually it is not necessary that the mortgage states the amount of the debt secured, or that it is evidenced by a » Hurd V. Robinson, 11 Ohio St. 232 ; Utley v. Smith, 24 Conn. 290, 314. ^ McDaniels v. Colvin, 16 Vt. 300. ^ Stoughton V. Pasco, 5 Conn. 442 ; Lewis v. De Forest, 20 Conn. 427 ; Sey- mour V. Darrow, 31 Vt. 122. *Garber v. Henry, 6 Watts (Pa.), 57; Gardner v. Webber, 17 Pick. (Mass.) 414 ; Commercial Bank v. Cunningham, 24 Pick. (Mass.) 274 ; James v. John- son, 6 Johns. Ch. (N. Y.) 429. 5 McDaniels v. Colvin, 16Vt. 300; Shirras ?-. Caig, 7 Cranch (U. S.), 34; Truscott V. King, 6 Barb. 346 ; Stuy vesant v. Hall, 2 Barb. Ch. (N. Y.) 151. « Carnall r. Duval, 22 Ark. 136 ; Jarratt v. McDaniel, 32 Ark. 598 ; Fetes v. O'Laughlin, 62 Iowa, 532 ; Lashbrooks v. Hatheway, 52 Mich. 124 ; Michigan Ins. Co. V. Brown, 11 Mich. 265 ; Page v. Ordway, 40 N. H. 253 ; Machette v. Wanless, 1 Colo. 225. THE DEBT SECURED. 487 note or any instrument/ The amount of the debt need not be shown upon the face of the mortgage, if reference be made to other evidence from which the amount of the debt may be de- termined. The true amount of the debt secured cannot always be discovered by the mortgage, however correctly the note may be described therein. It is a rule of law that if a written instrument refers to any deeds and contracts with sufficient explicitness to identify them, they are to be regarded so far constituting a part of such deeds and contracts as to be read with them in order to determine their terms and conditions. And a record of a mortgage will impart notice to parties that the amount of the note is to be determined by that instrument itself, to which reference is made.^ But if the debt is certain, it has been held that then the amount must be stated ; and a description of a debt in the mortgage as a note due from the mortgagor to the mortgagee, of a certain date, payable on demand wdth interest, without stating the amount, is not a valid security against subsequent incumbrances.^ The Kentucky court seems to indorse this rule, and holds so far as reasonably practicable, the mortgage must set out the amount of the debt for the payment of which the parties intended it as a security. " We do not mean to in- timate that an omission to state the date of the note, or the time at which it will fall due, or the precise amount of the debt, even when the amount is ascertained, is essential to make the mortgage invalid." * And in Maryland no mortgage is valid except as between the parties thereto, unless there be indorsed thereon an oath or affirmation that the consideration in said mortfras-e is true ' Curtis V. Flinn, 46 Ark. 70. ' Kellogg V. Frazier, 40 Iowa, 502 ; Clark v. Hyman, 55 Iowa, 14 ; Bourne v. Littlefield, 29 Me. 302 ; Gill v. Pinney, 12 Ohio St. 38 ; Babcock v. Lisk, 57 111. 327 ; Booth w. Barnum, 9 Conn. 286; Stoughton v. Pasco, 5 Conn. 442 ; 13 Am. Dec. 72. ^Hart r. Chalker, 14 Conn. 77; Metropolitan Bank v. Godfrey, 23 111. 604 ; Battenhausen v. Bullock, 11 111. App. 665 ; Pettibone v. Griswold, 4 Conn. 158, 162 ; Crane v. Deming, 7 Conn. 387, 395. Compare Utley v. Smith, 24 Conn. 290. *Pearce v. HaU, 12 Bush (Ky.), 209. 488 NATURE AND REQUISITES OF THE CONTRACT. and bona fide as therein set forth.' That the oath was taken can only be estabhshed by a formal indoreement upon the mortgage. Parol proof cannot be admitted to prove that such an affidavit was made.^ The affidavit must contain words sufficient to be equivalent to those used in the statute, when the exact words are not used.^ The strictness required in Connecticut and Illinois is against the weight of authority, and is not to control in other jurisdic- tions. The general rule is as has been stated, and a reference in a mortgage to a note secured by it, without specifying its contents, is sufficient to put subsequent purchasers upon in- quiry and to charge them with notice.* And a mortgage for a certain sum, divided in specific items to each of several creditors, containing no personal covenants, cannot be held to secure creditors a sum larger than that mentioned.^ Pending an appeal from a judgment against joint obligors, one of them gave a mortgage or trust deed to secure the pay- ment of such judgment or any judgment rendered in any other suit of the same cause of action. The judgment was re- versed. The mortgagor died and one of the plaintiffs. It was lield that the trust deed secured the payment of a second judgment, notwithstanding the change of parties." Where a mortgage describes the indebtedness secured by it as a note for $1,500, the time and manner of payment to be as therein appear, it is sufficient.'' § 4G5. What Indebtedness Secured. — A mortgage is se- curity only for the debt thereby secured, and cannot be held for other debts from the mortgagor; upon payment > M(L Rev. Code, 1878, p. 380, secta. 35, 36. 2 ReifFv. Eshleman, 52 Md. 582. 3 Stanhope v. Dodge, 52 Md. 483. * Somersworth Savings Bank v. Eoberta, 38 N. H. 22 ; Fetes v. O'Laughlin, 62 Iowa, 532. * Sheldon v. Erskine, 78 Mich. G27. « Walker r. Doane, 131 111. 27. 'King V. Kilbride, 58 Conn. 109. THE DEBT SECURED. 489 of the identical debt, the mortgagee must release the m.ort- gage/ A reference to a larger amount in an unexecuted agreement between the parties cannot control the debt secured by the mortgage.^ And a mortgage for a certain sum cannot be held to secure a larger amount.^ Nor is a mortgage given by one person to secure the pay- ment, at maturity, of notes executed by another, security for renewal notes substituted therefor.* A mortgage given to secure all the indebtedness of the mortgagor to the mortgagee is valid without specifying the separate debts or their amounts.^ But a mortgage given to secure a gross sum which might be furnished in goods and materials toward the erection of a house for the mortgagor, a collateral liability, or one assumed as surety or guarantor, will not be within its terms and will not thereby be secured.^ But a mortgage made as security for a debt, evidenced by a note, will operate as security for the same continuing debt, though the evidence of it be by renewal or otherwise. But, if one deed of trust is executed as a substitute for a preceding one, the former will at once cease to have any validity.^ A description of " a note or notes for about $350 " does not include six notes amounting to over |1,500.^ Neither does a mortgage to secure a note of $5,000, payable in six months, include a note for $3,000, payable in thirty days, if the latter note was given in a new and independent transaction upon the failure of negotiations for a loan of the first-mentioned amount.^ » Beardsley c. Tuttle, 11 Wis. 74; Vanmeter t;. Vanmeters, 3 Gratt. (Va.) 148; Michigan Ins. Co. v. Brown, 11 IMich. 265. "" Turnbull v. Thomas, 1 Hughes, C. C. 172. ^Sheldon v. Erskine, 78 Mich. G27. * Ayres v. Wattson, 57 Pa. St. 360. * Michigan Ins. Co. v. Brown, 11 Mich. 265. * Doyle V. White, 26 Me. 341. ' Ames V. Railway, 2 Woods, C. C. 206 ; Appeal of Bank of Commerce, 44 Pa. St. 423. V * storms V. Storms, 3 Bush (Ky.), 77. ' Walker v. Carleton, 97 111. 582. 490 NATURE AND REQUISITES OF THE CONTRACT. And a mortgage to secure the payment of dues to a build- ing association does not secure the payment of a sum in addi- tion thereto, there being no express agreement to pay such additional sum/ A mortgage securing certain payments, and the performance of an agreement, also provided that it should become security for the performance of a certain other agreement, should the mortgagor elect to perform the second agreement. After the election and notice by the mortgagor, such mortgage will become security for the performance of the second agreement.^ § 466. Unliquidated Indebtedness. — A mortgage to secure unliquidated indebtedness is good. Thus, a mortgage may be given to secure whatever amount of indebtedness may at any time thereafter exist from the mortgagor to the mortgagee, a bank ; and the mortgage is not restricted by the proviso to the indebtedness of the mortgagor to the bank, arising from direct dealings between them, but is security also for the amount of notes made by the mortgagor to the order of a third person, and by him indorsed to the bank and discounted for him.^ So also it may be given to secure a sum stated by arbitrators, in settling debts from the mortgagor to the mortgagee.* So a debtor may mortgage his property to secure a contingent lia- bility.^ But where a statute requires that the debt shall be stated in the mortgage, it cannot be made to cover unliquidated damages.^ A mortgage may be given to secure the fidelity of an agent or factor, or to secure the payment of moneys in the hands of a trustee, the amount being uncertain.^ So a mortgage may be given to secure an open account that is continually vary- ing ; ^ or to secure any balance that may remain after collecting 1 Whipperman v. Smith, 96 Ind. 275. « Furbish v. Sears, 2 Cliff. C. C. 454. 3 Nat. Bank v. Byard, 26 N. J. Eq. 255. * Emery v. Owings, 7 Gill (Md.), 488. s Moore v.. Ragland, 74 N. Car. 343. « Bethlehem v. Annis, 40 N. H. 34. ' Stoughton V. Pasco, 5 Conn. 442. "Esterly v. Purdy, 50 How. (N. Y.) Pr. 350 ; Moses v. Hatfield, 27 S. Car. 324. THE DEBT SECURED. 491 collaterals given to the mortgagee by the mortgagor ; ^ or for a certain sum or " thereabouts," when no material difference to the sum described, is shown ; ^ or to secure payment to be made in lumber under a prior agreement between the parties.^ In such mortgages, the mortgagee or holder of the mortgage must prove what is due/ §467. The Description of the Note Given with the Mortgage. — The description of the note must be reasonably certain, so that it can be identified. The utmost particularity is unnecessary. Thus, where a note is described as a note for $1,500, the time and manner of payment to be as therein ap- pear, it is sufficient.^ So when a mortgage recites that it was given to secure payment of $300 on the 9th day of May, 1883, $400 on the 9th day of May, 1884, and $100 on the 9th day of May, 1885, with interest, but the consideration was stated to be $300, and but one note was named, this description is sufficient, because this omission could mislead no one, and the mortgage was a valid security for all three notes.^ It is not necessary that all the particulars of the note secured should be set forth in the condition of the mortgage. It is enough if it appears with reasonable certainty to be the note intended.'' Judge Carpenter says that the particularity required in making a contract is not required in describing it, and that it may be safely assumed that some particulars may be omitted in the description. Certainty of description in every particular is dispensed with, provided the record gives reasonable notice of the nature and extent of the incumbrance.^ It is sufficient if the amount, date, and time of payment of the note are given, though ' Clarke v. Bancroft, 13 Iowa, 320. "Booth V. Barnum, 9 Conn. 286. 'Rees V. Logsdon, 68 Md. 93. * Dc M(At V. Benson, 4 Edwards (N. Y.), 297. *King V. Kilbride, 58 Conn. 109. * Shoemaker v. Smith, 80 Iowa, 655. ^ Webb V. Stone, 24 N. H. 282. ^ MVinchell v. Coney, 54 Conn. 24. See, also, Stoughton v. Pasco; 5 Conn. 442 ; Merrills v. Swift, 18 Conn. 257. 492 NATURE AND REQUISITES OF THE CONTRACT. the description fails to give what rate of interest was to be al- lowed, as the record, in effect, gives notice to subsequent pur- chasers, that its purpose was to secure the payment of such interest as had been reserved in the note.^ So when a note was described in a deed of release, as pay- able May 21, 1834, when in fact it was payable April 21, the description is sufficient, because evidence is admissible to show the agreement or identity of the note with the one de- scribed.^ So where a note did not correspond with the description in the mortgage, the note was held to cure the de- fective description in the mortgage.^ And where the condition was that the mortgagor should pay $500 at a future time specified, when the deed and note bearing even date with the mortgage should be void, it was held that a note of $500, payable on demand with interest, was the one secured by the mortgage,* The omission of " or order " in the note, payable to order of the mortgage, is not fatal.^ And when a mortgage describes a note which had not been executed by mistake, the description is sufficient, and the mortgage valid.^ The recitals in a mort- gage is competent evidence against the mortgagor to prove the consideration of the note described/ And a mortgage conditioned to pay whatever sum the mort- gagor miglit owe the mortgagee, either as maker or indorser of any notes or bills, bonds, checks, overdrafts, or securities of any kind given by him, secures only debts evidenced by writing.* A mortgage given at the same time as a note is, and de- ' Richards v. Holmes, 18 How. (U. S.) 143. ' Worthington v. Hylyer, 4 Mass. 196. ^Cleavenger v. Beath, 53 Ind. 172. * Bourne v. Littlefield, 29 Me. 302. See, also, Johns v. Church, 12 Pick. (Mass.) 557 ; Hall v. Tufts, 18 Pick. (Mass.) 455 ; Jackson v. Bowen, 7 Cow. (N. Y.) 13. * Hough V. Bailey, 32 Conn. 288. * Volrner v. Stagerman, 25 Minn. 234. ^Warner v. Brooks, 14 Gray (Mass.), 107. 8 Walker v. Paine, 31 Barb. (N. Y.) 213. It Avill be presumed that a note referred to in a mortgage or deed of trust is not under seal : Jackson v. Sackett, 7 Wend. (N. Y.) 94 ; Walker v. McCon- nico, 10 Yerg. (Tenn.) 228. THE DEBT SECURED. 493 scribing it, except that it omitted the words " as collateral security, with mortgage," sufficiently describes the debt, that debt not being conditional.^ §468. What the Condition Should Set Forth. — It is not required that the mortgage should set forth a literal copy of the instrument secured thereby. It is sufficient to describe it according to its legal effect.^ Thus, if it is stated in the con- dition of the mortgage that the mortgagor is indebted to the mortgagee for moneys loaned and his liability on divers bills of exchange and promissory notes, and it provides that if he discharges them within six months the deed should be void, it is a sufficient description of the debt, since it is capable of being made certain by parol evidence.^ Parol evidence is admissible to show the real consideration, and what notes were actually intended to be designated.* And a description is not void when extrinsic evidence can be applied to its proper sub- ject-matter.^ And, in general, when a note is offered in evi- dence, in connection with a mortgage, it is not necessary that all the particulars of it should be specified in the condition of the mortgage in order to identify it as the note intended to be secured thereby. If a general description of the note is con- tained in the mortgage it will be prima facie evidence that it is the note intended to be secured, although the note may con- tain additional particulars, or be signed by other persons than the mortgagor. Thus, where a mortgage described the note secured as one of $625, signed by the mortgagor, payable to the mortgagee, or order, on demand, with interest annually, and of even date with the mortgage, and the note offered in evidence was of the same date, amount, and payable to the mortgagee, or order, ^ Hill V. Banks, 61 Conn. 25. 'Muldrowt;. Caldwell, 7 Mo. 563; Hey wood v. Wingate, 14 N. H. 73; Pitcher v. Barrows, 17 Pick. (Mass.) 361. *Aull V. Beverly, 61 Mo. 160. * Nazro v. Ware, 38 Minn. 443. , *Hurd V. Eobinson, 11 Ohio St. 232. See, also, Williams v. Hilton, 35 Me. 547; Partridge v. Swazey, 46 Me. 414; Boody v. Davis, 20 N. H. 140; McKin- Bter V. Babcock, 26 N. Y. 378. 494 NATURE AND REQUISITES OF THE CONTRACT. " in teaming, on demand, with interest annually, from Warner to Boston, at the following prices," to which was added a fur- ther stipulation as to forwarding in part by railroad, and the note was signed by the mortgagor and two others, it was held that the note or contract so produced was prima facie the note intended by the description in the mortgage.^ A promissory note was made and delivered on or about the 8th day of August, 1867, payable on or about one j^ear after date to the mortgagee, signed by' three persons. The note offered in evidence was dated August 6, 1867, payable on or before September 1, 1868, and it contained a condition that it might be paid by the delivery of a barge in lieu of money. It was held sufficiently identified as the note described in the mort- gage.^ But, of course, the note must agree in some respects with that described in the mortgage,^ for if the note be totally variant from the one described in the mortgage parol evidence is inadmissible in an action at law to identify it.* When notes are otherwise identified it is no objection to the validity of the mortgage that it does not state the names of the holders of the notes secured.^ A mortgage with the year left blank, securing a note never made, is invalid.'^ § 469. It is not Necessary to Have Collateral or Per- sonal Security. — To constitute a mortgage it is not necessary that there should be any collateral or personal security for the debt secured by the mortgage ; '' because the validity of the mortgage stands upon the genuineness of the debt described in the condition thereto. It need not exist in the form of a promissory note.^ The mortgage depends upon the existence 1 Robertson v. Stark, 15 N. H. 109. 2 Paine v. Benton, 32 Wis. 491. 'Stanford v. Andrews, 12 Heisk. (Tenn.) 664. *Follctt V. Heath, 15 Wis. 601. *Boyd r. Parker, 43 Md. 182. « Parker v. Parker, 17 Mass. 370. ' Smith V. People's Bank, 24 Me. 185 ; Rice r. Rice, 4 Pick. (Mass.) 349. »Hod^don v. Shannon, 44 N. H. 572 ; Lund v. Lund, 1 N. H. 39 ; Weeks v. Eaton, 15 N. H. 145. THE DEBT SECURED. 495 of the debt it is given to secure/ And if the mortgage or deed of trust describes a note or bond which was not given, its vaHdity is not affected.^ The question to be answered is, does the debt exist ? If it does, the recital of that fact in the deed is sufficient, without any other evidence ; ^ and though the written evidence be destroyed, it does not affect the mortgage.* A mortgage given to secure a debt actually existing is good, though there be no note and no time of payment, and can be immediately enforced.^ And it has been decided that a mort- gage to secure a note attached thereto is valid though the note was not signed by the maker, as the note might be read in evidence as part of the mortgage.® § 470. Clerical Mistakes and Inaccuracies. — Clerical inaccuracies in the description of a debt will not affect the lien of a mortgage as against the mortgagor or subsequent judgment creditors of his, provided the debt is clearly identi- fied as the one intended to be secured.'' Thus, a mortgage was given in blank, the sum which it was designed to secure not appearing either upon the mortgage or the registry ; but the provision thereto provided that it was to be void on the payment of (blank) agreeable to the condition of the bond ' Griffin t;. Cranston, 1 Bosw. (N. Y.) 281; Coutanf r. Servoss, 3 Barb. (N. Y.) 128 ; Jackson v. Bowen, 7 Cow. (N. Y.) 13 ; Farmers' Loan and Trust Co. v. Curtis, 7 N. Y. 466 ; Moses v. Hatfield, 27 S. Car. 324. 2 Mitcliell V. Burnham, 44 Me. 286 ; Goodhue v. Berrien, 2 Sandf. Cii. (N.Y.) 630 ; Baldwin v. Raplee, 4 Ben. D. C. 433. ■''Eacho V. Cosby, 26 Gratt. (Va.) 112. See, also, Burger v. Hughes, 5 Hun (N. Y.), 180. *Clough V. Seay, 49 Iowa, 111. ^Brookings v. White, 49 Me. 479; IMcCaughrin v. Williams, 15 S. Car. 515, 516 ; Carnall v. Duval, 22 Ark. 136. « McFadden v. State, 82 Ind. 558. Where a note represents a part of the amount described in a mortgage, it is entitled to a proportionate part of the mortgage security : Adger v. Pringle, lis. Car. 527. And a mortgage for a greater sum than the amount due, in the absence of a fraudulent intent, is valid to the extent of the actual debt : Gordon v. Preston, 1 Watts (Pa.), 385. See, also, Chester v. Wheelwright, 15 Conn. 562. ' Tousley v. Tousley, 5 Ohio St. 78. 496 NATURE AND REQUISITES OF THE CONTRACT. given by the mortgagor to the mortgagee of even date with the mortgage and payable at a date. The bond contained the sum. It was held to be good against subsequent mortgagees.^ And a writing giving the amount of a blank left in a mort- gage, attached to the page on which the registry is made, is a sufficient notice to subsequent mortgagees.^ So where a mortgage is executed to secure the payment of promissory notes, and the notes are misdescribed in the mort- gage, the mortgagee is entitled to relief in equity against a subsequent mortgagee.^ If the note is described as being signed by the mortgagor and indorsed by another, it may be corrected in equity to cover a bond signed by the principal, and also signed by a surety as such.* A misdescription of the date and time of payment in a note secured by the mortgage may be corrected.^ Parol evidence may be introduced to show the real considera- tion, as a general rule, before the correction of the mistake of the clerk ; " and parol evidence is admissible to prove that the note produced is the note described in the mortgage.^ § 471. Admissibility of Parol Evidence. — Parol evidence is admissible to show that the note described in the mortgage is the one produced in evidence. Thus, where a note secured by a mortgage is, in some par- ticulars, misdescribed, it may be shown by parol evidence that it is the one intended to be described.* So a note payable •'* in one after date," may be iden- tified as one payable in one " year " after date, to correspond 'Hall V. Lambert, 3 Halst. Ch. (N. J.) 651. * Lambert v. Hall, 3 Halst. Ch. (N. J.) 410. 3 Porter v. Smith, 13 Vt. 492. * In re Clarke, 2 Hughes, C. C. 405. ^Tousley v. Tousley, 5 Ohio St. 78. ^ Nazro v. Ware, 38 Minn. 443. 'Nazro v. Ware, 38 Minn. 443; Williams v. Hilton, 35 Me. 547 ; Bourne v. Littlefield, 29 Me. 302. 8 Bourne v. Littlefield, 29 Me. 302 ; Williams v. Hilton, 35 Me. 547 ; 58 Am. Dec. 729 ; Johns v. Church, 12 Pick. (Mass.) 557 ; 23 Am. Dec. 651 ; Stanford v. Andrews, 12 Heisk. (Tenn ) 664 ; McKinster v. Babcock, 26 N. Y. 378 ; Nazro V. Ware, 38 Minn. 443. THE DEBT SECURED. 497 with one described in the mortgage given to secure it.^ So a promissory note agreeing in many respects with the one de- scribed in the mortgage deed, though variant therefrom in some of its particulars, may be proved by parol evidence to be the note intended to be described in the mortgage.^ This is founded upon the principle that a thing is to be regarded as certain which can be made certain, and parol evidence can be adduced to apply the contract to its subject ; that where there is enough to put those concerned upon inquiry, the means of knowledge and knowledge itself are in legal effect the same.^ Parol evidence may be admitted to show that Ebenezer Hall, 3d, means Ebenezer Hall, and that a note was dated sev- eral months before.* If the ordinary principle of allowing extrinsic evidence to apply to a written contract to its proper subject-matter, can control in such cases, then the mortgage is valid as to third persons, and the inaccuracy in the description can be cor- rected.^ And it has been held that a description entirely variant with the note may be shown to be the one intended to be described.® The amount and nature of the debt described and when contracted may be shown by parol.^ §472. Substitution of New Notes — Renewal. — Notes may be given in renewal of one secured by a mortgage, and the new note carries with it the original security.* So a bond given in renewal of one secured in a mortgage, even to an assignee, retains its place in the mortgage as a se- ^ Stowe V. Merrill, 77 Me. 550. nVilliams v. Hilton, 35 Me. 547 ; Aull v. Lee, 61 ]Mo. 160 ; Hall v. Tay, 131 Mass. 192 ; Goddard v. Sawyer, 9 Allen (Mass.), 78 ; Bell v. Fleming, 12 N. J. Eq. 13 ; Duval v. McLoskey, 1 Ala. 708. ^ Jones V. Guaranty and Indemnity Co., 101 U. S. 022. * Hall V. Tufts, 18 Pick. (Mass.) 455. 5 Gill V. Pinney, 12 Ohio St. 38 ; Clark r. Hyman, 55 Iowa, 14, 26 ; Hurd v. Robinson, 11 Ohio St. 232. 'Baxter v. Mclntire, 13 Gray (Mass.), 168 ; Gunn v. Jones, 67 Ga. 398. ^ Babcock v. Lisk, 57 111. 327 ; Bank v. Willard, 10 N. H. 210. , « Kidder v. Mcllhenny, 81 N. Car. 123; Bank v. Rose, 1 Strobh. (S. Car.) Eq. 257 ; Lover v. Bessenger, 9 Baxt. (Tenn.) 393, 395. VOL. I.— 32 498 NATURE AND REQUISITES OF THE. CONTRACT. curity debt,^ But a note not secured by the mortgage, and no part of the original consideration agreed upon, cannot be in- chided in such mortgage by subsequent agreement between the parties, to the prejudice of junior incumbrancers.^ A subsequent debt, as a due-bill of the mortgagor to the mortgagee, will not be substituted by parol agreement, some time after the mortgage, unless there is a clear showing that there was such an agreement when the exchange was effected.^ In California the code* provides that a mortgage can be created, renewed, or extended only by writing, executed with the formalities required in the case of a grant of real property. Hence, the renewal of a note for the payment of the mortgage debt does not create a new mortgage after the original mort- gage has been barred by the statute of limitations.^ A mortgage given to secure the payment at maturity of the notes of another does not secure renewal notes sul^stituted in place of them, because the mortgagor stands in the relation of surety for the debtor, and his obligation cannot be continued without his consent." It was agreed that a promissory note should be substituted for notes of a larger amount already secured by a mortgage ; that if paid at maturity it should be considered a payment and discharge pro tanto of those notes and of the mortgage, and that the mortgage should be held as collateral security for the new note, and not be discharged or cancelled until that was paid. It was held that this agreement did not create a lien upon the mortgaged property to secure its payment. The court says it amounts to this : " Give me your note for $600 ; if j)aid, I will indorse it on the mortgage ; if not, the mortgages are to stand as they are." Hence, no new right in the mortgaged property accrues, and no new lien is created. The relation of the parties is not changed.^ ^Hyman r. Devereux, 63 N. Car. 624. ^ McCaughrin v. Williams, 15 S. Car. 505. 3 Tucker v. Alger, 30 Mich. 67. ^ Civil Code, sect. 2922. ^ Wells V. Harter, 56 Cal. 342. « Ayres v. Wattson, 57 Pa. St. 360. mowe V. Wilder, 11 Gray (Mass.), 267. I THE DEBT SECURED. 499 The surrender of unpaid notes and taking a new note for the balance due, do not of themselves discharge the lien of the mortgage.^ The taking of a new note and mortgage by the mortgagee from the mortgagor for the same debt upon the same property, will not discharge the lien of the first mortgage, but that lien will be continued in the new mortgage. This would be other- wise if the second debt was created by the parties getting to- gether and having a settlement of mutual running accounts and other debts, among which was the first mortgage debt, and a balance is found due the mortgagee ; this balance, being put in a new note and mortgage, will form a new con- sideration, and the lien of the first mortgage will be divested ; or if at the time the second mortgage is taken it is agreed and understood that it is to be in full payment and satisfaction of the first mortgage, that will operate as a cancellation of the first mortgage.^ So, where a husband gave a mortgage for the purchase- money of real estate, and this mortgage was afterward dis- charged, and at the same time and as part of the same trans- action a new note and mortgage were given for the same pur- chase-money debt, the instantaneous seisin of the husband did not operate to give the wife a homestead right in the premises or dower.^ The taking of a new note and mortgage to secure an in- debtedness already evidenced by a note, and secured by a mortgage on the same property, does not, even where the first note and mortgage are cancelled, operate to discharge the lien of the first mortgage.* So the renewal of a mortgage reciting that it is to secure precisely the same indebtedness as the former one, will take priority over all mortgages and other ^ Dumell r. Terstegge, 23 Ind. 397 ; Flower r. Elwood, 66 HI. 4.38 ; M'Cor- mick V. Digby, 8 Blackf. (Ind.) 99 ; Bristol Milling, etc., Co. v. Probasco, 64 Ind. 406. * Walters r. Walters, 73 Ind. 425. * Burns v. Thayer, 101 Mass. 426. And see Gregory v. Thomas, 20 Wend. ^N. Y.) 17 ; Dillon v. Byrne, 5 Cal. 455 ; Swift v. Kraemer, 13 Cal. 526. * Packard v. Kingman, 11 Iowa, 219. 500 NATURE AND REQUISITES OP THE CONTRACT. subsequent liens made after the recording of the first mort- gage/ The substituting of other notes for the same amount does not discharge the debt. The new notes take the place of the old ones, leaving the indebtedness unaffected by the transac- tion. It is only substituting one instrument of evidence for another, without at all affecting the security.^ And as be- tween the immediate parties, it is competent for them to change the time and mode of payment, and still retain the mortgage security.^ § 473. The Two Instruments Must Be Construed To- gether. — The construction of the note and mortgage must be such as to give effect to each.* Thus, a provision in a note, secured by a mortgage, that " upon a failure to pay any of said interest within thirty days after due, the holder may elect to consider the whole note due, and it may be collected at once," controls a general provision in the mortgage, and restricts the right, in case of default of payment of interest, to declare the debt due, to the holder of the note. The court says, " the note and mortgage were made at the same time, in relation to the same subject-matter, and must, therefore, be construed together. By construing them together as parts of one contract, it is very evident that the provisions of the note control those of the mortgage.^ A mortgage for $5,000 and a written agreement were made on the same day. The agreement recited the execution of 1 Shaver v. Williams, 87 El. 469. See, also, Christie v. Hale, 46 111. 117; Houston V. Houston, 67 Ind. 276; Story's Eq. Jur., sects. 1035 c, 1035 e; Gregory v. Thomas, 20 Wend. (N. Y.) 17. 2 Morse v. Clayton, 13 Sm. & M. (Miss.) 373 ; Davis v. Maynard, 9 Mass. 242 ; Burdett v. Clay, 8 B. Mon. (Ky.) 287 ; Williams v. Starr, 5 Wis. 534. ^Hugunin v. Starkweather, 5 Gil. (111.) 422; M'Cormick v. Dighy, 8 Blackf. (Ind.) 99. * Nat. Bank v. Peck, 8 Kan. 662 ; Schoonmacker r. Taylor, 14 Wis. 313 ; Ti(M- man v. Hinman, 16 111. 400 ; Attawa, etc., Co. v. Murray, 15 111. 336 ; Round V. Donnel, 5 Kan. 56 ; Muzzy v. Knight, 8 Kan. 456 ; Crafts v. Crafts, 13 Gray (Mass.), 360. ^ Fletcher v. Daugherty, 13 Nebr. 224. See, also, Gillman v. Henry, 53 Wis. 468 ; Blakeslee v. Rossman, 43 Wis. 116. THE DEBT SECURED. 501 the mortgage, and that the mortgagee held a note of the mort- gagor for $1,500, and provided that that sum, in addition to the said $1,500, should be advanced, not exceeding in all $5,000, said sum, when advanced, to be secured by the mortgage. It was held that construing the mortgage and agreement together, the note for $1,500 was to be secured by the mortgage.^ A note with a blank for the insertion of " bearer or order " may be supplemented by the mortgage which describes the note as payable to the payee or " bearer." ^ And where a note provided for interest at ten per cent, per annum and the mortgage stipulated for " interest at the rate of ten per cent, per annum, payable annually, according to the terms of the promissory note," it was held that the mort- gage provided for something respecting which the note was silent, and must therefore govern.^ Parol evidence may be admitted to show that the note is the only debt secured by the mortgage.* A note and mortgage may supplement each other. If the mortgage contains a provision not in the note, it will control. Thus a mortgage provided that upon default in the payment of the interest, the whole debt should become due and pay- able. The note contained no such provision, but it became due upon default, and a personal judgment was taken against the mortgagor for a deficiency after foreclosure.^ § 474. Several Mortgages Upon Separate Pieces of Realty. — Where several mortgages are given to secure the ^ Evenson v. Bates, 58 Wis. 24. See, also, Leedy v. Nash, 67 Ind. 311 ; Stowe V. Merrill, 77 Me. 550 ; Wheeler & Wilson Manf. Co. v. Howard, 28 Fed. Rep. 741. 2 Elliott V. Deason, 64 Ga. 63. ^ Dobbins v. Parker, 46 Iowa, 357. And see Moses v. Hatfield, 27 S. Car. 324 ; Mowry v. Sanborn, 68 N. Y. 153 ; Winchell v. Coney, 54 Conn. 24 ; Rich- ards V. Holmes, 18 How. (U. S.) 143. * Hampden Cotton Mills v. Payson, 130 Mass. 88. In this case the mortgage provided for interest, but the note did not make such provision. See, also, Wheeler & Wilson Manf. Co. v. Howard, 28 Fed. Rep. 741 ; Shores v. Doh- erty, 65 Wis. 153 ; Commercial Exch. Bank v. McLeod, 67 Iowa, 718 ; Gregory 'V. Marks, 8 Biss. C. C. 44 ; Fletcher r. Daugherty, 13 Nebr. 224. * Gregory v. Marks, 8 Biss. C. C. 44. 502 NATURE AND REQUISITES OF THE CONTRACT. same debt, though upon several pieces of land, they constitute but one mortgage, and the mortgagee can have the benefit of them all for the security of this debt.^ So where there are several mortgages, though bearing upon their face evidence of distinct debts, yet they will be consid- ered as additional evidence of security for an original debt, which may be shown by parol evidence.^ But a mortgage given to two or more persons to secure their several demands, is several and not joint ; each mortgagee has a right to enforce his claim under the mortgage, in any form adapted to his case ; and, of course, the surviving mortgagee cannot maintain a case on the mortgage to enforce payment of the debt due the deceased mortgagee.^ § 475. The Mortgage Is Security Only for the Debt Specified. — A mortgage only secures the debt specified. Thus, the mortgagee, seeking the foreclosure of a mortgage, can have only such debts established as are within the terms of the mortgage.'* The mortgage cannot be extended to include other debts.^ But so long as the debt can be traced, the mort- gage remains security for its payment.® Neither can the mortgagor as against the rights of third parties, increase the charge upon the land, as by increasing the rate of interest,^ or by making the payment in gold instead of currency,^ or by confessing judgment and thus compound- ing the interest.^ 1 Franklin v. Gorham, 2 Day (Conn.), 142. 2 Anderson v. Da\aes, 6 Munf. ( Va.) 484. 3 Burnett v. Pratt, 22 Pick. (Mass.) 556 ; Donnels v. Edwards, 2 Pick. (Mass.) 617 ; Gardner v. Diedrichs, 41 111. 158 ; Eccleston v. Clipsham, 1 Saund. 153 ; Thayer v. Campbell, 9 Mo. 280. * funno V. Robert, 1(5 Fla. 738 ; Perrin v. Kellogg, 38 Mich. 720 ; Beekman v. First M. E. Church, 18 How. Pr. (N. Y.) 431. 5 Large v. Van Doren, 14 N. J. Eq. 208 ; Stoddard v. Hart, 23 N. Y. 556 ; Patterson v. Johnson, 7 Ohio, 225. 6 Van Wagner v. Van Wagner, 3 Halst. Eq. (N. J.) 27 ; Wilkerson v. Till- man, 66 Ala. 532 ; Chapman v. Jenkins, 31 Barb. (N. Y.) 164. ^ Burchard v. Frazer, 23 Mich. 224. 8 Belloc )). Davis, 38 Cal. 242 ; Taylor v. Atlantic, etc., R. R. Co., 55 How. Pr. (N. Y.) 275. Compare Poett v. Stearns, 22 Cal. 78. 9 McGready v. McGready, 17 Mo. 597. THE DEBT SECURED. 503 While an indebtedness other than that for which the mortgage was given cannot legally be attached to such mortgage, it is competent, in answer to a bill in equity to redeem a mortgage, for the defendant to show that it would be inequitable to allow the plaintiff to do so upon payment of the amount apparently due thereon, inasmuch as the defendant had for valuable consideration orally agreed that it should not thus be dis- charged, but should remain as security for other debts/ As against the mortgagor an oral agreement to extend the mort- gage to cover advances will be upheld.^ This rule applies to those claiming under him.* But such oral agreement cannot be set up against a subsequent mortgagee or attaching cred- itor ; * nor can it be extended for additional sums, and parol evidence is inadmissible in such cases to prove the agree- ment.^ The civil law authorizes a mortgagee to unite, as against his own debtor, a second loan without security, to the first, when the debtor seeks to redeem.^ The French code contains a similar doctrine. A novation of a debt, as a general rule, extinguishes the hypothecation. But when it operates solely between the creditor and debtor, to whom the mortgaged property belongs, they can by contract transfer the thing mortgaged for the old debt to the new one. This works no prejudice to the other creditors, because it does not prevent them from seizing the property and selling it pre- cisely as they might have done before the translation. The new obligation cannot exceed the old in amount, and it must be made at the time of the novation, not subsequently.^ So it is generally held that an oral agreement to extend the security of a mortgage so as to cover other or further debts and 1 Joslyn V. Wyman, 5 Allen (Mass.), 62 ; Stone v. Lane, 10 Allen (Mass.), 74 ; Upton V. Bank, 120 Mass. 153. ^ Walker v. Walker, 17 S. Car. 329, 337. ' Stone V. Lane, 10 Allen (Mass.), 74. * Upton V. Bank, 120 Mass. 153. ^Townsend v. Empire Stone Co., 6 Duer (N. Y.), 208. « Story's Eq. Jnr., sect. 415, n. 2, and sect. 1010 ; 1 Domat, p. 348, art. 4, ' and note ; Jarvis v. Eogers, 15 Mass. 389, 415. 'Touillier Droit Civil Francaise, tome 7, arts. 308, 310, 312, and note. 504 NATURE AND REQUISITES OF THE CONTRACT. liabilities is void as to third parties ; ^ but such agreement may be set up against a mortgagor or his assigns in equity.^ In Penns3dvania a mortgage is so entirely a security for money that payment or performance of the condition as fully satisfies it as it does a judgment.^ Thus, a mortgage given by two tenants in common, as security for a partnership debt, is discharged by payment of the debt, and cannot be kept alive as a security for an individual debt of one of the mortgagors to the mortgagee, even as against the interest of the debtor/ In Pennsylvania a mortgage of real estate cannot be created by oral agreement.^ And in Missouri, a verbal agreement that subse- quent advances shall constitute a lien on land already conveyed as a security for former loans, is within the statute of frauds and void.'' § 476. The Doctrine of Tacking. — The doctrine of tacking is not known to our laws as regards the right of a mortgagee to tack to his mortgage any debt not secured thereby, and require its payment by the mortgagor as a condition to his right to redeem.'' This doctrine is wholly suspended by the principle of registration, whereby the record of a prior mort- gage is constructive notice to all parties of its existence.^ A prior mortgagee cannot tack his debts against the mort- gagor, not included in the mortgage, to his prior mortgage, to the prejudice of a subsequent mortgagee.^ 1 Curie V. Eddy, 24 Mo. 117 ; Lawrence v. Tucker, 23 How. (U. S.) 14 ; Bank v. Finch, 3 Barb. Ch. (N. Y.) 293 ; Shirras v. Caig, 7 Cranch (U. S.), 34 ; Stoddard v. Hart, 23 N. Y. 556 ; Williams v. HilL 19 How. (U. S.) 250 ; Ex parte Hooper, 19 Ves. 477 ; Craig v. Tappin, 2 Sandf. Ch. (N. Y.) 78. 2 Upton V. Bank, 120 Mass. 153. * Asay V. Hoover, 5 Barr (Pa.), 21. * Thomas' Appeal, 30 Pa. St. 378. * Bowers v. Oyster, 3 Pa. 239. 6 O'Neill V. Capelle, 62 Mo. 202. ^ Bacon v. Cottrell, 13 Minn. 194 ; Edwards v. Dwight, 68 Ala. 389 ; Barthell V. Syverson, 54 Iowa, 160. ShifFer v. Feagin, 51 Ala. 335. 8 Grant v. Bank, 1 Caines' Cas. (N. Y.) 112 ; Wing v. McDowell, Walk. (Mich.) 175 ; Chandler v. Dyer, 37 Vt. 345. 9Siter V. M'Clanachan, 2 Gratt. (Va.) 280; Hughes v. Worley,l Bibb (Ky.), 200 ; Chase v. M'Donald, 7 Harr. & J. (Md.) 160. THE DEBT SECUHED. 505 So a mortgage, after payment of the amount named therein, cannot be made available to secure further amounts, unless the parties so agree by valid contract.^ And when a creditor, whose debt is secured by the assign- ment of a mortgage, purchases a judgment which constitutes a prior lien on the premises, at the request of the debtor, and with the express understanding that it shall be tacked to the mortgage, and paid out of the fund, he is entitled, in equity, to have it tacked to his mortgage, and paid out of the fund.^ And a mortgagee may take another mortgage which will be valid against an incumbrance implied by equity, of which he had no actual or constructive notice.^ If a vendor has a lien on the land for the purchase-money, and the vendee mortgages the premises to a third person, who pays the purchase-money, he may tack the money paid to the sum due on the mortgage.* Even by agreement with the mortgagor, the mortgagee cannot tack other debts to his mort- gage as against intervening mortgagees and judgment creditors.^ § 477. The Doctrine of Tacking in England. — In Eng- land there was a doctrine in relation to mortgages, by which if there were, for instance, three successive mortgages without notice, upon the same estate to three different persons, and the third acquires the first mortgage by assignment, he might hold the estate against the second until he paid both the first and the third. This was called " tacking " of mortgages, and rested upon the idea that the equities of the parties are all equal, and the first being in possession should not be obliged to give up his legal right of possession till his whole charge upon the estate was satisfied.^ § 478. Revival of Mortgage. — A mortgage that has been satisfied and delivered up to the mortgagor without cancella- ^ Johnson v. Anderson, 30 Ark. 745. ^Cullum V. Bank, 23 Ala. 798. 'Orvis V. Newell, 17 Conn. 97. * Henderson v. Stewart, 4 Hawks (N. Car.), 256. ' * Towner v. Wells, 8 Ohio, 136 ; Averill v. Guthrie, 8 Dana (Ky.), 82. * 3 Washb. Real Prop. 540 ; Williams Real Prop. 361. Tacking was abol- ished in England in 1847 by the Vendor and Purchaser Act 506 NATURE AND REQUISITES OF THE CONTRACT. tion may be again delivered as a valid security for a debt, by the mortgagor, and such new delivery gives it a new vitality against the mortgagor, but not as against intervening incum- brancers. The court says there can be no doubt that a mortgagor may again use or negotiate the mortgage which has been satisfied and paid off and delivered to him, except as against intervening securities.^ And a mortgage already re- corded may be made to secure a further sum, by an indorse- ment upon the mortgage executed and acknowledged with the formalities necessary in the first place to make it valid, and recorded with a proper reference to the mortgage.^ § 479. Increasing the Rate of Interest by Subsequent Agreement. — The rate of interest cannot be increased where rights of third persons intervene. Thus an agreement in writing between a subsequent purchaser of mortgaged lands and the mortgagee, for the payment of an increased rate of interest after due, in consideration of an extension of time, is valid as between the parties, but not as to third persons who have intervening rights.^ No incorporation of another in- debtedness will be allowed as to the rights of third parties. When gold is at a premium, the interest cannot be paid in gold.'' So when parties to a prior mortgage stipulated for the pay- ment of a higher rate of interest on the mortgage debt than was provided in the mortgage as recorded, such excess of in- terest has no priority and cannot be allowed as against junior incumbrancers.^ So a penalty imposed by statute for omitting prompt pay- ment of school money loaned upon a mortgage, does not come under the mortgage, but is personal to the mortgagor.^ When a mortgage to a building association, secures only monthly 1 Underbill v. Atwater, 22 N. J. Eq. 16. ^ Choteau v. Thompson, 2 Ohio St. 114. 3 Smith V. Graham, 34 Mich. 302. * Taylor v. Atlantic, etc., E. R. Co., 55 How. Pr. (N. Y.) 275. 5 Gardner v. Emerson, 40 111. 296. « Bradley v. Snyder, 14 111. 263. THE DEBT SECURED. 607 payments, the payments of fines, and other dues to the asso- ciation do not come under the mortgage lien.^ The owner of tlie equity of redemption may contract in writing to increase the interest, uj^on a valuable consideration as between him and the mortgagee.^ § 480. Expenses for Collecting. — The expenses for col- lecting the debt are not considered as augmenting the indebted- ness, and thereby infringing on the rights of intervening in- cumbrancers. Thus, the court of equity may allow the mort- gagee a per cent, for the expenses of collecting his mortgage debt, when the instrument provides for such allowance. The mortgagor may stipulate that a certain sum or percentage shall be allowed the mortgagee for the expenses, if he be compelled to bring suit to recover the debt.^ Such a compensation to the mortgagee for the expenses for compelling the mortgagor to perform his contract is valid, and, of course, cannot injure the rights of other incumbrancers.* A debtor refusing or neglecting to pay his creditor imposes upon the creditor the expense of resorting to the law to enforce his rights. It is equitable and just that the debtor in such case should pay the expenses which have been imposed upon his creditor. While the law makes no provision for enforcing such a conscionable obligation it will certainly be assumed a suffi- cient consideration.^ If the stipulation in the mortgage is for the payment of something which the court can see is legal and a valid and legitimate charge or expense, then the court will uphold the same ; but if the stipulation is so indefinite that the court can- not tell whether the payment was intended to be for something legal or illegal, then the court will not uphold the stipulation. Thus, where the mortgage contains a stipulation that the mort- gagor shall pay not only the debt secured and interest thereon, ^ Hamilton Building Association v. Reynolds, 5 Duer (N. Y.), 671. * Smith V. Graham, 34 Mich. 302; Taylor v. Thomas, 61 Ga. 472. ' McLane v. Abrams, 2 Nev. 199. ^ *Tholen v. Duffy, 7 Kan. 405. * Williams v. Meeker, 29 Iowa, 292; Nelson v. Everett, 29 Iowa, 184. 508 NATURE AND REQUISITES OF THE CONTRACT. but also, in case of foreclosure, the costs " and fifty dollars as liquidated damages for the foreclosure of the mortgage," such stipulation is void and cannot be enforced.^ Liquidated damages are not applicable to such a case. If they were they might afford a secure protection for usury and countenance oppression under form of law,^ In all the cases whers a jjarty relies on the payment of liquidated damages as a discharge, it must clearly appear from the contract that they were j^aid and received absolutely in lieu of performance.^ § 481. Solicitor's Fees. — A mortgagor may stipulate to pay attorney's fees in case of foreclosure, and such agreement will be upheld. The attorney's fee must be reasonable, although such amount does not rest in computation, but may be ascer- tained by evidence aliunde^ And a covenant in a mortgage that the mortgagor will pay, in addition to the mortgage debt, all counsel fees and costs which the mortgagee may incur in collecting the same, is not • within the prohibition of a statute limiting the lien of a mortgage to the principal sum expressed on the face thereof. '^ And courts of equity in absence of any express contract, will allow the mortgagee costs and expenses necessarily incurred in defending his title against the mortgagor and parties claiming under him.^ But the fee must be reason- able.^ But if the suit for collection is unnecessary, the attorney's fee will not be allowed.^ If the fee is not excessive, a court of equity will not refuse to enforce the stipulation,® which may be * Foote V. Sprague, 13 Kan. 155 ; Kurtz v. Sponable, 6 Kan. 395. 2 Gray v. Crosby, 18 Johns. (N. Y.) 219. ' Graham v. Bickham, 4 Dal. (Pa.) 150. See, also, Slosson v. Beadle, 7 Johns. (N. Y.) 72 ; Hasbrouck v. Tappen, 15 Johns. (N. Y.) 200 ; Daly v. Maitland, 88 Pa. St. 384. *Hoyt V. Smith (Wash. St.), 30 Pac. Rep. 664; Clawson v. Munson, 55 111. 394 ; Tholen v. Duff>', 7 Kan. 405 ; AVilliams v. Meecker, 29 Iowa, 292. ^Maus r. McKelhp, 38 Md. 231. ^Loniax v. Hide, 2 A^ernon, 185 ; Hunt r. Fownes, 9 Yes. 70. ' Tallman v. Truesdell, 3 Wis. 443 ; Hitchcock r. Merrick, 15 Wis. 522. ^Alexandrie v. Saloy, 14 La. Ann. 327. 3 Sharp V. Barker, 11 Kan. 381. THE DEBT SECURED. 509 enforced, as well against subsequent purchasers and incum- brancers, as against the mortgagor himself.^ If an unreasonable and oppressive exaction be made of the mortgagor, so that the stipulation amounts, in fact, to a penalty which he incurs by default, a court of equity will give the debtor relief.^ But a reasonable fee may be recovered as part of the costs without any averment in the petition as to what amount is a reasonable fee.^ It has been held that where a mortgage empowers the mort- gagee in the usual manner to sell, rendering the surplus moneys to the mortgagor, after deducting the costs of the sale, and also $100 as an attorney's fee, should any proceedings be taken to foreclose, such fee cannot be recovered upon a foreclosure in equity.* Where two persons buy property together, and one furnishes all the money, and the other, to secure him for one-half the money, mortgages other property, and the two then agree in writing that the mortgage is given for money advanced in the purchase, and that in the settlement of accounts the mortgagor shall be allowed a reasonable compensation for the services which he may render as attorney in perfecting the title of the property purchased, the value of such service rendered may be proved for the purpose of reducing the amount due on the mortgage.^ But a provision in a mortgage for the " expenses of the sale " does not include attorney's fees.® The amount should not ex- ceed the contract price by the parties, or that actually received.^ Such stipulations in either note or mortgage are as a general rule valid.* But this doctrine is not accepted by all the States. ^ Pierce v. Kneeland, 16 Wis. 672. ''Daly V. Maitland, 88 Pa. St. 384. ' Nelson v. Everett, 29 Iowa, 184 ; Hurd v. Coleman, 42 Me. 182 ; Bronson v. Lacrosse R. R. Co., 2 Wall. (U. S.) 283 ; Pierce v. Kneeland, 16 Wis. 672. *Sage V. Riggs, 12 Mich. 313. ^Whitmore v. Reynolds, 46 Cal. 380. ^Thomas v. Jones, 84 Ala. 302. V 'Broadbent v. Brumback (Idaho), 16 Pac. Rep. 555. ®Cox V. Smith. 1 Nev. 161; Sperry v. Horr, 32 Iowa, 184; Wood r. North, 510 NATURE AND REQUISITES OF THE CONTRACT. Kentucky/ Ohio,^ and Michigan,^ reject this stipulation in a mortgage, and hold that it is void as against public policy. This attorney's fee cannot be considered as usury, and there- fore an enlargement of the debt.* It must be considered that the true intent and purpose of the provision for such fee is the holding the mortgagee harmless from costs and expenses of a suit to foreclose.* But when the fee is so large as to suggest that it is a mere device to secure illegal interest, or some unconscionable advan- tage, the court will be slow to enforce the payment of it, and ought, probably, on slight additional evidence to that effect, refuse to allow it, or reduce it to a reasonable sum.® Whenever this stipulation is resorted to as a cover for a greater rate of interest than is allowed by law, it then is in- valid ; but where it is made in good faith, as an indemnity for the necessary expenses of foreclosure, and is reasonable in amount, it can be incorporated in the contract.^ In those cases where the stipulation is made in both note and mortgage, that in the note only may be recovered if reasonable.^ And though the mortgagee signs the bill of complaint for fore- 84 Pa. St. 407 ; Johnston v. Speer, 92 Pa. St. 227 ; Bank v. Gay, 63 Mo. 33 ; 71 Mo. 627 ; Jones v. Padatz, 27 Minn. 240 ; Morgan v. Edwards, 53 Wis. 599 ; Dietrich v. Bayhi, 23 La. Ann. 767 ; Seaton v. Scovill, 18 Kan. 435 ; Bank v. Easmussen, 1 Dak. 60 ; Clawson v. Munson, 55 111. 394 • Machine Co. v. Moreno (Oreg.), 29 Am. Rep. 406 ; 6 Sawyer, C. C. 35. ^Thomasson v. Townsend, 10 Bush (Ky.), 114. 2 State r. Taylor, 10 Ohio, 378; Shelton t). Gill, 11 Ohio, 417; Spalding t-. Bank, 12 Ohio, 544 ; Martin v. Bank, 13 Ohio, 250. 3 Van Marter v. McMillan, 39 Mich. 304, 305; Sage v. Riggs, 12 Mich. 313; Myer v. Hart, 40 Mich. 517 ; Vosburgh v. Lay, 45 Mich. 455. See Session Laws of 1885, art,. 133. * Lloyd r. Scott, 4 Pet. (U. S.) 224; Cutler v. How, 8 Mass. 257; Tuttle r. Clark, 4 Conn. 153 ; Pollard v. Baylors, 6 Munf. (Va.) 433 ; Jones v. Hubbard, 6 Call (Va.), 211 ; Gower v. Carter, 3 Iowa, 244; Fisher v. Anderson, 25 Iowa, 28; Rogers v. Sample, 33 Miss. 316; G^mbril v. Doe, 8 Blackf. (Ind.) 140; Bilhngsley v. Dean, 11 Ind. 331 ; Lawrence v. Cowles, 13 111. 577 ; Sumner v. People, 29 N. Y. 337 ; Bank v. Curtiss, 19 Johns. (N. Y.) 326. ^ Burns v. Scoggin, 16 Fed. Rep. 734, opinion by Deady, J. ® Machine Co. v. Moreno, 6 Sawyer, C. C. 35. "> Griswold v. Taylor, 8 INIinn. 342 ; Tallman v. Truesdell, 3 Wis. 443. Hamil v. Rogers, 79 Ga. 581. THE DEBT SECURED. 511 closure per se, the fee may be allowed where he is represented in the litigation by other solicitors.^ Under the California statute/ entitled " An Act to abolish attorney's fees and other charges in foreclosure," when a mortgage provides a certain amount as attorney's fees, it is error for the court to allow more than is specified ; ^ and in the absence of such provision, the mortgagee, under the statute, is not entitled to counsel fees.* Nearly all the decisions allow a reasonable attorney's fee, especially when so stipulated in the mortgage,^ and the holder of the note may collect tlie fees specified.^ The Louisiana court holds that a per cent, for attorney's fees is in the nature of damages, and is covered by the mortgage.^ A suit was begun to foreclose a mortgage of $5,000, provid- ing for a reasonable attorney's fee ; a change of venue was taken to another county, eight days being occupied in taking depositions, and the case was stubbornly contested ; held, that an allowance of $500 solicitor's fees upon the testimony of two practicing lawyers that such fee was reasonable, is not reversi- ble for error.^ If the court adds an additional fee, the mortgagee can remit it, and then it is not error.^ It is held in some of the States that the court will not enforce an unconscionable allowance for attorney's fees in a mortgage, and having no authority to make a new contract for the parties, will not make any allowance therefor ; ^^ that where no fees are specified, none will be allowed." Many of the courts, and it 1 Barry r. Guild, 126 111. 439. " Act of March 27, 1874. ^Monroe v. Fohl, 72 Cal. 570. *Sichel V. Carrillo, 42 Cal. 493; Schallard v. Eel Riv. Steam Co., 70 Cal. 144 ; Mascarel v. Raftbur, 51 Cal. 242 ; Moran v. Gardemeyer, 82 Cal. 96. *Levy V. Beasley, 41 La. Ann. 832. « Cheltenham Imp. Co. v. Whitehead, 128 111. 279. 'Succes.sion of Duh^, 41 La. Ann. 209. « easier v. Byers, 129 111. 657. See, also, Telford v. Garrels, 132 111. 550. » Killops V. Stephens, 73 Wis. 111. '"Balfour v. Davis, 14 Ore. 47. V "Jefferson v. Edrington, 53 Ark. 545. See, also, Am. Freehold Land & Mortg. Co. V. McCall (Ala.), 11 S. Rep. 288. 612 NATURE AND REQUISITES OF THE CONTRACT. is the general rule, will allow a reasonable attorney's fee, though no stipulation is included in the mortgage. § 482. Taxes. — It is well settled that a mortgagee may pay taxes in order to preserve his lien, and tack the amount to the mortgage debt.^ And a stipulation for insurance for the mort- gagee's benefit, being intended to afford security supplementary to and connected with the mortgage, and to keep the mortgaged property itself so far intact as a means of security as to per- petuate the safety of the mortgagee's interest in case the build- ing should be burned, is in equity a sort of adjunct to the mortgage, and is binding on the mortgagor and all others claiming under him, with notice.^ Taxes when included in a judgment, draw the same rate of interest as the judgement.^ It is the general rule that money paid by the mortgagee, to redeem the premises from a tax sale, or from any charge which is a paramount lien upon the property, becomes part of the mortgage debt, and may be enforced by foreclosure.* In one case in Iowa it was decided that the mortgage security cannot be extended to embrace debts of the mortgagor, such as taxes on the land, not provided for in the instrument.^ But this seems to be repudiated in a later case, which holds that the doctrine thus announced must be confined strictly to the facts in that particular case,^ thus, in effect, overruling it as a general rule. It seems that equity may enforce, over a judgment uj)on the lessee's interest, a priority for the payment of moneys to pre- serve the lease from forfeiture, where the lessee was not bound 1 Hill V. Townley, 45 Minn. 167 ; Gormley v. Bunyan, 138 U. S. 62.3 ; Hall V. Gould, 79 111. 16 ; Parsons v. Gaslight & Coke Co., 108 111. 380 ; Silver Lake Bank v. North, 4 Johns. Ch. (N. Y.) 370 ; Faure v. Winans, Hopk. Ch. (N. Y.), 283 ; Burr v. Veeder, 3 Wend. (N. Y.) 412 ; Rapelye v. Prince, 4 Hill (N. Y.), 119 ; Hamilton v. Denny, 1 Ball & B. 202 ; Trimleston v. Hamill, 1 Ball & B. 377 ; Mix v. Hotchkiss, 14 Conn. 32. 2 Miller v. Aldrich, 31 Mich. 408. 3 Sharp V. Barker, 11 Kan. 381. * Hill V. Eldred, 49 Cal. 398 ; Robinson v. Ryan, 25 N. Y. 320 ; Wright v. Langley, 36 111. 381. ^ Savage v. Scott, 45 Iowa, 130. ® Barthell v. Syverson, 54 Iowa, 160. THE DEBT SECURED. 513 to make the payment, and it preserved the security for the judgment creditor. It must be something which the lessee was not bound by the lease to pay, and which had had the effect to preserve the security for the benefit of a judgment creditor. Such a claim would be the payment of an assessment which the lessee was bound to pay and did not, the payment of which prevented the termination of the lease by a sale of the land ; ^ that is, the subsequent leinor has a preference by way of sub- rogation over even a prior incumbrancer, who has been pro- tected by such payment. But such claim must be for some other cause than the ordinary rent and taxes of the premises,^ and when he claims reimbursement, he must seek it at the foreclosure suit ; he is entitled to subrogation, in the foreclosure suit on the payment of the charge, but as against a purchaser at a sheriff's sale of the premises, he is not entitled to subrogation.^ If the mortgage contains no covenants to pay taxes and assess- ments, the mortgagor is not liable for them after he has sold his equity of redemption, and the mortgagee cannot collect them from him.* Taxes and assessments on mortgaged land assessed before bankruptcy of the owner, must be paid out of the estate,^ and after assignment, by the assignee as expenses.^ The lien of a mortgage attaches ec|ually for the debt and for the costs necessarily incurred in the enforcement of it.^ A covenant in a mortgage for the payment by the mortgagor of all taxes that may be assessed upon the premises therein described cannot be enforced after the mortgage debt is discharged.^ Where a mortgage stipulates that upon the non-payment of taxes due upon the premises, the debt secured by the mort- gage should become due, it is valid.^ 1 Cook V. Kraft, .3 Lans. (N. Y.) 512. "^ Cook V. Kraft, 3 Lans. (N. Y.) 512. 'Manning v. Tuthill, 30 N. J. Eq. 29. * Marshall v. Davies, 16 Hun (N. Y.), 606. * In re Moller, 8 Ben. D. C. 526. * In re Moller, 8 Ben. D. C. 526. ^ Hurd V. Coleman, 42 Me. 182. * Hitchcock V. Merrick, 18 Wis. 357. See, also, Manning v. Tuthill, 30 N. J. Eq. 29. ^Stanclift v. Norton, 11 Kan. 218. VOL. I.— 33 514 nature and requisites of the contract. Article 2. Future Advances. §483. Preliminary, Its Face That It was Given § 484. Statutory Provisions. to Secure Future Advances. § 485. Requisites. § 491. Notice — Such Mortgages are a § 486. Limitation of the Advances. Valid Lien from the Date of § 487. A Question of Good Faith. Execution. § 488. Parol Evidence. § 492. Mechanic's Lien — Priority. § 489. Subsequent Parol Agreement § 493. The Future Advances Should to Extend the Mortgage to be Described with Reasonable Advances. Certainty. § 490. It is not Necessary that the ^ 494. Continuing Security. Mortgage Should Show on ^ 495. Limitations of the Security. § 483. Preliminary. — This question is not free from diffi- culty, and a diversity of opinions exist among the courts whether mortgages for future advances are vaUd. One hne of decisions holds that a mortgage which does not specify that for which it is given so distinctly as to give definite information on the face of the mortgage of what it secures, so as to render it unneces- sary for the inquirer to look beyond the mortgage and seek in- formation aliunde, is void as against creditors and purchasers. Another line holds that a mortgage for future advances is valid as to all allowances made under it before notice by the mort- gagee of the supervening rights of purchasers or incumbrancers. Still others hold that a mortgage for future advances to be made or liability to be incurred, when duly recorded, is valid as a security for indebtedness incurred under it, in accordance with its terms. And again a distinction has been made be- tween mortgages in which the mortgagee is obligated to ad- vance a given sum and those in which he is not so bound.^ §484. Statutory Provisions. — In Georgia the code pro- vides that the mortgage shall " specify the debt to secure which it is given." ^ So long as the means for ascertaining the amount of the debt ^Witczinski v. Everman, 51 Miss. 841. ' Code, sect. 1945. ■ THE DEBT SECURED. 515 are pointed out, it is immaterial that the amount is not stated, or is from its nature indefinite.^ In New Hampshire the statute provides that no conveyance in writing of any lands shall be defeated, or any estate incum- bered by any agreement, unless it be inserted in the condition of the conveyance and made a part thereof, stating the sum of money to be secured, or other thing to be performed. And no estate conveyed in mortgage shall be holden by the mortgagee for the payment of any sum, or the performance of any other thing, the obligation or liability to the payment or performance of which arises, is made or contracted after the execution and delivery of such mortgage.^ But a mortgage made in part to secure a fixed sum of money agreed to be paid by the mort- gagee on the happening of a definite contingency, is not within the statute prohibiting mortgages to secure future advances.^ So a mortgage conditioned to secure a note, the consideration of a part of which is a credit of an agreed sum by the mortgagee, on his books, to the mortgagor, is not prohibited.* But the court does not hold that a mortgage given to secure an absolute note, intended as a security for advances hereafter to be made, would be valid if at the time of the execution of the mortgage the sum of the advances was not agreed upon, or the mortgagee was under no obligation to make them. A mortgage may be void, under this statute, as to part of the con- sideration which is a future advance, and valid for the part which was a debt at the time the mortgage was executed.^ The Maryland code provides that no mortgage, or deed in the nature of a mortgage, shall be a lien or charge on any es- tate or property for any other or different principal sum or sums of money than appear on the face of the mortgage, and are specified and recited in it, and particularly mentioned and ' Allen V. Lathrop, 46 Ga. 133. * Gen. Laws, 1878, ch. 136, sects. 2, 3 ; Gen. Stat., ch. 122, sects. 2, 3. ^ Fessenden v. Taft (N. H.), 17 Atl. Rep. 113 ; Stearns v. Bennett, 48 N. H. 400,402. *Abbatt V. Thompson, 58 N. H. 255. ^ * Leeds v. Cameron, 3 Sum. C. C. 488 ; Bank v. Willard, 10 N. H. 210 ; John- son V. Richardson, 38 N. H. 353. 516 NATURE AND REQUISITES OP THE CONTRACT. expressed to be secured thereby at the time of executing it ; and that no mortgage, or deed in the nature of a mortgage, shall be a lien or charge for any sum or sums of money to be loaned or advanced after the same is executed, except from the time said loan or advance is actually made ; that no mortgage to secure such future loans or advances shall be valid unless the amount or amounts of the same, and the times when they are to be made, shall be specifically stated in said mortgage/ This prohibition does not apply to mortgages to indemnify the mortgagee against loss from being indorser or security, nor to any mortgage given by brewers to maltsters to secure the payment to the latter of debts contracted by the former lor malt and other materials used in the making of malt liquors. A mortgage to secure future advances not to exceed a limited amount may be enforced to the amount of the advances made upon it within that limit, although such advances were made after the mortgagee had received notice of a junior incum- brance.^ § 485. Requisites. — Mortgages to secure future advances are valid under the common law,^ if properly made for that purpose.* Mortgages to secure future advances, made in good faith, are generally upheld.^ And the purpose to secure future advances need not appear on the face of the mortgage, as it may be shown by parol evi- dence that it was the intention of the parties when the mort- gage was executed that a certain sum named therein as an ex- isting debt, but which was not really such, should be the limit of advances to be made by the mortgagee. 1 Eev. Code, 1878, art. 66, sect. 43 ; Laws of 1872, ch. 213. This amendment and addition to the code does not apply to Anne, Arundel, Baltimore, St. Mary's, and Prince George's counties. 2 Wilson V. Ruspell, 13 Md. 494. 3 Hopkinson v. Rolt, 9 H. L. Cas. 514. ^ Burgess v. Eve, L. R. 13 Eqs 4-50 ; Menzies v. Lightfoot, L. R. 11 Eq. 459 ; Daun V. London Brewery Co., L. R. 8 Eq. 155. 5 McCarty v. Chalfant, 14 W. Va. 531 ; Klein v. Glass, 53 Tex. 37 ; United States V. Hooe, 3 Ci-anch (U.S.), 73; Shirras r. Caig, 7 Cranch (U. S.), 34 ; Lawrence v. Tucker, 23 How. («U. S.) 14 ; Nat. Bank v. Whitney, 103 U. S. 99; Jones V. Guaranty and Indem. Co., 101 U. S. 622. THE DEBT SECURED. 517 Such evidence, however, will not be admitted to the preju- dice of intervening creditors and incumbrancers if they, by such admission would be injured by such representations in the mortgage/ A mortgage to secure future advances, which on its face gives information as to the extent and purpose of the contract, so that a purchaser or junior creditor may, by inspection of the record, and by ordinary diligence and common prudence, ascertain the extent of the incumbrance, will prevail over the supervening claim of such purchaser or creditor as to all ad- vances made by the mortgagee within the terms of such mort- gage, whether made before or after the claim of such pur- chaser or creditor arose.^ And though it appears on the face of the mortgage to be all for a present debt, and is, therefore, open to suspicion as misrepresenting the real transaction, yet, if upon inspection, the real transaction shall appear to be fair, though somewhat variant from that which it described, it would seem to be unjust and unprecedented to deprive the person claiming under the deed, of his real equitable rights, unless in favor of a person who has in fact been injured or deceived by the misrepresentation.^ The New York cases seem to require that the purpose should 1 Wilson V. Russell, 13 Md. 495 ; Pickersgill v. Brown, 7 La. Ann. 297 ; D'Meza v. Generes, 22 La. Ann. 285 ; Bank v. Cunningham, 24 Pick. (Mass.) 270 ; Evenson v. Bates, 58 Wis. 24 ; Collins v. Carlisle, 13 111. 254 ; James v. Johnson, 6 Johns. Ch. (N. Y.) 429 ; Griffin v. Oil Co., 11 N. J. Eq. 49 ; Sum- mers V. Roos, 42 Miss. 749 ; Speer v. Skinner, 35 111. 282 ; Gunn v. Jones, 67 Ga. 398 ; Hendrix v. G^re, 8 Oreg. 406 ; Sims v. Mead, 29 Kan. 124 ; Mizner V. Kussell, 29 Mich. 229 ; Judge v. Vogel, 38 Mich. 568 ; Irwin v. Tabb, 17 Serg. & R. 423 ; Walker v. Walker, 17 S. Car. 329 ; Bacon v. Brown, 19 Conn. 29 ; Mix V. Cowles, 20 Conn. 420 ; Forsyth v. Freer, 62 Ala. 443 ; Lovelace v. Webb, 62 Ala. 272. ^ Witczinski v. Everman, 51 Miss. 841. ^ Shirras v. Caig, 7 Cranch (U. S.), 34 ; Schuelenburg v. Martin, 1 McCrary C. C. 348 ; Schulze v. Bolting, 8 Biss. C. C. 174 ; New Orleans Bank v. Le Breton, 120 U. S. 765 ; Seaman v. Fleming, 7 Rich. Eq. (S. Car.) 283 ; Garber V. Henry, 6 Watts (Pa.), 57 ; Fassett v. Smith, 23 N. Y. 252 ; Doyle v. White, 26 Me. 341 ; Goddard v. Sawyer, 9 Allen (Mass.), 78 ; Hall v. Tay, 131 Mass. 1,92 ; James i\ Morey, 2 Cow. (N. Y.) 246, 292 ; Madigan v. Mead, 31 Minn. 94, 98 ; Truscott v. King, 6 N. Y. 147. 518 NATURE AND REQUISITES OF THE CONTRACT. be stated in the mortgage/ though there are some that hold that such mortgages may be given for a definite sum large enough to cover all such floating and variable indebtedness as may arise from a course of dealings between the parties.^ § 486. Limitation of the Advances. — It is held that the limitation to the advances should be named in the mortgage. Thus, when the mortgage recites that it is to secure future advances to the extent of $1,500 to be made under an agree- ment set out therein, the lien is limited as against subsequent mortgagees to that amount, but against the mortgagor it is good for the whole of the advances.^ A mortgage to cover future advances will be good not only between the parties, but as to purchasers of the mortgagor with notice of the mortgage.* So a few cases hold that the utmost limit for which the mortgage is to be security must be stated therein.* This is held to be requisite to the validity of the mortgage, being controlled in some States by statute.^ A mortgage to secure repayment of future advances will be good up to such time as some third person acquires an interest by mortgage, conveyance, or judgment in the mortgaged premises, and notice thereof is given to the holder of the prior mortgage.^ § 487. A Question of Good Faith. — It is the general doc- trine that a mortgage given for a specific sum in good faith as security for future advances is a valid security, as against the 1 Walker v. Snediker, Hoff. Ch. (N. Y.) 145 ; Divver v. McLaughlin, 2 Wend. (N. Y.) 599 ; Wescott v. Gunn, 4 Duer (N. Y.), 108. 2 Bank v. Finch, 3 Barb. Ch. (N. Y.) 293 ; Murray v. Barney, 34 Barb. (N. Y.) 347 ; Truscott v. King, 6 N. Y. 147. 3 Wagner v. Breed, 29 Nebr. 720 ; Bell v. Fleming, 12 N. J. Eq. 13 ; Beek- man v. Frost, 18 Johns. (N. Y.) 544. * Freiberg v. Magale, 70 Tex. 116 ; Lovelace v. Webb, 62 Ala. 271. sTully V. Harloe, 35 Cal. 302; Babcock v. Bridge, 29 Barb. (N. Y.)427; Youngs r. Wilson, 24 Barb. (N. Y.) 510. 8 Eev. Code of Maryland, 1878, art. 66, sect. 43 ; Wilson v. Eussell, 13 Md. 494 ; Laws of New Hampshire, 1878, ch. 136, sects. 2, 3 ; Code of Georgia, sect. 1945. Tlie Louisiana Code provides that a mortgage may be given for an obligation which has not yet risen into existence : Civil Code, art. 3292. 'Lanahan v. Lawton (N. J.), 23 Atl. Rep. 476. THE DEBT SECURED. 519 general creditors of the mortgagor, for advances not exceeding the sum specified in the mortgage.^ The only question in such case is the bona fides of the transaction.^ And at common law a mortgage, bona fide, may be for future advances and liabili- ties for the mortgagor by the mortgagee, as well as for present debts and liabilities.^ There can be no more fair bona fide and valuable considera- tion than the drawing or indorsing of notes at a future period for the benefit and at the request of the mortgagor.* Neither is the validity of a mortgage to secure future ad- vances affected by the fact that the advances are to be made in materials for building instead of money .^ A mortgage of land executed in good faith to secure advances to be thereafter made to pay for labor performed, and material furnished in and for the erection of a building on the premises, and advances were so made, although after the beginning of the building, becomes a lien upon the premises from the time of the execution and recording thereof ; and if it is recorded before the commence- ment of the building it will take precedence of liens for labor performed and materials used in the erection of the building.® So an agreement that a mortgage shall be a continuing security for any future advances, whether made before or after maturity, will extend the lien of the mortgage in favor of advances made after its maturity. And a mortgagor's wife, who joined in the execution of the mortgage, which covered the homestead, can- not complain that it was given for future advances, when these are less than the sum to secure which the mortgage purports to be given.'^ It is not necessary for a mortgage to secure future advances > Banking Co. v. Leonard (Ky.), 13 S. W. Rep. 521. "Shirras v. Caig, 7 Cranch (U. S.), 34. 'Leeds v. Cameron, 3 Sum. C. C. 492; Conard v. Ins. Co., 1 Pet. (U. S.) 448. *Lyle V. Ducomb, 5 Bin. (Pa.) 585. See, also, ^loroney's Appeal, 24 Pa. St. 372; Crane v. Deming, 7 Conn. 387; Boswell r. Goodwin, 31 Conn. 74; Grif- fin V. Burtnett, 4 Edw. Ch. (N. Y.) 673 , Piatt v. Griffith, 27 N. J. Eq. 207. * Brooks V. Lester, 36 3Id. 65; Doyle v. AVhite, 26 Me. 341. * Wisconsin Planing Mill Co. v. Schuda,, 72 Wis. 277. See, also, Moroney's Appeal, 24 Pa. St. 372 ; Piatt v. Griffith, 27 N. J. Eq. 207 ' Banking Co. v. Leonard (Ky.), 13 S. W. Rep. 521. 520 NATURE AND REQUISITES OF THE CONTRACT. to specify any particular or definite sum which it is to secure ; it is not necessary for it to be so completely certain as to pre- clude the necessity of all extraneous inquiry. If it contains enough to show a contract that it is to stand as security to the mortgagee for such indebtedness as may arise from future deal- ings between the parties, it is sufficient to put a purchaser or incumbrancer on inquiry ; and if he fails to make it, he cannot claim protection as a bona fide purchaser.^ Even if the intent to secure future advances is not disclosed by the terms of the instrument, yet, if the mortgage is recorded and states a specific sum which it is intended to secure, so as to apprise third persons of the extent of the lien, which may be claimed under it, it is good for subsequent advances, except as against persons acquiring equities prior to the time when such advances are made.^ § 488. Parol Evidence. — Though a mortgage purports to be given for a fixed sum, parol evidence is admissible to show that it was given to secure future advances and other amounts.^ And though the mortgage on its face is for a specific sum, parol evidence is admissible to show that it was really intended to secure future advances to be made from time to time.* But in Arkansas and Ohio it is held that the intent must appear on the face of the instrument, and cannot be shown by parol evidence.^ So a mortgage which purports to be one of indemnity cannot be shown by [)arol evidence to be for the purchase-money, as against the rights of third parties.*' In general, the consideration cannot be inquired into for the 1 Witczinski v. Everman, 51 Miss. 841 ; Robinson v. Williams, 22 N. Y. 380 ; Stoughton V. Pasco, 5 Conn. 442 ; Leeds v. Cameron, 3 Sum. C. C. 492 ; McDaniels v. Colvin, 16 Vt. 304 ; Summers v. Roos, 42 Miss. 778. 2 D'Meza v. Generes, 22 La. Ann. 285 ; Farnum v. Burnett, 21 N. J. Eq. 87 ; Bank v. Cunningham, 24 Pick. (Mass.) 270 ; Hubbard v. Savage, 8 Conn. 215 ; Foster v. Reynolds, 38 Mo. 553. =• Banking Co. v. Leonard (Ky.), 13 S. W. Rep. 521. * Wilkerson v. Tillman, 66 Ala. 532 ; McKinster v. Babcock, 26 N. Y. 378 ; Shirras v. Caig, 7 Cranch (U. S.), 34 ; Hall v. Tay, 131 Mass. 192. * Johnson v. Anderson, 30 Ark. 745 ; Spader v. Lawier, 17 Ohio, 371. 8 Curtis V. Root, 28 111. 367. THE DEBT SECURED. 521 purpose of defeating the mortgage, but it may to ascertain the amount due on it ; and the mortgage will be held good for that amount as against subsequent incumbrancers with notice/ When a fixed sum is expressed as secured by the mortgage, it cannot be shown by parol evidence that a further sum was intended to be secured as against junior incumbrancers.^ The mortgage must set forth the foundation of the liability which it is intended to secure at the time of the execution of the mortgage.^ If this is done, and the intention of the parties made manifest, and the duty is pointed out which the mortgage is to secure, it is enough to satisfy the requirements of a statute which provides that a " mortgage must specify the debt to secure which it is given," even though no limit is set to the advances, as if they are to be made for carrying on a farm during the year.^ § 489. Subsequent Parol Agreements to Extend the Mortgage to Advances. — Subsequent parol agreements to ex- tend the mortgage to advances and liabilities other than those contemplated at the time of the execution of the mortgage, have been upheld as between the parties and those claiming under them with notice of the agreement, but not as to third persons in the early English cases.^ In Massachusetts, such agreements are upheld in equity as against the mortgagor or his grantee with notice. But such agreement would not be upheld as against subsequent mort- gagees or bona fide purchasers, or attaching creditors, nor in law where the legal title is involved.^ Other States hold the same doctrine and allow a mortgage partly or wholly paid to ^ Farnum v. Burnett, 21 N. J. Eq. 87. "^ Stoddard (•. Hart, 23 N. Y. 558 ; Townsend v. Empire, etc., Co., 6 Duer (N. Y.), 208; Murray v. Barney, 84 Barb. (N. Y.) 336. ^Bank v Godfrey, 23 111. 579. * Allen V. Lathrop, 46 Ga. 133; Collier v. Faulk, 69 Ala. 58; Jarratt v. McDaniel, 32 Ark. 598. ^Demainbray r. Metcalfe, 2 Vern. 698; Baxter v. Manning,! Vern. 244; Holliday v. Kirtland, 2 Ch. R. 361. * Joslyn V. Wynian, 5 Allen (Mass.), 62 ; Stone v. Lane, 10 Allen (Mass.), 74. 522 NATURE AND REQUISITES OF THE CONTRACT. be given as securit}^ for further advances up to the amount so paid, though a different mortgagee is one of the parties.' But on foreclosure the mortgagor or junior incumbrancer may redeem by payment of the mortgage debt only, no matter to what amount he may be indebted on other accounts.^ An agreement indorsed on the mortgage and recorded with a marginal reference to the record of the original mortgage, is valid. ^ But if the amount is indorsed on the bond only and not on the mortgage, and no record is made of this change, the agreement is void.* But such parol agreements are not generally upheld,^ in this country nor by the decisions of England.^ After a mortgage has been paid, it is functus officio and ex- tinguished, and cannot be made use of by the parties as a con- tinuing security .'^ The agreement for the advances must be contemporaneous, and, hence, a subsequent parol agreement is invalid.^ § 490. It is not Necessary that the Mortgage should Show on its Face that it was Given to Secure Future Advances. — A mortgage may be made to secure an obligation, under the Louisiana code, " which has not yet arisen into existence ; " but in such case the mortgage can only be enforced ' Walker v. Walker, 17 S. Car. 329 ; Underbill v. Atwater, 22 N. J. Eq. 16 ; Upton V. Bank, 120 Mass. 153. 2 Lee V. Stone, 5 Gill & J. (Md.) 1 ; Hughes v. Worley, 1 Bibb (Ky.), 200 ; Schiffer v. Feagin, 51 Ala. 335. ^ Choteau v. Thompson, 2 Ohio St. 114. * Stoddard v. Hart, 23 N. Y. 558. * Flower v. O'Bannon, 43 La. Ann. 1042 ; Townsend v. Empire Co., 6 Duer (N. Y.), 208 ; James r. Morey, 2 Cow. (N. Y.) 293 ; Sims v. Mead, 29 Kan. 124 ; Mizner v. Kussell, 29 Mich. 229 ; Gray v. Helm, 60 Miss. 131. Com- pare Hendricks v. Robinson, 2 Johns. Ch. (N. Y.) 309 ; Brinkerhoff v. Marvin, 5 Johns. Ch. (N. Y.) 320. ® Ex parte Hooper, 1 Meriv. 7. ' Murray v. Barney, 34 Barb. (N. Y.) 336 ; Truscott v. King, 6 N. Y. 147. See, also, Edwards v. Dwight, 68 Ala. 389 ; Doyle v. White, 26 Me. 341 ; Mou- not V. Ibert, 33 Barb. (N. Y.) 24 ; Thomas' Appeal, 30 Pa. St. 378 ; O'Neill v. Capelle, 62 Mo. 202. 8 Truscott V. King, 6 N. Y. 147, 161 ; Walker v. Snediker, Hoff. Ch. (N. Y.) 145 ; Hall v. Crouse, 13 Hun (N. Y.), 557. THE DEBT SECURED. 623 in so far as the future obligation sliall have been created. It is not necessary that the mortgage should express upon its face that it was executed to secure future advances.^ It will be security for the specific amount named.^ The mortgage will be good for all advances made, if they are not specifically named, before the rights of third parties intervene.^ Such mortgage may cover present indebtedness and future advances, and such fact may not be stated on the face of the instrument.* An absolute conveyance given as a mortgage may be used to secure future advances.^ §491. Notice — Such Mortgages are a Valid Lien from THE Date of Execution. — A mortgage made in good faith to cover future advances of money or materials, or future indorsements, is a valid lien from the date of its execution, if properly recorded,^ as against subsequent purchasers or incum- brancers, except as to advances made after actual as distin- guised from record notice of a subsequent incumbrance, though the mortgage does not disclose upon its face that it is given in part for future advances, if the amount of liability is expressly ^ Morris v. Executors, 39 La. Ann. 712. See, also, Lehman v. Godberry, 40 La. Ann. 219. ' Collins V. Carlisle, 13 111. 254 ; Darst v. Gale, 83 111. 136 ; Hendrix v. Gore, 8 Oreg. 406 ; Townsend v. Empire, etc., Co., 6 Duer (N. Y.), 208 ; Foster v. Rey- nolds, 38 Mo. 553 ; McCarty v. Chalfant ; 14 W. Va. 531 ; Forsyth v. Freer, 62 Ala. 443 ; Huckaba v. Abbott, 87 Ala. 409 ; Griffin v. Oil Co., il N. J. Eq. 49 ; Bank v. Finch, 3 Barb. Ch. (N. Y.) 293. ^ Robinson v. Williams, 22 N. Y. 380 ; Fassett v. Smith, 23 N. Y. 252 ; Div- ver V. McLaughlin, 20 Am. Dec. 653, and note ; Hubbard v. Savage, 8 Conn. 215 ; Lovelace •;;. Webb, 62 Ala. 271. * TuUy V. Harloe, 35 Cal. 302 ; Summers v. Roos, 42 Miss. 749 ; Hendrix v. Gore, 8 Oreg. 406 ; Evenson v. Bates, 58 Wis. 24 ; Keyes v. Bump, 59 Vt. 391 ; Bassett v. Daniels, 136 Mass. 547. * Harper's Appeal, 64 Pa. St. 315 ; Fessler's Appeal, 75 Pa. St. 483. Com- pare Bank v. Godfrey, 23 111. 579. « Tulley ?'. Harloe, 35 Cal. 302, 309; 95 Am. Dec. 102; Ackerman i'. Hun- sicker, 85 N. Y. 46 : 39 Am. Dec. 621 ; Googins v. Gilmore, 47 Me. 13 ; 74 Am. Dec. 472 ; Morris v. Cain, 39 La. Ann. 712 ; Shirras v. Caig, 7 Cranch (U. S.) 34 ; McDaniels v. Colvin, 16 Vt. 300 ; 42 Am. Dec. 521 ; Ward v. Cooke, 17 N. J. Eq. 93, 99; 3 Pom. Eq. Jur., sects. 1197, 1198; Tapia v. Demartini, 77 Cal. 383. 524 NATURE AND REQUISITES OP THE CONTRACT. limited.* But it is generally held, that the lien of the mort- gage cannot be enforced as against subsequent incumbrancers, of which the mortgagee has actual notice, for advancements or indorsements made or given after such notice. The notice, as held by many courts, must be actual. Constructive notice, by the recording of subsequent incumbrances, is not suffi- cient.^ But actual notice is not necessary in some jurisdictions, and it is held that the record of the junior mortgage is notice to the first mortgagee and to all other parties, and any advance made thereafter shall be postponed to such junior incumbrancer.^ Where constructive notice is sufficient, the lien of the mort- gage attaches as to these subsequent optional advances, only from the time they are made and not from the date of the mort- gage. So when advances were made, and a subsequent judg- ment entered on the same day, though the judgment was entered a few hours after the former, the claims of both mort- gage and judgment creditor were ordered paid pro rata, as the law does not recognize fractions of a day in such cases.* The weight of authority has been that actual notice is necessary ; the doctrine is otherwise now. § 492. Mechanic's Lien — Priority. — The same rules as to priority of lien of a mortgage to secure future advances, and the necessity of actual notice as distinguished from record no- tice of a subsequent lien, apply to holders of subsequent mechanics' liens, and in favor of a beneficiary not named in ' Tapia v. Demartini, 77 Cal. 383. 2 Ackerman v. Hunsicker, 85 N. Y. 52 ; 39 Am. Dec. 621 ; Ward v. Cooke, 17 N. J. Eq. 93, 99; Shirras v. Caig, 7 Cranch (U. S.), 34; 3 Pom. Eq. Jur., sect. 1199 ; McDaniels v. Colvin, 16 Vt. 300 ; McCarty v. Chalfant, 14 W. Va. 531 ; Nelson v. Boyce, 7 J. J. Marsh. (Ky.) 401 ; Witezinski v. Everman, 51 Miss. 841 ; Lovelace v. Webb, 62 Ala. 271 ; Ripley r. Harris, 3 Biss. C. C. 199. 3 Kramer r. Bank, 15 Ohio, 254 ; Spader v. Lawler, 17 Ohio, 371 ; Terhoven v. Kerns, 2 Barr (Pa.), 96; Parmentier v. Gillespie, 9 Barr (Pa.), 86; Bank's Appeal, 36 Pa. St. 170 ; Ladue v. Railroad Co., 13 Mich. 380. And see Collins V. Carlisle, 13 111. 254 ; Boswell v. Goodwin, 31 Conn. 74 ; 3 Am. Law Reg. (N. S.) 92 and note ; Meeker v. Clinton, etc.. Railroad Co., 2 La. Ann. 971 ; Adams v. Wheeler, 10 Pick. (Mass.) 199. * McClure v. Roman, 52 Pa. St. 458. THE DEBT SECURED. 625 the mortgage, who seeks to enforce a lien for advances under a trust created for his benefit in such a mortgage for a sum cer- tain given to another person.^ In Wisconsin, however, con- structive notice is sufficient. Thus, a mortgage of land, exe- cuted in good faith to secure advances to be made, to pay for labor performed and materials furnished in and for the erection of a building on the premises, and advances were so made, although after the commencement of the building, becomes a lien upon the premises from the time of the execution and recording thereof ; and if it is recorded before the commence- ment of the building it will take precedence of liens for labor performed and materials used in the erection of the building.^ Merely staking off the land is not such a beginning as to defeat the precedence of a mortgage executed afterward but before anything more had been done. Something must be done which is intended to remain permanently as a part of the building.^ Where a building was erected while the mortgagor w^as in possession under a contract of sale, but before the conveyance and mortgage were given, the mortgage executed simultaneously with the deed and given to secure both the j)urchase-money and advances made by the mortgagee to aid in the construction of the building in pursuance of an agreement made at the time of the contract of sale, was given precedence over the mechan- ics' lien both as to purchase-money and the advances. The seisin of the mortgagor was instantaneous and not sufficient to allow a mechanics' lien to attach as against the mortgagee. In like manner where a lease for ninety-nine years renewal forever was given, and the leasehold was simultaneously mortgaged to secure the lessor for advances to aid in the construction of a building on the leased land, the mortgage was paramount to a prior judgment against the lessee.* 'Tapiav. Demartini, 77 Cal. 383; Maroney's Appeal, 24 Pa. St. 372. See, also, Piatt V. Griffith, 27 N. J. Eq. 207. ^Wisconsin Planint; Mill Co. v. Schuda, 72 Wis. 277. See, also, Lyle v. Ducomb, 5 Binn. (Pa.) 585; Taylor v. Le Bar, 25 N. J. Eq. 222; Brooks v. Lester, 36 Md. 65 ; Choteau v. Thompson, 2 Ohio St. 114. V 'Mackintosh v. Thurston, 25 N. J. Eq. 242. *Ahern v. White, 39 Md. 409. 526 NATURE AND REQUISITES OF THE CONTRACT. Where the mortgagee is compelled to make advances, he is entitled to the security of the mortgage for all his advances whether made before or after the attaching of the intervening rights of third parties, and with or without knowledge of such claims/ Thus, where a railroad company made a mortgage to a trus- tee upon all its property then owned or afterward to be owned and acquired, to secure bonds which the company had agreed to issue to a contractor in payment for the building of its road, the mortgage was paramount to a lien for material afterward furnished the company, and used upon the road, although the advances were made after notice of the material- man's claim of a lien.^ § 493. The Future Advances Should be Described with Reasonable Certainty. — The mortgage should contain the subject-matter and all facts necessary to a certain result. It should define the incumbrance in such a way as to prevent the substitution of everything which a fraudulent grantor may de- vise to shield himself from the demand of his creditors.^ It is enough if the extent of the incumbrance can be ascertained by ordinary diligence.* Nor is it necessary in such mortgages that a definite or spe- cific sum should be stated on the face of the instrument as the ultimate amount intended to be secured. There is, however, a considerable diversity of opinion on this subject, but this con- ' Brinkmeyer v. Helbling, 57 Ind. 435 ; Boswell v. Goodwin, 31 Conn. 74 ; Alexandria Saving Inst. v. Thomas, 29 Gratt. (Va.) 483 ; Taylor v. Cornelius, 60 Pa. St. 187 ; Lovelace v. Webb, 62 Ala. 271. ^ Nelson v. lova, etc., R. R. Co., 8 Am. Railroad Rep. 82. A case of frequent occurrence coming under this rule is, that where the mortgagee binds himself to make advances to enable the mortgagor to erect buildings, such advances to be made as the work progresses, and if in such cases the mortgage is made before the work is begun on the building, it will take i^reference over a mechanic's hen of the builders or materialmen, though the work was begun or materials furnished before any advances were actually made under the mortgage. ^Pettibone v. Griswold, 4 Conn. 158. * Stoughton V. Pasco, 5 Conn. 449 ; Collier v. Faulk, 69 Ala. 58 : Witczinski V. Everman, 51 Miss. 841 ; Garber v. Henry, 6 Watts (Pa.), 57. THE DEBT SECURED. 527 elusion is sustained by the weight of authority as the better rule.' All that can be required is that a mortgage designed to secure such future liabilities should describe the nature and amount of them with reasonable certainty, so that they may be ascertained by the exercise of ordinary diligence on proper in- quiry.^ A claim against the mortgagor as indorser of the note of a third party, which was purchased by the mortgagee from the mortgagor, and which has been regularly presented and allowed as an unsecured claim against the estate of the deceased mort- gagor, cannot be foreclosed, in whole or in part, as a claim under the terms of the mortgage for " further advances to the mortgagor by the mortgagee, and other indebtedness to the mortgagor by the mortgagee that may exist, arise, or be con- tracted before the satisfaction thereof," not exceeding a certain sum. The mortgagee was not thereby authorized to buy up notes of third parties upon which the mortgagor was a simple indorser, and hold the same as secured by the mortgage.^ A note secured by mortgage issued by a planter to the order of his merchant to make good all advances in the working of the plantation, although received as collateral security, may be sued on directly by the holder for the exact amount of the ad- vances.* If the mortgagee fails to advance the entire amount, he may enforce the security for the amount actually advanced, subject, however, to the right of the mortgagor to have a rebate to the extent of his loss.'^ In Connecticut the mortgage must truly describe the debt intended to be secured ; and it is not sufficient that the debt be 1 Divver v. McLaughlin, 20 Am. Dec. 653, 658 ; 2 Wend. (N. Y.) 596 ; Love- lace V. Webb, 62 Ala. 271 ; Collier v. Faulk, 69 Ala. 58. ' Witczinski v. Everman, 61 Miss. 841 ; Collier v. Faulk, 69 Ala. 58. " Moran r. Gardemeyer, 82 Cal. 96. See, also, Moran v. Gardemeyer, 82 Cal. 102. *ChafFe v. Whitfield, 40 La. Ann. 631. ^ Watts r. Bonner, 66 Miss. 629 ; Coleman v. Galbreath, 53 Miss. 303 ; For- syth r. Freer, 62 Ala. 443 ; Robinson v. Cromelein, 15 Mich. 316 ; Turpie v. Lowe, 114 Ind. 37 ; Kline v. McGuckin, 25 N. J. Eq. 433. Compare Walker V. Carleton, 97 111. 582. 528 NATURE AND REQUISITES OF THE CONTRACT. of a character that it might have been secured by the mortgage had it been truly described/ A mortgage conditioned to pay all sums due and to become due is sufficiently certain.^ " What I may owe him on book " was construed to refer to future accounts, no accounts subsist- ing between the parties when the mortgage was executed.^ And when a mortgage is given to secure future advances for carrying on a plantation, the mortgagor's liability is not limited to the year in which the mortgage was executed/ §494. Continuing Security. — The security may be con- tinued. Thus, when the condition of the bond is " to pay all advances which may be made to them under this agreement at the times, in the manner, and with the interest agreed upon," it is sufficient to make the mortgage a continuing security for all unpaid advances. The bond is like a penal official bond by an officer required to keep, pay over, and account for all moneys which come under his hands, in whatever amount, and at what- ever times. Such moneys may be a hundred-fold greater than the penalty of the bond, and when all have been paid or accounted for except an amount equal to or within the penalty of the bond, the securities, even, are held liable on such bond for such deficit.^ So a mortgage to secure future advances is valid, though the amount named in the note is not the amount absolutely secured to be paid. Thus, a note was given for $15,000, and it was held that the mortgage was valid ''for a balance of account and future advances " to the extent of $15,000." So a guaranty given to secure the payment of $1,800 of successive advances was held to secure a same amount of any 1 Bramhall v. Flood, 41 Conn. 72. Compare Mix v. Cowles, 20 Conn. 420 ; Townsend v. Todd, 91 U. S. 452 ; Hubbard v. Savage, 8 Conn. 215 ; Shepard r. Shepard, 6 Conn. 37 ; Pettibone v. Griswold, 4 Conn. 158 ; Stoughton v. Pasco, 5 Conn. 442 ; Ketchum v. Jauncey, 23 Conn. 123. 2 Michigan Ins. Co. v. Brown, ll Mich. 266. ^McDaniels v. Cohnn, 16 Vt. 300. *Bryce v. Massey (S. Car.), 14 S. E. Rep. 768. 5 Shores v. Doherty, 65 Wis. 153, 158, opinion by Orton, J. « Fisher v. Otis, 2 Pin. (Wis.) 78. I THE DEBT SECURED. 529 future time, toties quoties, whenever the antecedent transactions were discharged, and that it was a continuing guaranty/ A guaranty of the payment by another of goods to be sold in the future, secured by a mortgage on land, is revoked by the death of the guarantor, and thereupon the land may be re- deemed from the mortgage upon payment for the goods sold up to that time. Judge Knowlton says : " We are of the opinion that the right to sell upon the faith of the guaranty, rests upon a continuing authorit}^, and that where a mortgage is given instead of a personal promise as security, the authority proceeds from the mortgagor, and is terminated by his death." ^ The English doctrine is the same, with this exception : The guaranty is terminated, not by the death of the guarantor, but by notice of his death.^ § 495. Limitations of the Security. — As a general rule all limitations as to amounts, time, and the nature of advances must control.* However, other expressions may modify this rule. Thus, when advances are made to enable the mortgagor to raise a crop, a court of equity, if necessary to carry out the purposes of the trust, will protect and uphold additional advances over and above the limitations in the deed.^ So where a mortgage was given to secure a note for $5,500, and such advances as had been or might be made within two years, not to exceed in all an indebtedness of $6,000, and advances were made to an amount largely over $6,000, the mortgage was held to cover the advances and the note for $5,500.^ And if limited in amount and time, and the full amount be advanced and paid, and then further loans are made within the specified time, these loans also will be covered by the mortgage ; ^ if the ^ Douglass V. Reynolds, 7 Pet. (U. S.) 11.3. See, also, Fassett v. Smith, 23 N. Y. 252; Commercial Bank v. Cunningham, 24 Rich. (Mass.) 270. ^ Hyland v. Habich, 150 Mass. 112. " Harriss v. Fawcett, L. R. 15 Eq. 311 ; L. R. 8 Ch. 866 ; Coulthart v. Clement- son, 5 Q. B. Div. 42, 47 ; Lloyd v. Harper, 16 Ch. Div. 290, 314, 319. * Miller r. Whittier, 36 Me. 577. ^ Bell v. Radcliff, 32 Ark. 645. V 6 Lawrence v. Tucker, 23 How. (U. S.) 14. ^ Wilson V. Russell, 13 Md. 494. VOL. I. — 34 530 NATURE AND REQUISITES OP THE CONTRACT. advances had been made after the time, the mortgage would not have covered them/ Where, in an action to foreclose a $15,000 mortgage given as security for the payment of any and all notes, checks, and drafts indorsed by the mortgagee for the benefit or accommoda- tion of the mortgagor, and it appears that when the mortgage was given, the mortgagee was indorser for the mortgagor upon only one note for $3,000, the mortgage will be held to secure future indorsements made by the mortgagee, in ignorance of a second mortgage on the same premises, to secure other indorse- ments.^ As he had no notice, actual or constructive, of the existence of the other mortgage, he had the same right to make indorsements upon the faith of his mortgage security as if the other mortgage had not been made.^ Article 3. Indemnified Mortgagee for Future Advances. § 496. Validity. I 502. When Action Can Be Main- § 497. Description of the Debt. tained on the Mortgage, i 498. Parol Evidence. § 503. Creditor's Rights of Substitu- § 499. Limitation of Security. tion. I 500. Continuing Security. f 504. Subrogation of Surety to the I 501. The Lien of an Indemnity Rights of the Creditors. Mortgage Attaches with the ^ 505. Release of Security. Execution and Delivery. §496. Validity. — A mortgage may be given to secure the mortgagee from loss by reason of a liability that he may sub- sequently incur.^ So a mortgage may be given to indemnify the mortgagee for becoming surety or indorser.^ Indemnity mortgages are valid if honestly and fairly given. And if merely an indemnity to the extent of securing the mortgagor's debts, and made with the express concurrence of the creditors, 1 Miller v. Whittier, 36 Me. 577. " Farr v. Nichols, (N. Y.) 30 N. E. Rep. 834. ' Ackerman v. Hunsicker, 85 N. Y. 43. * Goddard v. Sawyer, 9 Allen (Mass.), 78. 6 Uhler V. Semple, 20 N. J. Eq. 288 ; Clark v. Oman, 15 Gray (Mass.), 521. \ THE DEBT SECURED. 531 it is valid.^ So a mortgage given to indemnify the mortgagee against loss in consequence of his drawing notes in favor of the mortgagor is as vahd where the notes are to be drawn in futuro as where they are already drawn. ^ So where a promis- sory note secured by mortgage was given in order to indemnify the promisee against any loss which he might suffer by reason of his subsequent indorsing for the accommodation of the promisor, such notes are valid.^ The true consideration should be fairly and fully stated in order to guard against suspicion of a fraudulent transaction, though such consideration may be explained.* A promise by one person to indemnify another for becoming a guarantor for a third is not within the statute of frauds. Such promise need not be in writing, and the assumption of the responsibility is a sufficient consideration for the promise.^ A liability to loss on the part of the mortgagee is a consider- ation for the mortgage given to secure him against it, as such is a direct benefit to the mortgagor, of whatever nature it may be,^ and it is not essential that any consideration shall pass at the time of the execution of the mortgage.'^ Hence, where a cashier of a bank procured a party to execute his note to the bank, to be used as a collateral for the bank's accommodation, and at the time promised to protect the party against loss there, the execution of the note was a good consideration for the cashier's promise, and a good consideration also for a mortgage afterward made by him to the party to secure the partly against his contingent liability on the note.^ Adams v. Niemann, 46 Mich. 135. ' Lyle V. Ducomb, 5 Binn. (Pa.) 585. ^ Gardner v. Webber, 17 Pick. (Mass.) 407. * McKinster v. Babcock, 26 N. Y. 378 ; Commercial Bank v. Cunningham, 24 Pick. (Mass.) 270. ^ Chapin v. Merrill, 4 Wend. (N. Y.) 657. See, also, Holmes v. Knights, 10 N. H. 175 ; Dunn v. West, 5 B. Men. (Ky.) 376 ; Lucas v. Chamberlain, 8 B. Men. (Ky.) 276. « Magruder v. State Bank, 18 Ark. 9 ; Haden v. Buddenrick, 49 How. Pr. (N. Y.) 241 ; Simpson v. Robert, 35 Ga. 180. ' Wright V. Bundy, 11 Ind. 398 ; Cooley v. Hobart, 8 Iowa, 358. ^ Duncan v. Miller, 64 Iowa, 223. 532 NATURE AND REQUISITES OF THE CONTRACT. § 497. Description of the Debt. — When such a mortgage discloses the nature of the debt or liability to be secured, it is a valid description. If the description states that the mort- gage is an indemnity against a contingent liability it is suf- ficient.^ Thus, a mortgage given to a bank to secure payment of $10,000 in six months, containing a proviso that the mortgage was given to secure whatever amount of indebtedness at any time hereafter existing from the mortgagor to the mortgagee, is not restricted by the proviso to the indebtedness of the mort- gagor to the mortgagee arising from direct dealings between them, but is security also for the amount of notes made by the mortgagor to the order of a third person which the bank discounted.^ So where a mortgage is made to indemnif}^ one against loss by reason of becoming surety upon a note executed to negotiate a loan to carry on business, it was held that while a provision in the deed rendering the property liable for " no more than for $5,000, is a limitation upon any increase of the debt," yet interest is recoverable as incident to the debt.^ If a certain term is specified, and the term is "be the debts more or less," the mort- gage covers all debts for which the mortgagee is surety.* A mortgage conditioned to indemnify the mortgagee for indorsing notes, where hereafter requested, to an amount of $7,000, and also renewal notes, is valid.^ When the description shows that the notes are to be dis- counted at a certain bank, the mortgage is valid though the notes were discounted at another bank.^ So a mortgage to secure an " accommodation indorser and signer on sundry notes, drafts, and bills of exchange, now maturing in sundry banks, and in the hands of sundry individuals, to the amount ' TJtley V. Smith, 24 Conn. 290. See, also, Merrills v. Swift, 18 Conn. 257 ; Bacon v. Brown, 19 Conn. 29. 2 Nat. Bank v. Byard, 26 N. J. Eq. 255. 3 Stafford V. Jones, 91 N. Car. 189. *Orr V. Hancock, 1 Root (Conn.), 265. * Ketclium v. Jauncey, 23 Conn. 123. * Patterson i'. Johnston, 7 Ohio, 225. THE DEBT SECURED. 533 of $50,000, a particular description of which we are not able to give, or in whose hands thej^ are," is valid.^ Stating that the indemnitor had indorsed two bills of exchange, when he had indorsed but one and paid the other, does not make the mortgage invalid.^ § 498. Parol Evidence. — Parol evidence is admissible to show the true nature of the mortgage, and for what purpose and for what consideration it was given. Thus, a mortgage given for a definite sum, without specifying the liabilities secured, may be shown by parol evidence to have been given to indemnify the mortgagee against his liability as an indorser or surety for the mortgagor.^ So when the condition is to indemnify the mort- gagee for indorsements of certain notes, payable at two banks specified, parol evidence is admissible to show what notes had been indorsed by the mortgagee and were intended to be secured.* If the mortgage is for a definite sum, and secures the pay- ment of notes for definite amounts, it may be shown that it is simply an indemnity mortgage.^ Where a mortgage recited that the mortgagor was in- debted to the mortgagee in a certain sum, " being for money advanced," and that the mortgage was made to secure the pay- ment of such debt, the mortgagee is not precluded from show- ing that the real consideration of the mortgage was the indorse- ment by him of the mortgagor's note for that sum.^ § 499. Limitation of the Security. — To create a liability upon a mortgage given to guarantee a loan, the loan should 'Lewis V. De Forest, 20 Conn. 427. ''Fetter v. Cirode, 4 B. Mon. (Ky.) 482. » Shirras v. Caig, 7 Cranch (U. S.), 34 ; Bank r. Finch, 3 Barb. Ch. (N. Y.) 293 ; Lawrence v. Tucker, 23 How. (U. S.) 14 ; McKinster v. Babcock, 26 N. Y. 378. * Benton v. Sumner, 57 N. H. 117. ^ Price V. Gover, 40 Md. 102 ; Moses v. Hatfield, 27 S. Car. 324 ; Jones v. Guaranty and Ind. Co., 101 U. S. 622 ; Mayer v. Grottendick, 68 Ind. 1. See, also, Athol Savings Bank v. Pomroy, 115 Mass. 573 ; Vegan v. Caminetti, 65 Qal. 438. « McKinster v. Babcock, 26 N. Y. 378. 534 NATURE AND REQUISITES OF THE CONTRACT. correspond with that recited in the mortgage.^ So a mortgage to secure the mortgagee from all liability that he may incur by reason of his becoming surety or indorser on the notes of the mortgagor, does not secure notes given to the mortgagee for money lent by him to the mortgagor and received as evidence of the loan.^ The conditions of a mortgage were that the mortgagor should pay " the just and full sum of all moneys " which he might owe to the mortgagee, " either as maker or indorser of any notes or any bills of exchange, bonds, checks, overdrafts, or securities of any kind, given by him according to the conditions of any such writings obligatory, executed by him to the mortgagee as col- lateral security." It was held that this instrument called for written evidence of debt, signed or indorsed by the mortgagor, and could be satisfied by no other, and that it could not be made available as a security for debts not in writing.^ § 500. Continuing Security. — An indemnity mortgage stands as security for all renewals of the notes secured. When new securities are given for the mortgage debt, the mortgage will not be deemed discharged, unless there be an express agreement to that effect.* Thus, when a mortgage was given, conditioned to save harmless the mortgagee from his indorse- ments on specified notes, and such notes, as they became due, were renewed by the substitution of other notes or drafts, having different names on them, but the obligation of the original indorsements by the mortgagee was preserved through all the renewals, and the substituted paper was ultimately discharged by the mortgagee, the mortgage remained in force as security for the subsequent indorsements. By the change of parties the original notes were satisfied, and yet the mortgage was held not discharged by such substitution.^ 1 Thomas v. Olney, 16 111. 53. 2 Clark )'. Oman, 15 Gray (Mass.), 521. 3 Bank V. Paine, 31 Barb. (N. Y.) 213. * Chapman v. Jenkins, 31 Barb. (N. Y.) 164. * Pond v. Clarke, 14 Conn. 334 ; Brinkerhoff v. Lansing, 4 Johns. Ch. (N. Y.) 65. THE DEBT SECURED. 535 The general rule is that a deed of trust or mortgage executed as an indemnity to the sureties, will be upheld whilst the liability continues.^ And such mortgage protects the mort- gagee from a liability incurred by him jointly with the mort- gagor, for money borrowed to pay a prior note.^ And notes substituted may be indorsed by a new firm formed by taking another partner ; ^ and such notes need not be given for the same amounts and for the same time as the original.* And a mortgage to indemnify a surety upon a guardian's bond will cover a renewal of that bond.^ A mortgage to two persons, " as a continuing security and indemnity," includes such liabilities as were named, incurred by either of them separately and individually and jointly.^ It also covers liabilities made in the name of a firm after one of the members has secretly withdrawn/ When such a mortgage is assigned, the liability which the mortgagee would incur follows the assignment.^ An indemnity mortgage may provide in terms that it shall be a continuing security.^ § 501. The Lien of an Indemnity Mortage Attaches WITH ITS Execution and Delivery. — The lien of an indem- nity mortgage begins with its execution and delivery, and not with the payment of the debt indemnified against.^" Thus, of two mortgages of indemnity, that which is first exe- cuted and duly recorded is the senior lien.^^ The lien attaches » Elliott V. Mayfield, 5 Port. (Ala.) 182 ; Hawkins v. May, 12 Ala. 673 ; Mayer v. Grottendick, 68 Ind. 1. * Nesbit V. Worts, 37 Ohio St. 378. ^ Bank v. Cunningham, 24 Pick. (Mass.) 270. ^Gault V. McGrath, 32 Pa. St. 392. *Bobbitt V. Flowers, 1 Swan (Tenn.), 511. « Bank v. Bigler, 83 N. Y. 51. ' Bank v. Howard, 35 N. Y. 500. *0'Hara v. Baum, 88 Pa. St. 114. ^ Fassett v. Smith, 23 N. Y. 252. " Brinkmeyer v. Helbhng, 57 Ind. 435 ; Brinkmever v. Browneller, 55 Ind. 487. " Krutsinger v. Brown, 72 Ind. 466. 536 NATURE AND REQUISITES OF THE CONTRACT. upon its execution and overreaches all subsequent conveyances affected with notice/ However, it is held that a mortgage to secure one who is ex- pected to make, indorse, or accept negotiable paper for the accommodation of another, is only a lien from the time such liability is incurred.^ Then the mortgage constitutes a lien from the time the liability is incurred and is paramount to a subsequent judgment.^ § 502. When Action Can Be Maintained on the Mort- gage. — When the contract is one of indemnity alone — to save the mortgagee harmless if required to pay the note, he can sustain no action upon the mortgage until he has sustained injury by paying the debt or a portion of it.* When the mortgage simply indemnifies the mortgagee for a liability he has incurred or may incur, the amount of the mortgage, or of the mortgage note, seems merely to limit the extent of the security. The mortgagee being compelled to pay the debt, can claim of his principal the amount he has paid as surety, with interest from the date of the payment.* But a distinction must be made between a mortgage condi- tioned to secure against a specific thing, and one of indemnity against damages by reason of the non-performance of the thing specified. When the indemnity provides against a fixed legal liability, the right of action becomes complete on the principal's failure to do the particular thing according to agree- ment. When the mortgage provides for indemnity only, and 1 Watson V. Dickens, 12 Sm. & M. (Miss.) 608; Burdett v. Clay, 8 B. Mon. (Ky.) 287 ; Taylor v. Cornelius, 60 Pa. St. 187 ; Lyle v. Ducomb, 5 Binn. (Pa.) 585. "Choteau v. Thompson, 2 Ohio St. 114; Bank's Appeal, 44 Pa. St. 423; Bank's Appeal, 36 Pa. St. 170. 3 Kramer v. Bank, 15 Ohio, 253 ; Hartley v. Kirlin, 45 Pa. St. 49 ; Smith v. Harry, 91 Pa. St. 119. * Gregory v. Hartley, 6 Nebr. 356 ; Forbes v. McCoy, 15 Nebr. 632 ; Stout v. Folger, 34 Iowa, 74; Lathrop v. Atwood, 21 Conn. 117 ; In re Ne^rus, 7 Wend. (N. Y.) 499 ; Thomas v. Allen, 1 Hill (N. Y.), 145 ; Churchill v. Hunt, 3 Denio (N. Y.), 321 ; Wilson v. Stilwell, 9 Ohio St. 467. ' Athol Savings Bank v. Pomroy, 115 Mass. 573 ; Vegan v. Caminetti, 65 Cal. 438. THE DEBT SECURED. 537 resultant damages, these must be actually suffered before the mortgagee has a right of action against his indemnitor/ If the mortgage is one of surety as well as of indemnity, it is not necessary to show that damages have been sustained before action against the principal. Thus, a mortgage given to in- demnify the mortgagee from loss, by reason of having become a surety upon a note executed by one of the mortgagors, and which stipulates that the mortgagors " will pay the sum of money above secured," is one of security, and the mortgagee may begin action upon failure of the maker to pay the note at maturity.^ The surety cannot recover from his principal for remote and unexpected consequences.'^ The fact that the surety has taken indemnity does not deprive him of his right against the princi- pal, unless it is agreed that he shall look to the indemnity alone.* If the security is a mortgage note which is due, the surety can, and perhaps should, collect it and turn it into money.* If the security is a note or bond from the principal, the surety can only recover the sum he has paid, although the nominal value may be more.^ If the security is a bond for conveyance, he acquires no lien on the land, but after payment may go into equity for reimbursement. If the payment is a voluntary one, the surety cannot look to his indemnity for reimbursement,^ and if he absolutely assumes the debt and becomes principal, he cannot look to a deed of indemnity given him by his principal.^ A surety who has been discharged by acts of the creditors may still enforce a mortgage given him for the benefit of the creditors.^'' ' Bank r. Bigler, 83 N. Y. 51, 61 ; Gilbert v. Wiman, 1 N. Y. 550. ' Gunel V. Cue, 72 Ind. 34. See, also, Loosemore v. Radford, 9 Mees. & Wei. 657 ; Wilson v. Stilwell, 9 Ohio St. 467 ; Gilbert v. Wiman, 1 N. Y. 550. ' Harden v. Cabot, 17 Ma&«. 169; Wynn v. Brooke, 5 Rawle (Pa.), 106. * Cornwall r. Gould, 4 Pick. (Mass.) 444 ; West v. Bank, 19 Vt. 403. ^ Hunter v. Levan, 11 Cal. 11. « Child V. Eureka Works, 44 N. H. 354 ; Monell v. Smith, 5 Cow. (N. Y.) 441. ' Porter v. Howard, 1 A. K. Marsh. (Ky.) 358. « Bachellor v. Priest, 12 Pick. (Mass.) .399. v'Bank r. Stewart, 4 Dana (Ky.), 27. 1" Newsam v. Finch, 25 Barb. "(N. Y.) 175. 538 NATURE AND REQUISITES OP THE CONTRACT. Where the principal debtor makes default in the payment of the notes, the sureties may enforce the payment of the mort- gage given to secure them and have the money applied on the debt. This is the law where the contract is more than a mere indemnity ; ^ but the surety cannot recover more from the principal debtor than he has paid for him.^ § 503. Creditor's Right op Substitution, — The creditor is entitled to the benefit of all pledges or securities given to, or in the hands of a surety of the debtor for his indemnity w^hether the surety is damnified or not, as it is a trust created for the better security of the debt and attaches to it.^ The creditor may reach this security, in equity, without even a judgment against the principal debtor,* The creditor after substitution has no higher right than the surety.^ Such indemnity mortgages create a trust and give the cred- itor an equitable lien on the land.^ When the surety obtains a mortgage to secure him against liability and also to secure his private debt, the creditor has the preference and must be first paid from the proceeds.'^ This right of the creditor to be substituted in the place of the surety continues until the liability of the surety is fixed by default of the mortgagor.^ Three joint indorsers of the paper of a manufacturing con- cern executed separate mortgages to a trustee under an agree- ment that if either should pay more than his proportion of the liabilities, he should recover from each of the others the shares they ought respectively to contribute. Held, that the ^ Hellams v. Abercombie, 15 S. Car. 117 ; McDaniel v. Austin, 32 S. Car. 601. 2 Kendrick v. Forney, 22 Gratt. (Va.) 748 ; Gieseke v. Johnson, 115 Ind. 308. 3 Roberts v. Colvin, 3 Gratt. (Va.) 358 ; Bank v. Robertson, 19 Ala. 798 ; Owens V. Miller, 29 Md. 144 ; Van Orden v. Durham, 35 Cal. 136 ; Bibb v. Martin, 22 Miss. 87 ; Haven v. Foley, 18 Mo. 130 ; Rice's Appeal, 79 Pa. St. 168 ; Green v. Dodge, 6 Ohio, 80 ; Osborn v. Noble, 46 Miss. 449, ^ Ray V. Proflfet, 15 Lea (Tenn.), 517. ^ Bush V. Stamps, 26 Miss. 463. « Paris V. Hulett, 26 Vt. 308. 'Ten Eyck v. Holmes, 3 Sand. Ch. (N. Y.) 428. 8Tilford V. James, 7 B. Mon. (Ky.) 336. THE DEBT SECURED. 539 agreement and mortgages secured the equality of payment be- tween the sureties, and also the payment of the indorsed notes to the holders who might join with the trustees in foreclosing the mortgage.^ § 504. Subrogation of Surety to the Rights op Cred- itors. — A surety who has paid the debt will be subrogated to all the rights of the creditor. Thus, where the mortgage of indemnity given the sureties was invalid, they were subrogated to the place of a judgment creditor who had made a levy.^ So a surety will have the benefit of a trust deed by which the debt was secured.^ So where the creditor holds security both from the debtor and the surety, he must hold all the first for the surety's benefit.* < § 505. Release of Security. — An indorser or surety hold- ing a mortgage for indemnity, whilst solvent, may, for a bona fide consideration, assign the mortgage ; but when insolvent his interest in the property is made to yield to the superior equity in favor of the creditor, for whom he is surety, and he cannot then dispose of the mortgage.^ If a surety releases the security taken for his indemnity from the principal debtor, before the creditor seeks to subject it to the debt, the creditor has no remedy to reach it.^ When the liability of the surety is con- tingent, as when he becomes an accommodation indorser, he has no right to insist on the application of the mortgage prop- erty, until his liability is fixed, and before it is fixed may re- lease the mortgage.'' But when the mortgage is conditioned to pay the indorsed notes at their maturity " to the holders of them," the mortgagee has no right to release the property, be- cause such a mortgage is a security for the payment of the ' Seward v. Huntington, 26 Hun (N. Y.), 217. ^ Hooe V. Barber, 4 Hen. & M. (Va.) 439. ^ Billings V. Sprague, 49 111. 509. *Bank i-. Maud, 18 Week. Rep. 312. See, also, Borland v. Muerer, 139 Pa. St. 513. *Woodville v. Reed, 26 Md. 179, 181. V* Stone V. Furber, 22 Mo. App. 498. 'Tilford V. James, 7 B. Mon. (Ky.) 336. 540 NATURE AND REQUISITES OF THE CONTRACT, notes, as well as an indemnity to the indorser, and it inures to the benefit of any one in whose hands the notes might be, and the mortgagee, therefore, has no power to release the mortgage/ And the holders of such notes are entitled to share in the property in proportion to their respective interests.^ After the surety's liability is fixed, the creditor has an equitable claim to the security, and can have the mortgage assigned to him.^ The application of the security for the benefit of third persons can only be had in equity when the mortgagee has not parted with it.* Article 4. Mortgages for Support. § 506. Preliminary. 1 511. Designation of Place where the 'i 507. The Nature of the Contract. Support Shall Be Furnished. §508. Construction of Contract— Com- ?512. Parol Evidence. pensation. §513. Trustee Process or Garnish- § 509. The Mortgagor Has the Right ment. of Possession. § 514. Settlement by Arbitration. 2 510. Alternative Condition of Pay- § 515. Bona Fide Grantee. ing Money or Supporting the § 516. Foreclosure. Mortgagee. §517. Redemption. § 506. Preliminary. — Mortgages for support are not inter- preted alike in all the States. Some holding that a deed, con- ditioned for the support of a person, is not a mortgage, and that the interest of neither party is assignable without the con- sent of the other. Chief Justice Bell says : " It is not every conveyance of land upon condition which is in equity regarded as a mortgage. Early definitions of mortgages are found, where no other conditional conveyances are regarded as mort- gages, but such as are made for the security of a loan or money. At another date we find the equitable doctrines as to mortgages extended to all cases where the conveyance is a security 1 Boyd V. Parker, 43 Md. 182. 2 Lewis V. Do Forest, 20 Conn. 427. 3 New Bedford Inst. v. Bank, 9 Allen (Mass.), 175 ; Thornton v. B?nk, 71 Mo. 221 ; Eastman v. Foster, 8 Met. (Mass.) 19; Riddle v. Bowman, 27 N. H. 236; Rice V. Dewey, 13 Gray (Mass.), 47. * Thrall v. Spencer, 16 Conn. 139 ; Post v. Bank, 28 Conn. 420. THE DEBT SECURED. 541 for any debt ; and the most modern notion is to apply the same doctrines to cases generally, where conditional deeds are made as a security for the performance of a contract. " But upon consideration it will be seen that this principle, though generally true, can have no application to any other contracts than such as by their non-performance create a debt, or a demand in nature of a debt, against the delinquent party. Wherever the condition, when broken, gives rise to no claim for damages whatever, or to a claim for unliquidated damages, the deed is not to be regarded as a mortgage in equity, but as a conditional deed at common law. It has the incidents of a mortgage only to a limited extent, and the party, if relieved by a court of equity from the forfeiture resulting from the non-performance of the condition, will not be relieved as in cases of a mortgage. It is not, however, intended to say that the same principle of justice which has led courts of equity to estab- lish the system of relief from forfeiture in cases of mortgages, will not entitle a party to analogous relief in cases where the design of the parties is to make a conveyance by way of security. The holder of a mortgage has been in equity re- garded as a trustee, holding the property for his own security first ; but any residue remaining after such security is obtained, for the benefit of the grantor ; and in a case of that kind no reasonable doubt can be entertained that the powers of courts of equity are ample to afford suitable relief. Such relief must be adapted to the nature of each case, and must be as various as the differing character of the contracts in question. The system of rules, adapted to do justice between debtor and cred- itor, may furnish analogies as to the modes of affording relief, but they are not likely to be suitable where the relations of the parties are different." ^ The mortgages for support are not looked upon as desirable contracts for the mortgagee. The wisdom of such contract is very questionable. The Son of Sirach denounces such transactions, as bringing disaster to the mortgagee. He says : " Give not thy son and * Bethlehem v. Annis, 40 N. H. 34, 39. 542 NATURE AND REQUISITES OF THE CONTRACT. wife, thy brother and friend, power over thee while thou livest, and give not thy goods to another ; lest it repent thee, and thou entreat for the same again. As long as thou livest and hast breath in thee, give not thyself over to any. For better it is that thy children should seek to thee than thou shouldst stand in their courtesy. In all thy works keep to thyself the pre-eminence : leave not a stain in thine honor. At the time when thou shalt end thy days and finish th}^ life distribute thine inheritance." ^ This same idea is set forth in the tragedy of Lear, when the fool confirms the opinion of the wise man of the Apocrypha : " Would I had two coxcombs and two daughters. If I gave them all my living, I'd keep my coxcombs myself." One of the evil consequences which seems almost invariably to attach itself to such arrangements is the distressing family discord and lawsuits which spring from such mortgages. When the land is given to a child wdth a mortgage back to the parent, courts should hold the child to the strict perform- ance of his part of the contract, and give the parent the right to recall the gift if he fails.^ § 507. The Nature of the Contract. — Whether such mortgage is assignable is a question answered differently by many courts. One line of decisions holds that such a contract is personal ; that the mortgagor cannot transfer such duty of support to third persons, and substitute them in his stead, without the consent of the mortgagee ; and if the mortgagor fails to superintend the fulfillment of this duty, he, thereby, makes default.^ The language of the condition, and the relationship of the parties to the deed, indicate generally that there is a personal trust reposed in the mortagor, and a personal obligation as- sumed by him, which he cannot assign over to third persons, substituting them in his place.* The mortgagor cannot assign ^ Ecclesiasticus, xxxiii, 19-2.3. 2 Soper V. Guernsey, 71 Pa. St. 219. 'Flanders v. Lamphear, 9 N. H. 201. * Bethlehem v. Annis, 40 N. H. 34 ; Eastman v. Batchelder, 36 N. H. 141. I THE DEBT SECURED. 543 his interest to a stranger and enable him to discharge the former obhgation, without the mortgagee's consent, and the mortgagee cannot assign his interest until after breach of condition.^ However, this rule is not general, for the Vermont court holds that a mortgage conditioned for the support of the mort- gagee admits of compensation, and where the mortgagor has conveyed his interest, the purchaser will be permitted to re- deem by making compensation for past support and by paying a specified allowance for the future support of the mortgagee.^ A mortgagee of land, with a mortgage conditioned for the support of himself and wife during their joint lives, and the life of the surviver, is a trustee for that purpose, and on his death, and condition of the mortgage broken, the court will appoint a trustee to appropriate the land for the purpose of the trust.* When the condition is to be performed by the mortgagor, his heirs, executors, or administrators, the duty cannot be transferred to a third person. If the mortgagor dies, then his heirs, executors, or administrators must perform the agreement, and the property thus held cannot be disposed of by the ad- ministrator to pay the debts of the mortgagor.* The parties must agree on definite terms. If their minds do not meet on some definite agreement, then no valid con- tract ever existed between them and they do not stand as mortgagee and mortgagor, or obligee and obligor.^ On the separation of husband and wife, the husband gave $400 to the wife's brother, who agreed to support the wife without cost to the husband, to save him harmless from all charges for her support, and secured the agreement by mort- gage. It was held that the fact that the mortgagor, after the husband and wife had been divorced, made a settlement with ' Bryant r. Erpkine, 55 Me. 153. ^ Austin V. Austin, 9 Vt. 420 ; Henry v. Tupper, 29 Yt. 358. ^Perkins v. Perkins, 60 N. H. 373, opinion by Allen, J. * Eastman v. Batchelder, 36 N. H. 141 ; Bryant v. Erskine, 55 Me. 153 ; Beth- lehem V. Annis, 40 N. H. 34. * French v. Case, 77 Mich. 64. 544 NATURE AND REQUISITES OF THE CONTRACT. her in which he accounted to her for $400, did not extin- guish the mortgage when it did not appear that she accepted the settlement in satisfaction of her claim for support.^ The mortgagor's interest may be sold on execution.^ § 508. Construction of Contract — Compensation. — Courts must construe contracts as made by the parties, in the light of all legitimate surrounding circumstances. Parties to such contracts for support may expressly stipulate that the support furnished them under the mortgage shall be provided by one personally, and if not so done that the estate shall be forfeited ; and this seems the better rule, for courts of equity may in their discretion grant relief from the forfeiture of an estate, conditional for the maintenance and support of a person, when the forfeiture is incurred, and the relief asked, by the original party to the con- tract.^ Equity will relieve from forfeiture on such terms as will provide a full compensation and indemnity for all damages sus- tained by reason of the breach of the contract. So the conditions in a deed for the support of the grantor during her life may be performed by another person than the grantee, when not otherwise stipulated ; hence, the owner of a mortgage executed by the grantee, under a decree of foreclosure, is entitled to the possession, on his performing the conditions, as against a tenant of the grantor.* A condition in a conveyance may be enforced by ejectment in Pennsylvania, but a consideration, even amounting to a covenant on the part of the vendor, cannot. A recovery by a father in ejectment, after breach, effectually revests the title in him as would a re-entry for condition broken.^ It is generally held that a court of equity may grant relief from the forfeiture of an estate conditioned for the maintenance and support of the grantee when the forfeiture was accidental 1 Coleman v. Whitney, 62 Vt. 123. ^ Bodwell Granite Co. v. Lane, 83 Me. 168. =* Austin V. Austin, 9 Yt. 420 ; Henry v. Tupper, 29 Vt. 358, 375 ; Joslyn r. Parlin, 54 Vt. 670. * Joslyn V. Parlin, 54 Vt. 670. ^Soper V. Guernsey, 71 Pa. St. 219. THE DEBT SECURED. 545 1 and unintentional, and not attended with irreparable injury. But it rests in the sound discretion of the court when relief shall be granted in this class of cases.^ Therefore the court will generally award compensation to the mortgagee for non- performance of the personal services.^ Such mortgage will be construed to be such support as is proper and suitable for the mortgagee according to his station in life ; and the amount required for such support can be ascertained with reasonable certainty. The granting of relief to the mortgagee rests in the sound discretion of the court, after the mortgagor makes default.^ §509. The Mortgagor Has the Right of Possession. — It is unreasonable to suppose that the mortgagor, under such a mortgage, should not hold possession, and it is held that such an agreement raises the implication that he should retain the pos- session, to enable him to fulfill the condition.* It is inferred, as a necessary implication, nothing appearing to the contrary, that the mortgagee is not to enter until condition is broken.^ So if the mortgagee takes a lease from the mortgagor of the same premises, the lease does not extinguish the mortgage, but is merely ancilliary to it.* § 510. Alternative Condition of Paying Money or Sup- porting Mortgagee. — When a mortgage is given with an alternative condition to support the mortgagee or to pay money, the mortgagor may have his election to retain posses- sion and support the mortgagee. After having chosen, he is then bound by his election, which is also conclusive upon the mortgagee,^ and the mortgage becomes security for the per- ^ Henry v. Tupper, 29 Vt. 358. ^ 2 Greenl. Cruise, 80 n ; Hoyt v. Bradly, 27 Me. 242. * Bryant v. Erskine, 55 Me. 153; Bethlehem v. Annis, 40 N. 11. 34; Rowell V. Jewett, G9 Me. 293 ; Henry v. Tupper, 29 Vt. 358, 375. * Hartshorn v. Hubbard, 2 N. H. 453 ; Dearborn v. Dearborn, 9 N. H. 117. ^Flandera v. Lamphear, 9 N. H. 201 ; Rhoades v. Parker, 10 N. H. 83; Brown v. Leach, 35 Me. 39, 41 ; Bryant v. Erskine, 55 Me. 153. « Powers V. Patten, 71 Me. 583. ' Bryant v. Erskine, 55 Me. 153. VOL. I. — 35. 546 NATURE AND REQUISITES OF THE CONTRACT. formance of the condition accepted by the mortgagor.^ Such property is not chargeable for the support of the mortgagee elsewhere, unless he was justified in leaving the mortgagor.^ A mortgage to secure the payment of $500 in five years, to be paid in furnishing the mortgagee support, does not give the mortgagor his election to pay in money.^ § 511. Designation of Place v^^here the Support Shall BE Furnished. — This class for support has often come before the courts, and it is generally held that when no place of performance is specified in the contract, the party to be sup- ported has the right to select his place of residence and place where he will receive the support contracted for, provided the party obligated to furnish the support is not thereby put to unreasonable and needless expenses.* Chief Justice Royce says: "The general rule is that where sup- port is secured by a conditional deed or mortgage, and no place is stipulated wh-er.e the person to be supported is to receive the sup- port, he has the right to be supported wherever he may choose to live, provided he does not impose any unreasonable exjDense on the party obligated to furnish the support ; and the condition of the deed is broken by declining to pay for the board of the party to be supported at a suitable place." ^ Where the sup- port is to be furnished on the premises, the mortgagee may have a separate room away and apart from the family, unless stipulated to the contrary.® He must pay for the support of the mortgagee at a suitable place, even though the mortgagee makes no demand for such support ; and if the mortgagor de- clines to pay for such support, he makes a default.'^ 1 Furbish v. Sears, 2 Cliff. C. C. 454 ; Lindsey v. Bradley, 53 Vt. 682. 2 Lindsey v. Bradley, 53 Vt. 682. ^ Hawkins v. Cleermont, 15 Mich. 511 ; Evans v. Norris, 6 Mich. 369. * Wilder v. Whittemore, 15 Mass. 262 ; Thayer v. Richards, 19 Pick. (Mass.) .398 ; Fiske v. Fiske, 20 Pick. (Mass.) 499 ; Hubbard v. Hubbard, 12 Allen (Mass.), 586; Petee «. Case, 2 Allen (Mass.), 546; Flanders v. Lamphear, 9 N. H. 201 ; Holmes v. Fisher, 13 N. H. 9 ; Rowell v. .Tewett, 69 Me. 293 ; Lamb V. Clark, 29 Vt. 273 ; Borst v. Crommie, 19 Hun (N. Y.), 209 ; Savings Bank v. Holt, 58 Vt. 166 ; Joslyn v. Parlin, 54 Vt. 670 ; 2 Wash. Real Prop. 66. => Young V. Young, 59 Vt. 342 ; Powers v. Mastin, 62 Vt. 433. 6 Hubbard v. Hubbard, 12 Allen (Mass.), 586. 'Pettee v. Case, 2 Allen (Mass), 546. THE DEBT SECURED. 647 He must provide a home according to the terms of the mort- gage. If the house decays he must furnish an equivalent.' If the mortgagor gives a bond conditioned to furnish suita- ble and appropriate rooms for the use of the obligee and his wife as long as it should be their pleasure to occupy the same, and in case they should become dissatisfied with the treatment of the obligor or his family, they were to have the privilege of going to reside with some other family, and the obligor was, at all times and places to furnish the support provided for them in the bond, the mortgagee and his wife have an option to reside with the mortgagor on the premises conveyed, or in some other place.^ §512. Parol Evidence. — The court in construing a con- tract for future support must construe such contract in the light of all legitimate surrounding circumstances. The intention of the parties to a contract is to be ascertained by applying its terms to the subject-matter ; and the admission of parol testi- mony for that purpose does not infringe upon the rule that makes a written instrument the proper and only evidence of the agreement contained in it.^ The place where the support is to be furnished not being named in the mortgage, and without explanation, it must be left as a fact to be inferred from the language used, and if the language is ambiguous, it is competent to consider the facts and circumstances developed upon the hearing as explanatory of that ambiguity.* § 513. Trustee Process or Garnishment. — The Vermont court says by Chief Justice Royce, that while an obligation for future support may not be a trusteeable debt, yet where the 'Gibson v. Taylor, 6 Gray (Mass.), 310. See, also, Jenkins v. Stetson, 9 Allen (Mass.), 128; Thayer v. Richards, 19 Pick. (Mass.) 398; Rhoades v. Parker, 10 N. H. 83 ; Fiske v. Fiske, 20 Pick. (Mass.) 499. ^ French v. Case, 77 Mich. 04. •■' Young V. Young, 59 Vt. 342. * 1 Addison on Contracts, 183 ; Gray r. Clark, 11 Vt. 58.1 ; Thompson v. Prouty, 27 Vt. 14 ; Joslyn v. Parlin, 54 Vt. 670 ; Young ?'. Y^)ung, 59 Vt. 342 ; Mason v. Mason, 67 Me. 646; Wales -y. Mellen, 1 Gray"(Mass.), 512. 548 NATURE AND REQUISITES OF THE CONTRACT. obligor has failed to support, and arbitrators have awarded a specific sum against him because of such failure, such award is a debt subject to attachment by trustee process ; and when the obligee in such case has brought his petition to foreclose the mortgage to secure his support, the obligor can deduct the amount for which he had been adjudged trustee/ But when the trustee executes his bond, conditioned for the support of the mortgagee or obligee during life, it is a debt which does not come within the trustee process, because the creditor has no greater right than the mortgagee, and can enforce preference of the bond in no other way than the obligee can ; and if the right can be attached then the creditor would be substituted in the place of the obligee, and be allowed to enjoy the mortgagee's right personally, which cannot be done.^ The obligation for support being of a personal character the property would not be subject to attachment by trustee process.' Such a contract does not come within a trustee process, because the trustee cannot be chargeable, as the thing or money due from him to the obligee or mortgagee depends upon a con- tingency. The duty to support is contingent upon the life of the party to be supported. And so the value of the support to be rendered is incapable of estimation and cannot be attached.' § 514. Settlement by Arbitration. — The parties may settle their differences by arbitration, and the arbitrators may construe the bond when one has been given. When an award is made in favor of the mortgagee in a defi- nite sum of money it is subject to attachment by the creditors of the mortgagee. Thus, arbitrators were chosen and passed upon all matters submitted to them, and gave an award of $203.87 for the past support and maintenance of the mort- gagee. It was held that such an award was a debt subject to attachment or garnishment, and judgment may be rendered * Dickinson v. Dickinson, 59 Vt. 678. * Briggs V. Beach, 18 Vt. 1 15. 3 Stanley v. Bobbins, 36 Vt. 422 ; Dickinson v. Dickinson, 59 Vt. 678, 682. See, also, Hastie v. Kelley, 57 Vt. 293 ; Marsh v. Austin, 1 Allen (Mass.), 235. * Dickinson v. Dickinson, 59 Vt. 678. I THE DEBT SECURED. 549 against the mortgagor as trustee of the mortgagee for the amount found due not exceeding the specified award. ^ But when it is conditioned in a bond that the parties may resort to arbitration to settle their rights, such agreement does not prevent an action for breach of condition by the mort- gagee, because an agreement for arbitration, according to the general principle, shall not deprive a party of his legal reme- dies.^ § 515. Bona fide Grantee. — The grantee in such convey- ances has no rights superior to any other grantee. So a con- veyance of land by an insolvent father to his son, in consider- ation of his son's promise to support and maintain his mother and father during their natural lives, is fraudulent and void as against existing creditors of the grantor, and the grantee is not entitled to protection against the creditors as a bona fide pur- chaser for value.^ No debtor, especially if insolvent, is permitted to tie up his property by a conveyance of this kind, in trust for the enjoy- ment of himself and family, so as to place it beyond the reach of his creditors.* § 516. Foreclosure. — The administrator of the grantee of a mortgage, given to secure an agreement for the support of the grantee and his wife during their Hves, is entitled to foreclosure of the mortgage for breach of condition, occurring before and since the grantee's death, although the grantee's widow is living, and does not appear in the suit.* But such mortgage cannot be foreclosed for the benefit of persons who had boarded the mortgagee at the request of the mortgagor.* In such mortgages it is impossible to determine in advance * Dickingon v. Dickinson, 59 Vt. 678, 681. * Hill V. More, 40 Me. 515. MVoodall V. Kelly, 85 Ala. 368. * Sandlin v. Eobbins, 62 Ala. 477 ; Benedict v. Renfro, 75 Ala. 121 ; Dow v. Jewell, 18 N. H. 340. ^ Marsh v. Austin, 1 Allen (Mass.), 235, ^ 'Daniels v. Eisenlord, 10 Mich. 454. 550 NATURE AND REQUISITES OF THE CONTRACT. what damages may result in the future from failure to perform a condition, and whenever complaint is made, the damages must be determined on the merits of each case. No court has any authority to make a decree in advance which shall limit the amount of recovery for such future violation.' And such an agreement without seal will be construed as a mortgage. And where it grants to them, the father and wife, " each and severally a life lien or dower or lien of maintenance for life," after breach the father alone may sustain an action against the mortgagor ; ^ or the widow may claim dower against the person claiming under the mortgagor.^ When the mortgagor gives a bond in a fixed sum, such sum will be regarded as a penalty, and the mortgage may be fore- closed, under some circumstances without redemption.* So it is not necessary to entitle the mortgagee to the full penalty of the bond as damages, especially if the condition has been sat- isfactorily carried out for some years, and no evidence is given of the actual injury resulting from the breach.^ Where the obligor has agreed to arbitration, and a specific amount has been awarded the obligee as damages for pas* sup- port, creditors of the obligee may garnish him or attach this sum ; and when in such case the obligee has brought his petition to foreclose the mortgage executed to secure his sup- port, the obligor can deduct the amount for which he had been adjudged trustee.® The obligor should have tendered money sufficient to pay both the award less the amount for which he was held trustee, and also the expense of the obligee's support, to the time of the tender.'^ Where a party receives a certain amount, in consideration of which he agrees to support a certain person during life, and at death bury her and erect a tombstone at her grave, and to secure » Tucker v. Tucker, 24 Mich. 426 ; 35 Mich. 365. ^^Gilson V. Gilson, 2 Allen (Mas?.), 115. ^Lanfair v. Lanfair, 18 Pick. (Mass.) 299. *Bresnahan v. Bresnahan, 46 Wis. 385. nVright V. Wright, 49 Mich. 624. 8 Dickinson v. Dickinson, 59 Vt. 678. 'Dickinson v. Dickinson, 59 Vt. 678, 682. THE DEBT SECURED. 551 the performance of this agreement, he executed a deed with a condition thereto attached, that the deed should be void if the agreement should be performed ; it was held that such a trans- action was a mortgage which could be foreclosed on failure to perform the agreement.* §517. Redemption. — The granting of relief in such forfeit- ure is in the sound discretion of the court. If the forfeiture has been accidental or unintentional, and not attended with irre- parable injury, the court will allow redemption,^ and the amount to be paid is susceptible of definite calculation, and the breach is not gross and willful.^ Cases of this character should be viewed by the court with something of distrust, and relief afforded the mortgagor with more reserve and circumspection than in ordinary cases of col- lateral duties. While it may not be necessary in all cases that it shall appear that the forfeiture arises from surprise, accident, or mistake, yet relief should not be granted when the omission was willful and wanton, or attended with suffering or serious inconvenience to the grantee or mortgagee, or there is any good ground to apprehend a recurrence of the failure to perform.* ^Cook V. Bartholomew, 60 Conn. 24. ' Henry v. Tapper, 29 Vt. 358, 375. See, also, Bryant v. Erskine, 55 Me. 153 ; Hoyt v. Bradley, 27 Me. 242 ; Bethlehem v. Annis, 40 N. H. 34, 43. 3 Rowell V. Jewett, 69 Me. 293. * Henry v. Tupper, 29 Vt. 358, 375. CHAPTER XIV. the consideration. Article 1. A Valid Consideration. ? 518. Consideration as Between the § 528. Parties. 2 519. Explanation of the Real Con- g 529. sideration. § 520. Sufficient Consideration. I 521. Statutory Provisions. ^ 530. ? 522. Indemnity. l 531. § 523. Truth of the Recitals. § 524. Extension of Time. § 532. § 525. Adequate Consideration. § 533. ? 526. Relationship. § 527. Purchaser as Assignee in Equity § 534. of the Debt. ^ 535. Settlement of Disputed Claims. Money Subject to a Devise or Bequest — Giving Notes by Remaindermen. Pre-existing Debts. Substitution of New Mortgage and Notes. Wife's Separate Property. Compromise among Members of Family. Passing of the Consideration. Accommodation Mortgages. § 518. Consideration as Between the Parties. — As be- tween the parties and their representatives, the consideration named in a mortgage does not determine the amount of a mortgage. Judge Walker says that the consideration in a mort- gage is not determinative of the amount of the mortgage, nor is it, when of record, notice of the amount due upon it, nor a limitation of the amount secured thereby. " A mortgage given to secure the sum named in the consid- eration clause may be half paid a week after it is executed, so that it will stand as security for only half the consideration named, or it may be one of long standing, with a large accu- mulation of interest upon it, making the amount due upon it double the consideration named in the mortgage, so that it would stand as security for double the consideration named." * And it is generally held that the real consideration of deeds and mortgages may be shown, although different from 1 Keyes v. Bump, 59 Vt. 391, 398. 652 THE CONSIDERATION. 553 that expressed in the instrument. The consideration named in the instrument is never conclusive. It is open to inquiry.^ It is not essential, even, that any amount be named in the consideration clause of the mortgage.^ It is settled that the sum or amount named as the considera- tion is of no moment, as the mortgage stands as a security for the amount of liabilities or indebtedness, whatever the sum may be, and it is not essential that any amount should be named in the security.^ When the conveyance nor the agreernent to pay was in- tended to be absolute, a creditor acquires no lien upon the land by virtue of such arrangement to secure the payment of his claim.* In the absence of direct evidence of the consideration — the mortgagor having absconded and the mortgagee being dead, it will be inferred from the fact of the indebtedness from the mortgagor to the mortgagee at the date of the mortgage, and its continuance and increase, that the mortgage was given to secure such indebtedness and such future indebtedness as might arise.^ § 519. Explanation of the Real Consideration. — The consideration stated and acknowledged in a deed or mortgage, is, however, presumed to be the real one until the contrary is proved.^ While the acknowledgment of a consideration in a deed cannot be contradicted for the purpose of defeating or affecting the title conveyed,'^ yet it is always competent to prove by parol what the real consideration was in an action upon the cove- nants.^ And where a note and mortgage were executed to the * Stevens v. Griffith, 3 Vt. 448 ; Wood v. Beach, 7 Vt. 522. * Robinson r. Williams, 22 N. Y. 380. * Miller ik Lockwood, 32 N. Y. 293. * Marshall v. Blass, 82 Mich. 518. *Lanahan v. Lawton (N. J.), 23 Atl. Rep. 476. * Belden v. Seymour, 8 Conn. 310 ; BayUss v. Williams, 6 Coldw. (Tenn.) 440 ; Clements r. Landnim, 26 Ga. 401. 'M'Crea v. Purmort, 16 Wend. (N. Y.) 460; Irvine v. McKeon, 23 Cal.475; ^ Wilkinson v. Scott, 17 Mass. 257. * Rhine v. Ellen, 36 Cal. 362 ; Pierce v. Brew, 43 Vt., 295 ; Lawtun v. Buck- 554 NATURE AND REQUISITES OF THE CONTRACT. same party and bore the. same date, and the mortgage recited that it was given to secure a sum equal to the amount of the note, it will be presumed that the note is secured by the mort- gage.^ Notes and mortgage of a husband and wife on his land were executed. The husband died and the wife as administratrix, after such notes and mortgage were barred by the statute of limitations, gave a new mortgage and notes to secure the prior mortgage and also to secure notes given by her ; it was held that, as to the husband's mortgage, the consideration was void.^ § 520. Sufficient Consideration. — A valuable considera- tion is one that is either a benefit to the party promising or some trouble or prejudice to the party to whom the promise is made.^ Any damage, or suspension, or forbearance of a right, will be sufficient to sustain a promise.^ So any benefit to the mort- gagor or to a stranger, or damage or loss to the mortgagee, rendered or sustained at the request of the mortgagor, is suffi- cient.^ A person obtaining negotiable paper, in good faith, and for a valuable consideration before maturity, is protected in its acquisition, and the mortgage given in such case is protected equally with the note.® Where there is no consideration, the mortgage may be ingham, 15 Iowa, 22 ; Harper v. Perry, 28 Iowa, 63 ; Hannan v. Oxley, 2.3 Wis. 519 ; Penna. Manf. Co. v. Neel, 54 Pa. St. 9 ; Huebsch v. Scheel, 81 111. 281 ; Paige V. Sherman, 6 Gray (Mass.), 511 ; Rabsuhl v. Lack, 35 Mo. 316 ; Morris Canal v. Ryerson, 3 Dutch. (N. J.) 467 ; Hubbard v. Allen, 59 Ala. 283. But see Mendenhall v. Parish, 8 Jones L. (N. Car.) 106. > Bailey v. Fanning Orphan School (Ky.), 14 S. W. Rep. 908. * Rosenberg v. Ford, 85 Cal. 610. ^ Jones V. Ashburnham, 4 East, 455 ; Lent v. Padelford, 10 Mass. 236. * Seaman v. Seaman, 12 Wend. (N. Y.) 381 ; Morton v. Burn, 2 Nev. & P. 297. * Parsons v. Clark, 132 Mass. 569 ; Magruder v. Bank, 18 Ark. 9; Sykes v. Lafferry, 27 Ark. 407 ; Popple v. Day, 123 Mass. 520 ; Harlan v. Harlan, 20 Pa. St. 303. ^Barnum v. Phenix, 60 Mich. 388. THE CONSIDERATION. 555 released upon showing to that effect. Thus, when a married woman gave a mortgage to a party, from fear that her husband would induce her to mortgage her separate property to secure his creditors, such mortgage will be cancelled when this fact is shown.^ The surrender of a vendor's lien is a valuable consideration for a mortgage.^ The omission from the description of a note in a mortgage of a nugatory clause in the note does not constitute variance.^ And a mortgage will protect a note intended to be covered by it, though by mistake or omission it is misdescribed, and the rule applies as against an attaching creditor of the mort- gagor, if there is no substantial difference between the note described and the one intended.* The acceptance of a note for $8,000, secured by a mortgage, for an unsecured debt of $9,922, is a good accord and satisfac- tion, and hence such mortgage is given for a valuable consider- ation.^ And where one of the considerations for a note and mortgage was certain land which the mortgagee agreed to con- vey, and the mortgagor was put into immediate possession thereof, there was no failure of consideration because the mort- gagee did not execute a deed, the same not having been de- manded, or because the land was subsequently forfeited for non-payment of taxes, since the forfeiture was in consequence of the mortgagor's default.^ § 521. Statutory Provisions. — At the time a note was made and a mortgage executed, the statute provided, as it still pro- vides, that no estate should be " incumbered by an agreement, unless it is inserted in the condition of the conveyance, and made part thereof, stating the sum of money to be secured or other thing to be performed ;"^ the indemnifying clause in the 'Colt V. McConnell, 116 Ind. 249. 'Lane v. Logue, 12 Lea (Tenn.), 681. 'Hoskins v. Cole, 34 111. App. 541. ^Denser v. Walkup, 43 Mo. App. 625. *Postf. Bank, 138 111. 559. ^ «Choate v. Kimball (Ark.), 19 S. W. Rep. 108. ' Rev. Stat, of N. H., ch. 131, sect. 2 ; Gen. Laws, ch. 136, sect. 2. 556 NATURE AND REQUISITES OF THE CONTRACT. condition of two mortgages given by the mortgagor was in one, " and hold the said H. B. harmless from all liabilities where he is bound for me ;" in the other, " also shall hold the said H. B. harmless from all loss, cost, and expense from all liabilities he may be under by reason of signing notes, bonds, receipts, and other papers with me ;" it was held sufficient to include a liability incurred by signing as surety for the defend- ant a note and a loss from the payment of the same before the mortgages were made, although the particular note is not de- scribed in the condition of the mortgages ; and the note may be identified, by extrinsic evidence, as one for the payment of which the mortgages were intended to secure.^ So a condition in a mortgage to indemnify the mortgagee against loss by reason of his having indorsed for the mortgagor certain notes is a sufficient consideration, and parol evidence may be admitted to show what notes indorsed by the mortgagee were intended to be secured by the mortgage.^ So where a note or obligation is offered in evidence in con- nection with a mortgage, it is not necessary that all the par- ticulars of it should be specified in the condition in order to identify it as the note intended to be and actually secured by the mortgage. A general agreement with the description is sufficient, and parol evidence may be introduced to further identify it.' The condition in the mortgage was the payment of $5,000, according to a bond for that sum of the same date with the mortgage. The condition of the bond was for the payment to the mort- gagee or obligee of all notes, drafts, or acceptances " made, indorsed, drawn, or accepted, by said Willard to said bank," on or before a date named, with interest, cost, and damages, and for indemnifying the bank against loss from discounting the notes, drafts, and acceptances. The description of the ' Barker ;;. Barker, 62 N. H. 366. ''Benton v. Sumner, 57 N. H. 117; Bassett v. Bassett, 10 N. H. 64; Bank v. Willard, 10 N. H. 210 ; Boody v. Davis, 20 N. H. 140. ^Melvin v. Fellows, 33 N. H. 401. THE CONSIDERATION. 557 indebtedness or the liability indemnified against, was held sufficiently certain/ So in Maryland, under the statute,^ no mortgage is valid except as between the parties, unless there be indorsed thereon an oath or affirmation of the mortgagee that the consideration in said mortgage is true and bona fide as therein set forth. The want of such affidavit is fatal to the validity of the mortgage, when assailed by interested third parties.^ And when this affidavit is made by an agent, it must show it or the mortgage will be invalid.* One claiming under a mortgage with notice stands in the same position as the mortgagor.^ § 522. Indemnity. — A desire of a debtor to indemnify his surety on a promissory note against loss which would occur if the surety should be compelled to discharge the debt is a suf- ficient consideration.^ To indemnify a mortgagee against loss or damage is a suffi- cient consideration for a mortgage.^ A liability to loss or damage on the part of the mortgagee is a consideration for a mortgage given to secure him against it, as much so as a direct benefit to the mortgagor, of whatever nature it may be.* § 523. Truth of the Recitals. — A statement of a larger amount in one of the notes than was really due does not avoid the mortgage as to a purchaser without actual knowledge. Definiteness or certainty as to the amount in the statement was unnecessary.^ But when the securities state neither a definite amount nor any such data respecting it as would put any one interested in ' Benton v. Sumner, 57 N. H. 117. "^ Code of 1860, art. 24, sect. 29. ^ Cockey v. Milne, 16 Md. 200. *Milholland v. Tiffany, 64 Md. 455. ^Phillips V. Pearson, 27 Md. 242. « Williams v. Silliman, 74 Tex. 626. 'Simpson v. Robert, 35 Ga. 180. *Haden v. Buddensick, 4 Hun (N. Y.), 649. ^Miller v. Rouser, 25 111. App. 88 ; Adams v. Niemann, 46 Mich. 135. 558 NATURE AND REQUISITES OF THE CONTRACT. the inquiry upon the track, leading to its discovery, then the consideration is invahd/ Both parties to a mortgage have a right to show the truth as to the consideration, no matter what may be the recitals." Because a mortgage is given for an amount greater than the real debt does not make it invalid;^ § 524. Extension of Time. — Extension of time of a mort- gage to a mortgagor is a sufficient consideration to support a mortgage given by a third person, and covenants by him to pay it.* Giving of future time, however short for the payment of an existing debt, is a valuable consideration,^ and becomes bind- ing wdiere a mortgage is delivered ; ^ but if no extension of time is given the mortgagee is not a bona fide purchaser for a valu- able consideration as to third parties.^ § 525. Adequate Consideration. — The recital of the pay- ment of one dollar, the receipt of which is acknowledged, as a consideration of a mortgage, is sufficient. A valuable consid- eration, however small or nominal, if given or stipulated for in good faith, is, in the absence of fraud, sufficient.* Parties, acting in good faith, must be left free to determine for themselves the adequacy of the consideration upon which disposition of property may be made, and whether their bar- gains and contracts are discreet, profitable, or unprofitable.* ' Bank v. Godfrey, 23 111. 604 ; Battenhausen v. Bullock, 11 111. App. 665 ; Bullock ?'. Battenhausen, 108 111. 28. 2 Leach v. Shelby, 58 Miss. 681; Wimberly v. Wortham (IMiss.), 3 South. Rep. 459. ^ Nazro r. Ware, 38 Minn. 443 ; Kcycs v. Bump, 59 Vt. 391. Miller v. Rouser, 25 111. App. 88 ; Adams v. Niemann, 46 INIich. 135. * Forrester v. Parker, 14 Daly (N. Y.), 208. 5 Thames v. Rembert, 63 Ala. 561 ; Sullivan Sav. Inst. v. Young, 55 Iowa, 132 ; Gary v. AVhite, 52 N. Y. 138 ; Schumpert v. Dillard, 55 Miss. 348 ; Gil- christ V. Gough, 63 Ind. 576 ; Phelps v. Fockler, 61 Iowa, 340. « Pennsylvania Coal Co. v. Blake, 85 N. Y. 226; Bank v. Wallace, 45 Ohio St. 152 ; Martin v. Nixon, 92 Mo. 26. ^ First Nat. Bank v. Ins. Co. (Ind.), 28 N. E. Rep. 695. * Boiling V. Munchus, 65 Ala. 558. 'Judge t;. Wilkins, 19 Ala. 765. I THE CONSIDERATION. 559 If there be no fraud or imposition, the least consideration will suppoii; a contract deliberately made with full knowledge of all the circumstances.^ But recitals in a mortgage may be contradicted in Alabama, by parol evidence.^ A recital in the mortgage of a consideration of one dollar, the receipt of which is acknowledged by the mortgagor, jwima facie shows a valuable consideration, and its actual payment.^ § 526. Relationship. — Relationship is a sujERcient consid- eration. Thus, the relationship existing between father and daughter is sufficient to uphold a mortgage given by her to him as security for her deceased husband's debts, though they could not have been enforced against her. This consideration would uphold the mortgage as a conveyance of her interest in the estate and make it valid.* § 527. Purchaser as Assignee in Equity of the Debt. — A purchaser at a foreclosure sale is, in equity, the assignee of the mortgage foreclosed, and a release of this equity is a suffi- cient consideration for a promise to pay. And a conveyance of land by a purchaser at a foreclosure sale to a person who had a contract for the land before sale, is consideration for a mortgage whether or not the latter was made a party to the foreclosure suit.^ § 528. Settlement of Disputed Claims. — The settlement of a disputed claim, in good faith, is a legal consideration for a promise.® If the account constitutes even a doubtful claim, it may fur- nish a good consideration to support the settlement and subse- quent promise based in part thereon.^ So a release of a •Train r. Gold, 5 Pick. (Mass.) .380; Hubbard v. Coolidge, 1 Met. (Mass.) 03 ; Haijjjh v. Brooks, 10 Ad. & El. 309. ^ Griinball v. Masfin, 77 Ala. 553. ^ Lawrence v. McCalmont, 2 How. (U. S.) 426. ' Ray V. Hallenbeck, 42 Fed. Rep. 381. ^ Wii.son V. White, 84 Cal. 2.39. ^ Wahl V. Barnum, 116 N. Y. 87. ' Grans v. Hunter, 28 N. Y. 394. 560 NATURE AND REQUISITES OF THE CONTRACT. plausible or colorable claim by settlement between the parties constitutes a good consideration.^ Accordingly a mortgage given for settlement of a disputed claim is a good considera- tion, and therefore valid.^ So where a settlement of accounts has been made by parties competent to contract, and a promissory note executed by one to the other to secure an amount covering both the balance found to be due and an additional sum for forbearance, and a mortgage has been made to secure the notes, and no fraud or unfair dealing on the part of the mortgagee is shown, such settlement is a sufficient consideration for the notes.^ § 529. Money Subject to a Devise or Bequest — Givinu Notes by Remaindermen. — A testator by his will gave his widow a life estate in a tract of land, with power to sell and dispose of the same for her own use and benefit, and what might remain unexpended at her death, to his two sons. During her life the widow sold the land, and shortly after made certain loans of money to the two sons, secured by mortgage, and she admitted in her lifetime that the money she let one of the sons have ^vas his money. It was held that the sale of the land for cash, and the subsequent loan of the money, made a prima facie case that the money loaned was that derived from the sale, and the notes should therefore bo cancelled.* § 530. Pre-existing Debts. — One's own debt, though past due, is always a sufficient consideration to support his mort- gage to the creditor to secure the debt, and, as to parties and privies, is as effectual as if made upon an adequate new con- sideration. No cases can be found in which a man's own debt has been ruled to be an insufficient consideration between him and his creditor, for a mortgage or other security received by tlie creditor from the debtor.^ And in many States 1 White V. Hoyt, 73 N. Y. 505. ''ZoebiFch v. Von Minden, 120 N. Y. 406. ^MrLane ?'. Piagorio, 24 Fla. 71. *Pritchard v. Walker, 121 111. 221 ; 22 111. App. 286. 5 Turner v. McFee, 61 Ala. 468 ; Machette v. Wanless, 1 Colo. 225 ; Paine v. Benton, .32 Wis. 491 ; Smith v. Worman, 19 Ohio St. 145 ; Kranert v. Simon, 65 111. 344. THE CONSIDERATION. 561 a trustee or mortgagee, whether for old or new debts, is a pur- chaser for a valuable consideration.^ It is said that whatever distinction there may have been formerly supposed to exist be- tween a mortgage to secure a past indebtedness, or one made at the time of execution as to consideration, has been exploded.^ But many courts hold that a pre-existing debt is not suffi- cient consideration to make the mortgagee a purchaser for value so as to protect him against the rights of third persons.^ It is held, in order to protect the mortgagee as jDurchaser against prior equities, he must have received some new con- sideration, or must have relinquished some security for a pre- existing debt due him,* and this seems to be the weight of authority. A pre-existing indebtedness repels the idea that the mortgagee is a bona fide party to the transaction. He parts' with nothing, nor does he relinquish any security or incur any liability upon the faith of the mortgage.^ But a debtor may give a bona fide security for any claim; against him.^ And a mortgage to secure a cash loan and a pre-existing debt is not given simply to secure a pre-existing debt, but is based on a valid present consideration.^ In Illinois a mortgage given for a pre-existing debt, and the mortgagee not surrendering the evidence of such debt, is invalid as to the rights of third parties, and will not entitle the mortgagee to protection against prior equities.^ ' McDowell V. Lockhart, 93 N. Car. 191 ; Evans v. Pence, 78 Ind. 4.39 ; Bafe- cock V. Jordan, 24 Ind. 14 ; Jackson v. Reid, 30 Kan. 10. 2 Potts V. Blackwell, 4 Jones Eq. (N. Car.) 58. ' Pancoast v. Duval, 26 N. J. Eq. 445 ; Dickerson v. Tillinghast, 4 Paige (N. Y.), 215; Coddington v. Bay, 20 Johns. (N. Y.) 637; Morse v. Godfrey, 3 i^tory, C. C. 364, 389 ; De Lancey v. Stearns, 66 N. Y. 157 ; Phelps v. Fockler, 61 Iowa, .340; First Nat. Bank v. Ins. Co. (Ind.), 28 N. E. Rep. 695; Edwards V. McKernan, 55 Mich. 520, 523. ^Pickett V. Barron, 29 Barb. (N. Y.) 505; Spurlock r. Sullivan, 36 Tex. 511. See, also, Schumpert r. Dilkrd, 55 Miss. 348; Withers r. Little, 50 Cal. 370; Lawrence r. Clark, .36 N. Y. 128. ^ Woodburn ?;. Chamberlin, 17 Barb. (N. Y.) 446 ; Van Slyck v. Foote, 10 Hun (N. Y.), 554; Thompson r. Van Vechten, 27 N. Y. 568. « Wright V. Towle, 67 Mich. 255 ; Jordan v. White, 38 Mich. 253. ^ Branch v. Griffin, 99 N. Car. 173 ; Bank v. Bridgets, 98 N. Car. 67. ^Metropolitan Bank v. Godfrey, 23 111. 004. VOL. I.— 36 562 NATURE AND REQUISITES OF THE CONTRACT. But SO far as negotiable paper is concerned, an indorsee taking it before maturity as payment or security for a pre- existing debt is a holder for value, and takes it free from latent defenses on the part of the maker/ Judge Drummond says that a mortgagee of real estate in Illinois is a bona fide purchaser, even though the mortgage was given to secure a pre-existing debt ; "^ this doctrine, in the absence of fraud, is certainly correct. While the Iowa rule is that a mortgage for a pre-existing debt without any additional consideration is junior to a subse- quent mortgage,^ yet where the time of payment of the pre- existing debt is extended for a definite time, and a mortgage is taken to secure the debt as thus extended, a new considera- tion enters in which gives the mortgage priority according to its date and record.* In New Jersey, where a married woman voluntarily joins with her husband in executing a mortgage on her own real estate, to secure a pre-existing debt of her husband, a new or independent consideration is not required.^ § 531. Substitution op New Mortgage and Notes. — Where one surrenders a mortgage and the accrued interest thereon, and takes a new mortgage, this is a mortgage for a valuable consideration.^ So a mortgage duly delivered and recorded is not affected by the substitution of new notes of the same amount and terms as the original notes secured thereby .'^ § 532. Wife's Separate Property. — In some of the States a wife may mortgage her property in the same manner as her husband can his. And in other States where money is bor- rowed by the wife, or by the husband and wife, or by either ' Doolittle V. Cook, 75 111. 354 ; Manning v. McClure, 36 111. 490. 2 Partridge v. Smith, 2 Biss. C. C. 183, 187. 3 Phelps ?;. Fockler, 61 Iowa, 340. *Koon V. Tramel, 71 Iowa, 132. * Lomerson v. Johnston, 44 N. J. Eq. 93. « Constant v. University, 111 N. Y. 604. ' Reid V. Abernethy, 77 Iowa, 438. THE CONSIDERATION. 563 of them, for the purpose of discharging a valid lien existing on the wife's separate property, or for a purpose which inures to its benefit or protection, the mortgage is valid/ And the wife may relinquish her dower right in her hus- band's property, without any pecuniary consideration.^ § 533. Compromise Among Members of Family. — A com- promise among members of a family of disputed claims of family property is a valid consideration for contracts entered into in effecting a settlement ; and a mortgage may be given by one of the parties to secure his agreement to such com- promise.^ § 534. Passing of the Consideration. — The consideration need not pass at the time of the execution of the mortgage. Thus, a creditor gave the debtor time upon the debt, provided that he would secure it by a mortgage upon property executed by a third person. This was a legal consideration for the mort- gage." A mortgage given to secure past debts is for a past consider- ation, and is valid.^ So a personal engagement by the mortgagee to raise the money in the future is a good consideration for a mortgage." Such consideration passes when the money is procured or the service performed.'' An agreement to purchase land and then to mortgage it is express, and is a specific lien, and the consideration is valid.^ Whenever the mortgagee agrees to raise money to pay the > Noland v. State, 115 Ind. 529. ^ McLane v. Piaggio, 24 Fla. 71. * Adams v. Adams, 70 Iowa, 253. See, also, Stapilton v. Stapilton, 1 Atk. 2 ; Zane v. Zane, 6 Munf. (Va.) 406 ; Paris v. Dexter, 15 Vt. 379. *]Magruder v. Bank, 18 Ark. 9. ■_ ^ Duncan v. Miller, (M Iowa, 223, 226 ; Moore v. Fuller, 6 Oreg. 272 ; Wright wSm "• Bundy, 11 Ind. 398. HB * Stevenson's Appeal, 68 Pa. St. 212. ^H , 'Johnson v. MeCurdy, 83 Pa. St. 282 ; Schafer v. Eeilly, 50 N. Y. 61. ^H nVright V. Shumway, 1 Bias. C. C. 23 ; Fleming v. Harrison, 2 Bibb (Ky.), ^^^_^ 171 ; Longworth v. Taylor, 1 McLean, C. C. 395. ■ 564 NATURE AND REQUISITES OF THE CONTRACT. mortgagor, or has negotiated bonds and performed his agree- ment, then the consideration passes and is vaHd/ By an express written agreement to make a mortgage, a lien is created on the land, in equity, on the principle that what has been agreed to be performed shall be performed, and the transaction is valid.^ § 535. Accommodation Mortgages. — The indorsement of a note by one not a party to it, and the execution of a mort- gage by the indorser to secure it, must have a new considera- tion, if the indorsement be made, and the mortgage executed after the making of the note. But if they are contemporaneous with the making of the note, the consideration for the note is sufficient. That is, in States where a pre-existing debt is not regarded as a valid consideration, if the debt of a third person, which is secured by assigning the mortgage, be already incurred there must be a new consideration.^ When a mortgage is made for the accommodation of another, it is not material that it be negotiated in the precise manner contemplated, when the interest of the party making it be not j)rejudiced.* Article 2. Wa7it of Consideration. I 536. Failure of Consideration. § 541. Estoppel of Mortgagor. g 537. Gift. § 542. Placing the Note and Mort- § 538. Agent's Acts. gage in Escrow. § 539. Written Contract. § 543. Parol Evidence. I 540. Seal. § 53 G. Failure of Consideration. — If the consideration fails, then the mortgage becomes invalid. Thus, a note and mortgage given for a fixed sum and payable absolutely, but with no consideration except an agreement to furnish goods ' Wood V. Condit, 34 N. J. Eq. 434 • Koberts v. Bauer, 35 La. Ann. 453. ^Hankey v. Vernon, 2 Cox, 12. ^ Davidson v. King, 51 Ind. 224. * Jacobsen v. Dodd, 32 N. J. Eq. 403. THE CONSIDERATION. 565 which the mortgagee afterward failed to furnish cannot be enforced against the mortgagor as tlie consideration has failed/ A failure of consideration makes the mortgage invalid.^ So when a mortgage is given for money to be advanced, but which is never paid, it is invalid.^ When made for future advances it is good only for ad- vances made.* And the mortgage debt may be questioned by a third person having an interest.^ Where a second mortgage was executed by a mortgagor to the holder of the first mortgage, proof is admissible to show that it was given as the payment of the interest due on the first.^ A purchaser received deeds from one having no title, and took possession of the land ; it was held that he received some consideration for a note and mortgage given on the land to secure a deferred payment, and that there was not a total failure of consideration for such note/ And where mortgages for $18,000 are given on an accounting which shows a balance due the mortgagee of at least $25,000, and the mortgagor for three years, until his death, pays the interest on and acquiesces in the mortgages, the heirs of the mortgagor have no standing to dispute the validity of the mortgages for want of consideration/ § 537. Gift. — A gift is a good consideration, and the grantee has a good title as against the grantor and any subse- quent grantee or mortgagee under him, or any subsequent creditor.^ ^ Fisher v. Meister, 24 Mich. 447. =* Smith V. Newton, 38 111. 230; Conwell v. Clifford, 45 Ind. 392; Brown v. Witts, 57 Cal. 304. 3 McDowell V. Fisher, 25 N. J. Eq. 93. * Marvin v. Chambers, 12 Blatchf. C. C. 495. * Mossop V. His Creditors, 41 La. Ann. 296. See, also, Dwyer v. "Woulfe, 39 La. Ann. 423. * Blair v. Carpenter, 75 Mich. 167. 'Sunderland v. Bell, .39 Kan. 21. » Howell V. Griffiths (N. J. Ch.), 22 At. Rep. 928. " Gall V. Gould, 40 Mich. 515 ; Page v. Kendrick, 10 Mich. 300 ; Keeler v. Ullrich, 32 Mich. 88. k 666 NATURE AND REQUISITES OF THE CONTRACT. However, a grantee, without notice, in a duly recorded deed, the sole consideration for which was love and affection of the grantor, cannot hold the land as against a prior unrecorded deed of the same property for a valuable consideration.^ In general a mortgage may be sustained against everybody but existing creditors, although it was intended merely as a gift.^ When executed and delivered, it is as valid as if it was based upon a valuable consideration, and is not open to the objection that it is a voluntary executory agreement, but may be enforced according to its terms as an executed conveyance.^ However, when a mortgage is given without any valuable con- sideration, questions can arise as to its delivery and recording, which could not otherwise be considered,* and when it is shown that there was no consideration of any kind, the mortgage is invalid.^ § 538. Agent's Acts. — A purchaser of a bond and mortgage takes them subject to the equities between the original parties ; it is only where the owner has, by his own affirmative act, con- ferred the apparent title and absolute ownership of a non-nego- tiable chose in action upon another, on the faith of which it has been transferred ^or valuable consideration that he is pre- cluded from asserting his real title. Thus, a wife and husband executed to a party a bond and mortgage, simply as an ac- commodation, to be used as collateral security for a loan, which the mortgagee sold to another party. It was held that the mortgagee or vendor of the instruments, having no authority to sell the bond and mortgage, conveyed no title to the vendee, and the bond and mortgage were declared void.^ So if the agent had used them to secure a judgment against other persons, ' Aubuchon v. Bender, 44 Mo. 560. ' Campbell v. Tompkins, 32 N. J. Eq. 170 ; Peabody v. Peabody, 59 Ind. 556. ^Brooks?'. Dalrymple, 12 Allen (Mass.), 102; Bucklin v. Bucklin, 1 Abb. App. Cas. (N. Y.) 242. ^Brifjham v. Brown, 44 Mich. 59. 5 Colt V. McConnell, 116 Ind. 249; Brooks v. Owen (Mo.), 19 S. W. Rep. 723. * Davis V. Bechstein, 69 N. Y. 440. THE CONSIDERATION. 567 it being a misappropriation of them, it renders them invalid.^ So where an agent empowered to take an assignment to his principal of certain securities and receive a conveyance to the same land in exchange for securities by such principal, takes a conveyance of the land to himself, he has no beneficial interest therein, but is a naked trustee ; and the one who, being charge- able with notice of the facts, takes a mortgage of such land, executed by such agent in his own name as security for money loaned him for his own use, cannot enforce such mortgage as against the principal, unless the transaction is subsequently ratified by the principal.^ § 539. Written Contract. — A written contract, such as a mortgage, imports a consideration, and casts the burden upon him who denies it, to show the contrary f and it is a presump- tion of fact that the sum mentioned in the mortgage is the con- sideration therefor, correctly stated ; and very convincing proof is required to rebut this presumption.* § 540. Seal. — At common law a seal implies a consideration, but many of the States have abolished the seal, and many others have destroyed its meaning so far as the admission of parol evidence is concerned to explain the instrument, and to establish the amount due upon it. At common law parol evi- dence is not allowed to show a sealed instrument void for want of consideration.^ In Illinois, any deed, bond, note, covenant, or other instru- ment under seal, except penal bonds, may be sued and declared upon as heretofore, or in any form of action in which such in- strument might have been sued upon if it had not been under seal.^ This statute abolishes the distinction between contracts under seal and those not under seal, except penal bonds, as far • Graver v. Wilson, 14 Abb. Pr. (N. Y.) N. S. 374. ^ Bank v. Morley, 19 Wis. 62. See, also. Young v. White, 7 Beav. 500 ; Kingston v. Kincaid, 1 Wash. C. C. 454. ^Bank v. McLeod, 67 Iowa, 718. MViswall V. Ayres, 51 Mich. 324. *Farnnm ?'. Burnett, 21 N. J. Eq. 87 ; Maxwell v. Hartmann, 50 Wis. 060 ; Cal- kins t'. Long, 22 Barb. (N. Y.) 97 ; Parker v. Parmele, 20 Johns. (N. Y.) 130, 134. •Rev. Stat., ch. 110, sect. 19. 568 NATURE AND REQUISITES OF THE CONTRACT. as bringing an action on such contracts is concerned.^ In New York a seal affords only presumptive evidence of a sufficient con- sideration, which may be rebutted as if no seal had been affixed.^ In New Jersey a fraudulent consideration may be shown as fully as if the seal had not been affixed.^ § 541. Estoppel of Mortgagor. — A mortgagor is not es- topped by the execution of a mortgage from showing a partial want of consideration for a note which such mortgage was given to secure.* He is not estopped except by his own representations, or those made by others with his consent ; he can plead " no con- sideration " in defense.^ The holder of the mortgage given to secure a negotiable note, stands in the same relation to the mortgage that he does to the note itself,*^ and if he be an assignee for value before maturity without notice, his claims are valid,^ though the mortgage was void between the original parties.^ But this rule does not apply to notes absolutely void, as in violation of statutes.^ A " no-defense " paper made by the mortgagor at the time of giving the mortgage, that there is no defense to it, estops him as against a purchaser of the mortgage from setting up fraud or want of consideration.^" But this rule may be different if the " no-defense " paper was procured by actual fraud. 1 Dean v. Walker, 107 111. 540. 2 3 Rev. Stat. 1875, p. G21 ; Torry v. Black, 58 N. Y. 185; Best v. Thiel, 79 N. Y. 15. "Laws of 1871, p. 8 ; Feldman v. Gamble, 26 N. J. Eq. 494, 496. * Jones V. Jones, 20 Iowa, 388. ^Wearse v. Peirce, 24 Pick. (Mass.) 141. « Cornell v. Hichens, 11 Wis. 353. ^ Stilwell V. Kellogg, 14 Wis. 461. 8Taylor?\Page, 6 Allen (Mass.), 86; Cazet v. Field, 9 Gray (Mass.), 329; Earl V. Clute, 2 Abb. App. Dec. (N. Y.) 1 ; Brigham v. Potter, 14 Gray (Mass.), 622 ; Coor v. Spicer, 65 N. Car. 401 ; Battles Rev. Stat, of N. Car., 1873, ch. 50, sect. 5. ^See Bowyer v. Bampton, 2 Stra. 1155; Kendall v. Robertson, 12 Cush. (Mass.) 156. loSchenck v. O'Neill, 23 Hun (N. Y.), 209 ; Smyth v. Munroe, 19 Hun (N. Y.), 550 ; Payne v. Burnham, 62 N. Y. 69 ; Hutchinson v. Gill, 91 Pa. St. 253. See, also, Best v. Thiel, 79 N. Y. 15. the consideration. 569 §542. Placing the Note and Mortgage in Escrow. — A valid delivery is necessary to give legal existence to a mort- gage or note. So when a mortgage and note are placed in escrow with an express understanding that they are not to be delivered to the mortgagee except upon the happening of a certain event, which never occurred, the consideration has failed ; and if they are turned over to the mortgagee without authority and suit is brought by a purchaser in good faith, for value, before maturity, no facts appearing to charge the mort- gagor with negligence, then they are invalid.^ The mortgage and note having been wrongfully delivered, and having been surreptitiously put into circulation without the knowledge or consent of the mortgagor, they never had a legal existence and were never fully executed.^ As a general rule, a negotiable promissory note, like other written contracts, has no legal inception or valid existence as such, until it has been delivered in accordance with the pur- pose and intent of the parties.^ When the custodian delivers the mortgage and note placed with him in escrow, without authority, and the mortgagor has not been negligent, they do not become operative any more than though they had been stolen from the possession of mortgagor and put in circulation. And to say that the rules and princi- ples of law in regard to negotiable paper preclude the mort- gagor from showing that the instruments were never delivered and consequently never had any legal existence, would be to extend those rules and principles beyond their just applica- tion. Bona fide holders of commercial paper should be pro- tected in all proper cases, but they are not the only parties who have rights which the courts are bound to respect. Nor does the principle apply that when one of two innocent per- ' Chipman v. Tucker, 38 Wis. 43. * Tisher v. Beckwith, 30 Wis. 56 ; Wait v. Pemeroy, 20 Mich. 425 ; Puffer v. Smith, 57 III. 527 ; Taylor v. Atchison, 54 111. 196 ; Putnam v. SuUivan, 4 Mass. 45 ; AVliitney v. Snyder, 2 Lans. (N. Y.) 477 ; Chapman v. Rose, 44 How. Pr. (N. Y.) 364 ; Nance v. Lary, 5 Ala. 370 ; Hamilton v. Vought, 34 N. J. L. 187 ; Powell V. Waters, 8 Cow. (N. Y.) 669. ^ Burson v. Huntington, 21 Mich. 416, 431, 432. 570 NATURE AND REQUISITES OF THE CONTRACT. sons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must stand it. So the custodian has no legal power or right to part with these in- struments by delivering them to the mortgagee. If he had purloined them from the possession of the mortgagor, and delivered them, the mortgagee's title would be as good as to deliver them without authority, for the instruments were never delivered, and were not intended to be delivered until ordered by the mortgagor.^ So where a purchase-price mortgage has been executed and deposited iij escrow to await completion of title in the mortgagor in fulfillment of a verbal bargain by the mortgagee to sell the land to the mortgagor, and the title to the land in the meantime passes into other hands, the delivery of the mortgage in violation of the arrangement will not operate to make it a valid mortgage, binding upon the mortgagor. The verbal bargain being a mere nullity, the mortgage when exe- cuted was without consideration.^ So a deed or mortgage purloined from the grantor, or ob- tained from him fraudulently, or wrongfully, without his knowledge, consent, or acquiescence, does not jDass title, even as against a subsequent purchaser for value without notice. The grantor may, however, be guilty of such a degree of negligence in executing it and permitting it to be exposed where it may readily be taken by the person named as grantee, as will estop him from setting up title as against a bona fide purchaser for value under the deed.^ The fraudulent procurement of a deed deposited as an es- crow from the depositary by the grantee named therein, will not operate to pass title.'* So a mortgage left with a depositary to be delivered when a , prior mortgage had been discharged and other conditions 1 Thomas v. Watkins, 10 Wis. 550 ; Burson v. Huntington, 21 Mich. 416, 431, 432 ; Walker i\ Ebert, 29 Wis. 194 ; Kellogg v. Steiner, 29 Wis. 626 ; Puffer v. Smith, 57 111. 527 ; Butler v. Cams, 37 Wis. 61. * PoAvell V. Conant, 33 Mich. .396. 3 Tisher v. Beck with, 30 Wis. 55. * Everets v. Agnes, 4 Wis. 343. I THE CONSIDERATION. 571 performed, is without consideration until the conditions are performed ; and if delivered without authority before such conditions have been fulfilled, it is void.^ An accommodation note has a consideration from the time of its transfer, pursuant to the intention with which it was made.^ §543. Parol Evidence. — Parol evidence is admissible to explain what the real consideration is, and the intention of the parties. Thus, where a second mortgage was executed by a mortgagor to the holder of a first mortgage, proof is admissible to show, though the second mortgage contained no reference to the first, that it was in fact given as a payment of the interest due thereon.^ So an interested third party, under the Louisiana law, may make proof of simulation by parol evidence and by the testi- mony of the party to the act.^ Parol testimony may be admitted to show the real intention of the parties.^ Where a note was given for a sum certain, secured by a mortgage, but no money passed, it may be shown by parol what the agreement was.® The burden is upon the party who sets up the want of con- sideration to prove it was made without consideration ; ^ and to show to the contrary very convincing proof is required.* ' Cressinger v. Dessenburg, 42 Mich. 580. * Bui'gess V. Bragaw (Minn.), 52 N. W. Rep. 45. ^ Blair v. Carpenter, 75 Mich. 167. * Mossop V. His Creditors, 41 La. Ann. 296. * McAteer v. McAteer, 31 S. Car. 313 ; Kaphan v. Ryan, 16 S. Car. 352. HlfCaughin v. Williams, 15 S. Car. 505 ; Calvert v. Nickles, 26 S. Car. 304. ^ Bank v. McLeod, 67 Iowa, 718. *Wiswall V. Ayres, 51 Mich. 324. See, also, Barker v. Barker, 62 N. H. 366; Benton v. Sumner, 57 N. H. 117 ; Melvin v. Fellows, 33 N. H. 401. 572 nature and requisites of the contract. Article 3. Illegal Consideration. §544. Against Public Policy. Transactions, Some of Which § 545. In Violation of Law. Are Illegal. I 546. When the Parties Are Not I 548. To be Valid in Part and Void Equally Guilty. in Part, the Mortgage Must § 547. When the Consideration Is be given in Good Faith. Made Up of Several Distinct ^ 549. The Burden of Proof. § 544. Against Public Policy. — Considerations of public policy are deemed paramount to private rights where there is a conflict between them, and the latter must yield. Rules of law founded upon public policy and the safety of society will not be set aside to sustain private rights.^ Accordingly a bond, the consideration of which is that the obligee should not appear and prosecute for perjury, is void.^ So a mortgage to secure a sum of money due to a mortgagee, but executed upon a consideration that he would obtain, without improper means, a nolle prosequi for a fraudulent conspiracy, is against public policy and invalid.* And the giving of a mortgage for the procuring of witnesses to testify to certain state of facts, is im- moral and against public policy, and an invalid contract.* When the agreement is that the mortgagee shall prevent the prosecution of a party for embezzlement, the consideration is illegal and void as against public policy. It is void because it is one which attempts to bind an individual to do an act prejudicial to the security of the community, and the parties have no right to make it.^ So a mortgage whose consideration, in whole or in part, is a stifling of a prosecution for a conspiracy to defraud and for embezzlement as a bank official, is void.® But the law will not aid either party to an illegal contract to enforce it against the other ; neither will it relieve a party to ^ Collins V. Blantern, 2 Wilson, 341 ; Wallace v. Hardacre, 1 Camp. 45 ; Keir V. Leeman, 51 Eng. Com. L. 308 ; 58 Eng. Com. L. 371 ; Marshall v. Railroad Co., 16 How. (U. S.) 334. "^ Collins V. Blantern, 2 Wilson, 341 ; 1 Smith's L. Cas. 154. 3 Wildey v. Collier, 7 Md. 278. * Patterson v. Donner, 48 Cal. 369. ^ Shaw V. Spooner, 9 N. H. 197 ; Roll v. Raguet, 4 Ohio, 408 ; Bowen v. Buck, 28 Vt. 308 ; Crowder v. Reed, 80 Ind. 1. *Pearce v. AVilson, 111 Pa. St. 14 ; Clark v. Pomeroy, 12 Allen (Mass.), 557. THE CONSIDERATION. 673 such a contract who has actually fulfilled it, and who seeks to reclaim his money or whatever article of property he may have applied to such a purpose. The law leaves the parties exactly where they stand.^ The suppression of illegal contracts is far more likely, in general, to be accomplished by leaving the parties without remedy against each other ; and relief is not granted where both parties are truly in pari delicto.'^ A note and mortgage given in lieu of notes and mortgage that were given in part to suppress a prosecution for forgery are not enforceable by an assignee of the payee, who took for value, but with notice of the illegality of the considertion ; ^ the consideration for the original notes being in part illegal, it cannot be questioned that the notes themselves were invalid in the hands of the original parties, and the assignee with notice has no better standing under the law.* Likewise, a note given as a substitute for, or renewal of, a note that was illegal is also invalid between the original parties.^- However, a mortgage executed to secure a note made by a cashier of a bank who had defaulted, to a surety on his bond as such cashier, for an amount paid for him by the surety in settlement of a civil liability, growing out of the defalcation, there being no agreement not to prosecute the cashier crimi- nally, is not illegal and void as against public policy.^ When an instrument is executed under the influence of duress of this nature, and the mortgagee or other purchaser for valuable con- sideration does not participate in the wrongful act, and has no notice of it, the validity of the instrument is in nowise affected or vitiated.^ And in general a mortgage which is against the policy of the law is invalid.* ^ At wood V. Fisk, 101 Mass. 363. ^ Claridge v. Hoare, 14 Ves. 59 ; Laing v. McCall, 50 Vt. 657. ' Pierce v. Kibbee, 51 Vt. 559. *Streit V. Sanl>orn, 47 Vt. 702. * Preston v. Jackson, 2 Stark. 237. 8 Moog V. Strang, 69 Ala. 98. ' Shrador v. Decker, 9 Pa. St. 14 ; Green r. Scranage, 19 Iowa, 461 : Talley v. Robinson, 22 Gratt. (Va.) 888 ; Rogers v. Adams, 66 Ala. 600. ^ Gilbert v. Holmes, 64 111. 548. See, also, Luetchford v. Lord, 57 Hun (N. Y.), 572. 574 NATURE AND REQUISITES OF THE CONTRACT. No agreement between parties to do a thing prohibited by Uiw, or subversive of any pubHc interest which the law clierishes will be judicially enforced.* § 545. In Violation of Law. — If a contract contravenes the statute it is illegal, and no agreement to do an act forbidden by statute, or to omit to do an act enjoined by statute is bind- ing.^ Hence, a mortgage given by a pre-emptor upon land pre-empted before entry is void, as forbidden by act of Con- gress.^ So where a party sells intoxicating liquors contrary to statute, and takes a mortgage to secure payment it is invalid.^ But the foreclosure of such mortgage has the effect to make the title absolute in the mortgagee, and therefore pays the debt.^ Illegality of consideration avoids a mortgage if the contract is in violation of statute, or of the common law,^ and courts will not aid the mortgagee to enforce payment, or the mort- gagor to obtain release of the mortgage.^ The maxim " ex turpi causa, non oritur actio" rests upon the clearest principle of pub- lic policy, and never to be ignored. So contracts entered into for fraudulent or illegal purposes are void, and the law will not aid either party to enforce them while they remain execu- tory, either in whole or in part, nor, when executed, will it aid either party to place himself in statu quo by a rescission, but will in both cases leave the parties where it finds them ;^ and if the ' Bish. on Cont., sect. 471 ; 2 Rand on Com. Paper, sect. 517 ; Brandt on Sur., sect. 11 ; Handy v. Publishing Co. (Minn.), 42 N. W. Rep. 872 ; Scott v. Gillmore, .3 Taunt. 226. ' Do Begins v. Armistead, 10 Bing. 110 ; Hooker v. De Palos, 28 Ohio St. 251 ; Durgin v. Dyer, 68 Me. 143 ; Milton v. Haden, 32 Ala. 30 ; Cope v. Rowlands, 2 Mees. & Wei. 153 ; Clark v. Protection Ins. Co., 1 Story, C. C. 109 ; Kott- witz V. Alexander, 34 Tex. 689. ^ Brewster v. Madden, 15 Kan. 249 ; and see, MeCue v. Smith, 9 Minn. 252 ; Warren v. Van Brunt, 19 Wall. (U. S.) 646. * Baker v. Collins, 9 Allen (Mass.), 253. ^McLaughlin v. Cosgrove, 99 Mass. 4. « Gilbert ?'. Holmes; 64 111. 548 ; Merrick v. Trustees, 8 Gill (Md.), 59 ; Scud- der V. Andrews, 2 McLean, C. C. 464 ; Spalding v. Preston, 21 Vt. 9. 'Atwood V. Fisk, 101 Mass. 363; James v. Roberts, 18 Ohio, 548; Snyder v. Snyder, 51 Md. 77. 8 Nellis V. Clark, 20 Wend. (N. Y.) 24 ; Hoover v. Pierce, 26 Miss. 627 ; Hooker v. De Palos, 28 Ohio St. 251 ; Atwood v. Fisk, 101 Mass. 363. THE CONSIDERATION. 575 parties are in pari delicto, they will be remediless ;^ their con- tract will not be set aside, and any money which may have been paid cannot be recovered back.^ If the parties are not m pari delicto, this rule is different.^ So whenever a party, acting under circumstances of great need or oppression makes a con- tract in violation of a law or rule of public policy, intended to protect persons against oppression, he is not in equal fault, and may recover of the other any money that he may have ad- vanced, or he may have the contract rescinded.'* But when an illegal consideration has been paid to one of two persons interested in it, the court will not aid the other to recover his share of it.^ In Nevada a mortgage was declared void which was given for a legal consideration because the mortgagee had the mort- gage given to a non-resident to escape taxation upon the amount of the loan. The court held that it is the policy of the rev- enue laws that all property within the State, except such as is in terms exempt, shall be taxed ; and any mortgage or contract entered into for the purpose of placing property otherwise taxable beyond the operation of the revenue laws, is opposed to that policy, and therein illegal ; so where a mortgage is exe- cuted to a non-resident for the sole purpose of preventing an assessment and of evading the payment of taxes upon money at interest, secured thereby, is void.*^ This decision is wrong in principle. In New York a mort- gage taken in the name of a third person to defraud creditors or to escape taxation cannot be successfully attacked by subse- quent incumbrancers, which is opposed to the Nevada rule. In speaking of the Nevada case, the court says : "As the case is ' Merrick v. Trustees, 8 Gill (Md.), 59 ; Scudder v. Andrews, 2 McLean, C. C. 464 ; Spalding v. Preston, 21 Vt. 9. ^ Howson V. Hancock, 8 Term. R. 575 ; McLoskey v. Gordon, 2(5 IMiss. 260 ; Setter v. Alvey, 15 Kan. 157. ^ Quirk V. Thomas, 6 Mich. 76. * Lowell V. Boston, etc.. Railroad Co., 2.3 Pick. (Mass.) 32 ; Scotten v. State, 51 Ind. 52; Bibb v. Miller, 11 Bush (Ky.), 306. ^ * Wood worth v. Bennett, 43 N. Y. 273. Compare Sackner v. Sackner, 39 Mich. 39 ; Cox v. Wightman, 4 Hun (N. Y.), 799. «Drexler v. Tyrrell, 15 Nev. 114. 576 NATURE AND REQUISITES OF THE CONTRACT. not authoritative in this State, it is sufficient to say that we have considered the opinion of the majority of the court, and the cases cited to sustain it ; and we do not think it correct or sus- tained by the citations. As we think the opinion fails to appre- ciate that there is no illegaUty in the contract of loan ; and that the question is only whether one who has borrowed money shall repay it." ^ § 546. When the Parties Are Not Equally Guilty. — If the parties are not in pari delicto, the law will aid the one not in equal fault ; ^ so the general rule is not applicable.^ So a legal estate vests in a trustee under a deed of trust, though he does not give a bond for the faithful discharge of his duties before entering upon his duties, in accordance with the provisions of the statute.* And a mortgage for a loan upon real estate security is valid between the parties, though pro- hibited by act of Congress.^ So a law prohibiting that school funds shall be loaned only upon unincumbered real estate does not invalidate a mortgage taken in violation of the statute by the officer charged with making a loan. Such mortgage can be enforced.*' If the contract be executory and the act prohibited by some special rule of public policy, and one party advanced money in consideration of the future execution of the illegal act, the intermediate time between such advance and the per- formance of the act is a locus pcenitentisc, during which he may rescind his contract and utterly abandon it, and recover the money advanced.'^ The rule is, that in so far as the contract is executory the de- fendant, although in pari delicto, or any one acquiring an interest in the property affected by the contract sought to be 1 Nichols V. Weed Sewing-Machine Co., 27 Hun (N. Y.), 200; 97 N. Y. 650. ''Lowell V. Boston, etc., Railroad Co., 23 Pick. (Mass.) 32; Scotten v. State, 51 Ind. 52. ^Deming v. State, 23 Ind. 416. Kiardner v. Brown, 21 Wall. (U. S.) 36. ^Bank v. Matthews, 98 U. S. 621. ^Deming v. State, 23 Ind. 416. 'Tappenden v. Randall, 2 Bos. & Pul. 467 ; White v. Bank, 22 Pick. (Mass.) 189 ; Express Co. v. Reno, 48 Mo. 264 ; Hooker v. De Polos, 28 Ohio St. 251. THE CONSIDERATION. 577 enforced may set up the illegality of its consideration in de- fense. No one is allowed to set up his own fraud or criminality to defeat an innocent party, but where both parties are parti- cipes criminis, the fraud may be set up and proved by either party, when the unexecuted portion of the contract is sought to be enforced against him.^ § 547. When the Consideration is Made Up op Several Distinct Transactions, some of which are Illegal. — If the consideration of a mortgage is made up of several distinct transactions, some of which are illegal, and that part of the consideration which is illegal can be separated with ease and certainty from the legal, the mortgage may be held valid for that part of the consideration free from illegality.^ If the mortgage is infected by an illegal consideration, it is void. Thus, upon a compromise with creditors, the mortgagor cannot have a secret understanding between himself and a creditor that his debt should be paid in full, and give a mort- gage, in part at least, to carry out that arrangement. Such a consideration would invalidate the mortgage in toto} If, how- ever, the sum secured be made up in part of a sum inadvert- ently included and without fraudulent intent, then the mort- gage may be valid for the actual debt secured, and void as to the balance.* If the illegality taints the whole transaction, the mortgage is invalid in totof' Thus, where promissory notes and a mortgage are given for the excess over a certain sum, upon an invoice of goods, which 1 McQuade v. Rosecrans, 36 Ohio St. 442 ; Goudy v. Gebhart, 1 Ohio St. 262 ; Raf;uet v. Roll, 7 Ohio, 77 ; Williams v. Englebrecht, 37 Ohio St. 383. But the Ohio cases go beyond the general rule. ^ Carleton v. Woods, 28 N. H. 2y0 ; Robinson v. Green, 3 Met. (Mass.) 159 ; Feldman v. Gamble, 26 N. J. Eq. 494 ; Robinson v. Bland, 2 Burr. 1077 ; Shaw V, Carpenter, 54 Vt. 155 ; Carradine v. Wilson, 61 Miss. 573 ; Warren v. Chap- man, 105 Mass. 87 ; Corbett v. Woodward, 5 Saw. C. C. 403 ; Williams v. Fitz- hugh, 37 N. Y. 444 ; Cook v. Barnes, 36 N. Y. 520 ; Yundt v. Roberts, 5 Serg. & R. (Pa.) 139. ^Lawrence v. Clark, 36 N. Y. 128 ; Sharp v. Teese, 4 Halst. (N. J.) 352, 440. * Weeden v. Hawes, 10 Conn. 50. * McQuade V. Rosecrans, 36 Ohio St. 442; Atwood v. Fisk, 101 Mass. 363, 366 ; Gerlach v. Skinner, 34 Kan. 86 ; Hinnen v. Newman, 35 Kan. 709. VOL. I.— 37 578 NATURE AND REQUISITES OF THE CONTRACT. is found to have been made by the payee of the notes and another with the intention of cheating and defrauding another, and the signatures to such notes and mortgage were actually obtained by means of such false and fraudulent inventory, the transaction is unlawful, and the consideration of such notes and mortgage is illegal, and the same are therefore void.^ Whenever the unlawful part of the contract can be separated from the rest, it will be rejected and the remainder established. But this cannot be done when one of two or more considera- tions is unlawful, whether the promise be to do one unlawful act, or two or more acts, part of which is unlawful ; because the whole consideration is the basis of the whole promise, and the parts are inseparable.^ While a partial want or failure of consideration avoids a bill or note only pro tanto, illegality in respect to a part of the con- sideration avoids it in toto. The reason of this distinction is founded, partly, at least, on grounds of public policy, and partly on the technical notion that the security is entire, and cannot be apportioned ; and where parties have woven a web of fraud or wrong, it is no part of the duty of courts of justice to unravel the threads, and separate the sound from the unsound ; and, in general, it makes no difference, as to the effect, whether the illegality be at common law or by statute.^ § 548. To Be Valid in Part and Void in Part, the Mortgage Must Be Given in Good Faith. — When the con- sideration is tainted by fraud, though separable, the mortgage is void. A mortgage cannot be valid in part and void in part whenever there is a fraudulent intent. If K part of the con- sideration for a transfer be merely a nominal or colorable con- sideration, contrived to hinder, delay, or defraud creditors, the whole transfer is void.^ So, if a mortgage is made with the ^ Fleming v. Greene (Kan.), 30 Pac. Rep. 11. * Widoe V. Webb, 20 Ohio St. 4.35 ; Add. on Cont. 905 ; Chit, on Cont. 730 ; 1 Pars, on Cont. 456 ; 1 Pars. N. & B. 271 ; Byles on Bills, 111 ; Chit, on Bills, 94. ^Gerlach v. Skinner, 35 Kan. 89 ; Collins v. Blantern, 2 Wils. 341. * Floyd V. Goodwin, 8 Yerg. (Tenn.) 484 ; Marriott v. Givens, 8 Ala. 694 ; Burke v. Murphy, 27 Miss. 167 ; McKenty v. Gladwin, 10 Cal. 227 ; Fielder v. Day, 2 Sand. 594 ; Hall v. Haydon, 41 Ala. 242 ; Albee v. Webster, 16 N. H. 362 ; Coolidge v Melvin, 42 N. H. 510 ; Mead v. Combs, 19 N. J. Eq. 112. A THE CONSIDERATION. 579 intent to secure a part of the property to the mortgagee, and to cover the residue for the use of the debtor, it is void as to the whole. To render an instrument vahd, it must be given in good faith, and without any intent to defraud creditors.^ If any part of the consideration be fraudulent, the instru- ment is void.^ But where the mortgage is executed in good faith, and the con- sideration is separable, it may be valid in part and void in part.^ § 549. The Burden of Proof. — The party setting up that the consideration of a mortgage arose out of an illegal contract, has the burden of proof, and to make his defense successful is bound to produce sufficient evidence to satisfy the court his defense is true.* A note and mortgage regular upon their face are prima facie evidence of their validity, and the burden of proof is for the mortgagor to show that they are without consideration.^ So in a case to enforce rights under a promissory note, given for the price of intoxicating liquors sold, before the passage of a statute in relation thereto, the burden of proving the illegality of the sale is upon the defendant.^ And when the validity of a note or mortgage is assailed, parol evidence showing payment of interest is admissible.^ And whenever the defense of ille- gality can be set up, it must be specially pleaded, whether the defense be made under the common law or under the statute.^ 1 Russell V. Winne, 37 N. Y. 591 ; Swinford v. Rogers, 23 Cal. 233 ; Sommer- ville V. Horton, 4 Yerg. (Tenn.) 541 ; Tickner v. Wiswall, 9 Ala. 305. 2 Burt V. Place, 6 Cow. (N. Y.) 431 ; Scott v. Gillmore, 3 Taunt. 22(5 ; Mouys V. Leake, 8 Term Rep. 411 ; Hinds v. Chamberlin, 6 N. H. 225 ; Frazier v. Thompson, 2 Watts & Serg. (Pa.) 235. •'' Leeds v. Cameron, 3 Sura. C. C. 488 ; Johnson v. Richardson, 38 N. H. 353 ; McMun-ay v. Connor, 2 Allen (Mass.), 205 ; Lavillebeuvre v. Frederic, 20 La. Ann. 374 ; Judd v. Flint, 4 Gray (Mass.), 557. * Feldman v. Gamble, 26 N. J. Eq. 494, 496. * Stuart V. Phelps, 39 Iowa, 14. « Brigham v. Potter, 14 Gray (Mass.), 522. ' Floyd County v. Morrison, 40 Iowa, 188. « Barnett r. Glossop, 3 Dowl. 625 ; 1 Bing. (N. C.) 633 ; Dickson v. Burk, 6 Xrk. 307 ; Huston v. AVilliams, 3 Blackf. (Ind.) 170 ; Suit v. Woodhall, 116 Mass. 547 ; United States v. Sawyer, 1 Gall. C. C. 87 ; Chambers v. Games, 2 Icwa, 320. PART 11. RELATIVE RIGHTS OF THE PARTIES TO Il^SIJRAKOE. CHAPTER XV. insurable interests. Article 1. TJie Mortgagor's Right to Insure for His Own Indemnity. ? 550. Insurable Interest of Mortgagor. ure and Before the Extin- ^ 551. The Mortgagor Has an Insur- guishment of His Redemp- able Interest After Foreclos- tion. § 550. Insurable Interest of Mortgagor. — The mortgagor has an insurable interest in the mortgaged property so long as he has any right to redeem the property.^ So long as the mortgagor has any interest in the property, he has also an in- surable interest ; ^ and the owner of the equity of redemption has an insurable interest equal to the value of the buildings on the land,^ notwithstanding the existence of a mortgage on the property of sufficient amount to absorb it* So a mortgagor whose right in equity to redeem has been seized on execution, has an insurable interest in the property, * Strong V. Manufacturers' Insurance Co., 10 Pick. (Mass.) 40 ; Walsh v. In- surance Co., 127 Mass. 383; Columbian Insurance Co. v. Lawrence, 2 Pet. (U. S.) 25 ; Franklin Insurance Co. v. Findlay, 6 Whar. (Pa.) 483 ; Traders' In- surance Co. V. Robert, 9 Wend. (N. Y.) 404 ; Mechler v. Insurance Co., 38 Wis-'. 665. ''Essex Savings Bank ?'. Meridian Ins. Co., 57 Conn. 335. * Insurance Co. v. Stinson, 103 U. S. 25. * Columbian Ins. Co. v. Lawrence, 2 Pet. (U. S.) 25 ; May on Insurance, sects. 81, 82. 580 INSURABLE INTERESTS. 58l which is not divested by a sale on execution of his equity of redemption, so long as his right to redeem such equity con- tinues.^ If he has an insurable interest at the time the policy was effected, and an interest also at the time of the loss, he is entitled to recover the whole amount of damages to the prop- erty, not to exceed the sum insured ; ^ and it does not change this rule, though the mortgagee has taken possession of the property.^ Policies of insurance are not deemed, in their nature inci- dent to the property insured, but are mere special agreements with the person insuring against loss or damages as he may sustain, and not the loss or damages any other person, hav- ing an interest, as grantee, or mortgagee, or creditor, or other- wise, may sustain by reason of the subsequent destruction by fire.* Therefore, when the mortgagor parts with his interest in the property before loss by fire, the right to the benefit of the insurance does not pass with the building to the purchaser.^ When the mortgagor has several policies of insurance, which contain a provision that he should not be entitled to recover any greater proportion of the loss than the amount insured might bear to the whole sum insured on the same property, in apportioning the loss, the value of the equity of redemption must be taken as the basis of settlement, and not the value of the entire property.^ And, in general, the insurable interest is measured by the value of the interest, if this does not ex- ceed the value of the property,^ according to his interest.* When there are no facts justifying the inference that the * Strong V. Manufacturers' Ins. Co., 10 Pick. (Mass.) 40. ^Hancox v. Fishing Ins. Co., 3 Sum. C. C. 142. ^Stephens v. 111. Mutual Fire Ins. Co., 43 111. 327 ; 111. Fire Ins. Co. v. Stan- ton, 57 111. 354. * Carpenter v. Providence Washington Ins. Co., 16 Pet. (U. S.) 495. * Wilson V. Hill, 3 Met. (Mass.) 66. «Tuck V. Hartford Fire Ins. Co., 56 N. H. 326. ' Sussex Co. Mut. Ins. Co. v. Woodruff, 26 N. J. L. .541 ; Slocovich v. Ori- vCntal Mut. Ins. Co., 13 Daly (N. Y.), 264 ; Tillou v. Kingston Mut. Ins. Co., 7 Barb. (N. Y.) 570. «Mix V. Andes Ins. Co., 9 Hun (N. Y.), 397. 582 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. mortgagor obtained the insurance for the mortgagee's benefit, the mortgagee has no equitable Hen upon the policy/ The mortgagee's claim then is no better than that of any creditor of the mortgagor. The policy is strictly a personal contract; it does not attach to the mortgage or to the land. The mere fact that the mortgage covers the property insured, and that he is personally liable for the debt, give the mortgagee no claim to the policy or the proceeds of it in case of loss ; ^ the mortgagor's interest is the full face of the policy at the time of the loss, and not the difference between such amount and the incumbrance on the property.^ § 551. The Mortgagor Has an Insurable Interest After Foreclosure and Before the Extinguishment of His Redemption. — The mortgagor has an insurable interest so long as his redemption is not extinguished. So he may take out an insurance after the mortgage has been foreclosed and before his redemption has ceased.* So where an order confirming a sale made under a decree of foreclosure to the mortgagee who is a party, is at the same time vacated, and the sale set aside for irregularity, the insurable interest of the mortgagor in possession is the same in the prop- ' Stearns v. Quincy Mut. Fire Ins. Co., 124 Mass. 61. ^Carpenter v. Providence Washington Ins. Co., 16 Pet. (IT. S.) 495 ; Vande- graaff v. Medlock, 3 Port. (Ala.) 389 ; McDonald v. Black, 20 Ohio, 185 ; Plimp- ton V. Ins. Co., 43 Vt. 497 ; Neale v. Reid, 3 Dowl. & Ry. 156, 158 ; Powels v. Innes, 11 Mees. & Wei. 10 ; Nichols v. Baxter, 5 R. 1. 491 ; Ames v. Richardson, 29 Minn. 330; Carter v. Rockett, 8 Paige (N. Y.), 437; Ryan v. Adamson, 57 Iowa, 30 ; Columbia Ins. Co. v. Lawrence, 10 Pet. (U. S.) 507 ; Wilson v. Hill, a Met. (Mass.) 66 ; Lynch v. Dalzell, 4 Bro. Pari. Cas. 431. It has been held that a covenant to insure, without stating that it is for the benefit of the mortgagee, does not imply that the mortgagor shall ap- propriate the insurance money either to discharge the debt or to restore the property : Lees v. Whiteley, L. R. 2 Eq. 143. ''Nussbaum v. Ins. Co., 37 Fed. Rep. 524; Guest v. Ins. Co., 66 Mich. 98 ; Judge v. Ins. Co., 132 Mass. 523 ; Holbrook v. Ins. Co., 1 Curtis, C. C. 197. * Essex Savings Bank v. Meriden Fire Ins. Co., 57 Conn. 335; Buffalo Steam-Engine Works v. Sun Ins. Co., 17 N. Y. 401 ; New England Ins. Co. v. Wetmore, 32 III. 221 ; Waring v. Loder, 53 N. Y. 581 ; Williams v. Roger Williams Ina. Co., 107 Mass. 377 ; 9 Am. Rep. 41. INSURABLE INTERESTS. 583 erty as if such sale and confirmation had not been made.^ Until tlie mortgagor's equity of redemption is extinguished, he has an insurable interest/ and when the right of redemption is barred, it seems that he has an insurable interest until the deed is delivered in pursuance of the sale, when the purchaser has a right of possession.^ And when a vendor conveys by absolute deed to secure a debt, the transaction is an equitable mortgage, and he has an insurable interest.* If the mortgagor sells his equity of redemption, or his grantee assumes the payment of the mortgage, he still has an insurable interest, because he is liable upon the mortgage note and has an interest in the preservation of the property to satisfy the debt and therefore pay the note.^ Article 2. The Mortgagor's Right to Insure for the Mortgagee's Indemnity. § 552. Covenant to Insure. § 556. The Rights of the Mortgagee 1 553. Covenant Running with the Under Such Covenant. Land. ^ 557. Invalidating PoUcy by Acts of § 554. Statutory Provisions. the Mortgagor. §555. The Mortgagee May Acquire Equitable Rights. § 552, Covenant to Insure. — The mortgagor may cove- nant in the mortgage to insure for the benefit of the mortagee. So where, by his covenant or otherwise, the mortgagor is bound to insure the mortgaged premises for the benefit of the mortgagee, the latter has, to the extent of his interest in the property destroyed, an equitable lien upon the money due on a ^ Insurance Co. r. Sampson, 38 Ohio St. 672. '^ Strong V. Manufacturers* Ins. Co., 10 Pick. (Mass.) 40. * Gordon v. Mass. Fire Ins. Co., 2 Pick. (Mass.) 249 ; Cheney v. Woodruff, 45N. Y. 98; Brown v. Frost, Hoff. Ch. (N. Y.j 41. Compare McLaren v. Hartford Fire Ins. Co., 5 N. Y. 151. * Hodges r. Tenn. Mar. & F. Ins. Co., 8 N. Y. 416; Walsh r. Phila. Fire Asso'n, 127 Mass. 383. 5 Waring v. Loder, 53 N. Y. 581 ; Buck v. Phoenix Ins. Co., 76 Me. 586 ; Herkimer v. Rice, 27 N. Y. 163. 584 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. policy taken out by the mortgagor ; ^ and this equity exists, although the covenant provides that in case of the mortgagor's failure to procure insurance and assign the policy, the mortgagee may procure it at the expense of the mortgagor.^ This equitable doctrine obtains in Louisiana. It is derived from the princi- ples of the civil law, which is the basis of the civil code of that State.^ Such covenants create a specific lien upon the insurance- money which is valid against an assignee in bankruptcy.* When the mortgagor is bound by the mortgage contract to keep the premises insured for the benefit of the mortgagee, and does in fact keep them insured by a policy which con- tains no statement, that the mortgagee has any interest therein, the mortgagee, nevertheless, has an equitable interest in and a lien upon the proceeds of the policy which a court of equity will enforce for his benefit ; ^ and a mortgagor's assignment of his claim under a certificate, after the loss, is an assignment of a debt — a mere chose in action, which the assignee takes sub- ject to all defenses and equities against the mortgagor.^ So when the agreement is that the mortgagor shall procure insurance upon the mortgaged j^roperty payable, in case of loss to the mortgagee, and the mortgagor or some one for him procures insurance in the mortgagor's or a third party's name without making it payable to the mortgagee, though this be done without the mortgagor's knowledge or without any intent to perform the agreement, equity will treat the insurance as 1 Wheeler v. Insurance Co., 101 U. S. 439 ; Thomas v. Vonkapff, 6 Gill & J. (Md.) 372. 2 Nichols V. Baxter, 5 R. I. 491 ; Carter v. Rockett, 8 Paige (N.Y.), 437; Dun- lop V. Avery, 23 Hun (N. Y.), 509. ^Bank v. Dugue, 5 La. Ann. 12; Wheeler v. Insurance Co., 101 U. S. 439. *In re Sands, 3 Biss.C. C. 175. 5 Thomas v. VonkapflF, 6 Gill & J. (Md.) 372; Carter v. Rockett, 8 Paige (N. Y.), 4.3G; Lazarus v. Ins. Co., 2 Am. Lead. Cas. 834; Norwich Fire Ins. Co. v. Boomer, 52 111. 442 ; Bank v. Benson, 24 Pick. (Mich.) 210; Miltenberger v. Beacom, 9 Pa. St. 198 ; King v. Ins. Co., 7 Cush. (Mass.) 1 ; Cromwell v. Ins. Co., 44 N. Y. 42 ; Miller v. Aldrich, 31 Mich. 408. * Archer v. Ins. Co., 40 Mo. 434 ; Wilson v. Hill, 3 Met. (Mass.) 66; Brichta t;. Ins. Co., 2 Hall (N. Y.), 372 ; Mellen v. Ins. Co., 17 N. Y., 609 ; Greene v. Warnick, 64 N. Y. 220. INSURABLE INTERESTS. 585 efifected under the agreement, and will give the mortgagee his equitable lien, who is entitled to the proceeds of the first insur- ance paid on the loss/ But this rule is not accepted in Massachusetts, where it is held that the mortgagee cannot have a lien in equity, unless the insurance was obtained by the mortgagor as the mortgagee's agent, or with intent to perform an agreement to insure.^ Where a mortgagor at the time of executing the mortgage covenanted to keep the premises insured, and is informed by the mortgagee's agent that the mortgagee would insure the premises, such statement confers no right on the mortgagor.^ Where the loss is payable to the mortgagee, and occurs after sale under foreclosure, but before the time of redemption has expired, the mortgagee is entitled to recover the loss, as the foreclosure is no extinguishment of the debt until the deed has been made, and the time of redemption has expired.* § 553. Covenant Running with the Land. — It is held by some authorities that a covenant to insure runs with the land, as much so as a covenant to repair, or to rebuild, or for another term, because it is a charge upon the land.^ On the other hand, it is held that a covenant to insure is entirely personal in its character, and does not affect the land or run with it, and is collateral and incident to the remaining covenants in the mortgage, and a conveyance of the land by the mortgagor would not make the vendee liable on the covenant.^ § 554. Statutory Provisions. — In Maine the statute pro- vides that a mortgagee of any real estate shall have a lien ' Ames V. Richardson, 29 Minn. 330. ^ Stearns v. Quincy Ins. Co., 124 Mass. 61. ^ Brant v. Gallup, 111 111. 487. See, also, Johnson v. Ins. Co. (S. Dak.), 45 N. W. Rep. 799. * National Bank v. Union Ins. Co., 88 Cal. 497. * Vernon v. Smith, 5 Barn. & Aid. 3; Spencer's Case, 1 Smith's Lead. Cas. 137 ; In re Sands, 3 Biss. C. C. 175. «Dunlop V. Avery, 89 N. Y. 592, 599 ; Reid v. McCrum, 91 N. Y. 412 ; Nor- man V. Wells, 17 Wend. (N. Y.) 150. See Thomas t;. VonkapflF, 6 Gill & J. (Md.) 372; Giddings v. Seevers, 24 Md. 363. 586 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. upon any policy of insurance against loss by fire procured thereon by the mortgagor, to take effect from the time he files with the secretary of the company a written notice briefly de- scribing the mortgage, the estate conveyed, and the sum re- maining unpaid thereon. If this written notice provides that the whole or any part of the sum shall be applied to the payment of the mortgage, the mortgagee's receipt shall be a sufficient discharge. If this notice does not so specify the ajjpropriation of the money, the mortgagee may at any time within sixty days after the loss enforce his lien by a suit against the mortgagor, and the com- pany as his trustee. A judgment may be rendered for wliat is found due upon the policy, notwithstanding the time of pay- ment of the whole sum by the mortgagee has not arrived. The amount recovered is first to be applied to the payment of the costs of the suit and then to the payment of the mort- gage debt, and the balance, if any, to the mortgagor. Payment is made to two or more mortgagees according to the priority of their mortgages. When a mortgagee claims the benefit of this lien, any policy of insurance previously or subsequently procured by him on his interest as mortgagee is void, unless it is agreed to by the company insuring the mortgagor's interest.^ If the insurers settle in good faith with the mortgagor before the expiration of sixty days after loss and before any notice of the loss has been filed with the secretary, the mortgagee's lien is divested, although such notice be afterward filed within the sixty days." The statute annuls all provisions of a policy at variance with it.^ In Massaciiuseics the statute provides that in case of loss upon property hereafter insured within the terms of the fire insurance policy thereon, all such insurers thereof, upon the proper presentation of proof by the claimants in accordance with the provisions of the policy, together with an authentic 1 Rev. Stat. 1871, ch. 49, sects. 32-36. ^ Burns v. Collins, 64 Me. 215. ' Emery v. Piscataqua Fire & M. Ins. Co., 52 Me. 322. INSURABLE INTERESTS. 587 Statement of the title, showing of rights and interests of all parties therein, shall pay all mortgages expressly protected by any policies taken out in the name of the mortgagor, in the order of their priority, to the extent of their respective j^olicies or interests in their respective mortgage claims, before the owner of the equity of redemption in said property shall receive anything ; but this provision does not enlarge the amount which any insurance company would otherwise pay on account of any loss ; and any payment so made by any such company under its policy in accordance with the provisions of this act, whether to the person named in the policy or not, shall be deemed and taken to be in payment and satisfaction of the liability of such company under its policy to the full extent of such payment/ In California it is provided that when a mortgagor of prop- erty effects insurance in his own name, providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to the mortgagee, the insurance shall be deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his which would otherwise avoid the insurance will have the same effect, although the property is in the hands of the mortgagee. If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee, and at the time of his assent im- poses further obligations on the assignee, making a new contract with him, the acts of the mortgagor cannot affect his rights.^ § 555. The Mortgagee May Acquire Equitable Rights. — The insurance may be assigned by indorsement on the policy. Thus, where an owner of land procures insurance and orders his agent to indorse the policy to the mortgagee, the mortgagee thereby becomes entitled to the insurance, and his right can- not be affected by a revocation or cancellation of the indorse- ment made without his knowledge or consent.^ ^ > Laws of 1878, ch. 132, sect. 2. ''Civil Code, sects. 2541, 2542 ; Codes and Stats., 1877, sects. 7541, 7542. 2Reid V. McCruin, 91 N. Y. 412. 588 KELATIVE EIGHTS OF THE PARTIES TO IXSUllANCE. So where the agreement to keep insurance to indemnify the mortgagee was merely verbal, but the mortgagor had acted U])on it by obtaining such insurance, and his grantee takes with knowledge, and subsequently surrendered this polic}^, and took another, which was not payable to the mortgagee, the mortgagee is entitled in equity to have the insurance money ap- plied in payment of the mortgage debt/ So when an insurance company approves the actions of its soliciting agent in indorsing upon an insurance policy a clause making it payable to the mortgagee, it thereby accredits such agent as its agent to represent it, at least, as to that particular risk, and if such agent afterward assures the parties that nothing more need be done to secure the mortgagee, in the event of sale by the mortgagor, the company will be estopped from alleging the contrary.^ When the mortgagor, in terms, makes the policy, in case of loss, payable to the mortgagee, it is equivalent to an assign- ment of the policy to the mortgagee, to be held by him as collateral security for his debt, with the consent of the insurers.^ Such covenant operates to give the mortgagee an interest in the policy, and invests him with the same rights which he would have if, without such words in the body of the policy, the mortgagor had assigned it to him with the express consent of the insurers.* And it is a contract for the full term for which the policy is issued, and the insurers under such a stipu- lation as is in cpestion, cannot terminate the contract of in- surance by withdrawing it before the expiration of the term specified in the contract and without notice to the mort- gagee.^ And the mortgagee to whom the policy of insurance is made payable-, in case of loss, is not bound by an adjustment of such » Miller v. Aldrich, 31 Mich. 408. ^ Wachter v. Phoenix Assurance Co., 132 Pa. St. 428. ^ Ennis v. Ins. Co., 3 Bosw. (N. Y.) 516 ; Luckey v. Gannon, 37 How. Pr. (N Y.) 134, 138. * Grosvenor v. Ins. Co., 5 Duer (N. Y.), 517 ; Conn. Mut. L. Ins. Co. v. Scam- mon, 4 Fed. Rep. 263. ^ Lattan v. Ins. Co., 45 N. J. L. 453. INSURABLE INTERESTS. 589 loss, made without his knowledge or consent, by the assured, the mortgagor, and the insurance company/ § 556. The Rights of the Mortgagee Under Such Covenant. — By indorsing over the policy to the mortgagee does not operate as a new contract to insure the interests of the mortgagee, but that he can claim only what the party originally insured is entitled to recover under his contract.^ So a covenant to pay to the mortgagee in case of loss is merely a contingent order or stipulation, assented to by the insurers, for the payment of the loss of the assured, if any, to the mortgagee. It gives the mortgagee the same right to recover that the assured would have if no such clause had been inserted in the policy. So any violation of the conditions and stipulations of the policy which would defeat the right of the assured to recover upon such policy will defeat the right of the mortgagee.^ Hence, if loss occurs, but the mortgagor re- builds in the same manner as the building was at first, the in- surance is payable to the mortgagor and not to the mortgagee, as he has sustained no loss.* The rights of the parties are these : The undertaking to pay the mortgagee is an undertaking collateral to and de- pendent upon the principal undertaking to insure the mort- gagor. It is in effect that the insurance company agrees that whenever any money shall become due to the mortgagor upon the contract of insurance it will, instead of paying it to the mortgagor himself, pay it to the mortgagee. The mortgagor must sustain a loss for which the insurer is liable before the party appointed to receive the money has a right to claim it. It is the damage sustained by the party insured, and not by ' Harrington v. Ins. Co., 124 Mass. 126. ^Fogg?;. Ins. Co., 10 Cush. (Mass.) 337; Hale v. Ins. Co., 6 Gray (Mass), 169; Loring v. Ins. Co., 8 Gray (Mass.), 28; Turner v. Ins. Co., 109 Mass. 568. ' Bates V. Ins. Co., 10 Wall. (U. S.) 33 ; Grosvenor v. Ins. Co., 17 N. Y. 391 ; State Mut. F. Ins. Co. v. Eoberts, 31 Pa. St. 438 ; Smith v. Ins. Co., 120 Mass. 90 ; City Five Cents Savings Bank v. Ins. Co., 122 Mass. 165 ; Brunswick Sav- ings Institution v. Ins. Co., 68 Me. 313 ; Fitchburg Saving Bank v. Ins. Co., 125 Mass. 431. *In re Moore, 6 Daly (N. Y.), 541. 590 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. the party appointed to receive payment that is recoverable from the insurer.' § 557. Invalidating Policy by Acts of the Mortgagor. — The ordinary policy contains a clause that no sale or trans- fer shall be made of the property unless the company has notice and agrees to it, otherwise the policy shall be void if this condition is violated.^ Such a result is prevented by stipulating that no alienation by the mortgagor shall affect the mortgagee's rights to recover.^ Without this clause for the protection of the mortgagee, a policy is forfeited by a transfer of the premises, although no change in or assignment of the interest of the insured had taken place subsequent to the date of the policy.* But the rights to the policy are not to be defeated or limited by the acts of a stranger for which the parties are not respon- sible, and of which they have no knowledge.^ So where the policy stipulates against more insurance, and the mortgagor gives a second mortgage to another mortgagee who takes out insurance in his own favor, it does not avoid the policy, and the first mortgagee may recover on his policy.^ To protect the mortgagee a special clause must be inserted in the mortgage, stating that the acts of the mortgagor in transferring the property shall not invalidate the policy.^ But the mortgagee must comply with the provisions of this clause, for it does not protect the mortgagee's interest in a case where he or his agent is negligent, and his own act or default makes the policy void.^ So where the policy has a clause making it void by an increase of the hazard, the mortgagee is affected with notice of the fact known to his agent, and a failure by ^Grosvenor v. Ins. Co., 17 N. Y. 391. '^Grosvenor v. Ins. Co., 17 N. Y. 391. 3 Macomber r. Ins. Co., 8 Cush. (Mass.) 133. * Springfield F. & M. Ins. Co. v. Allen, 43 N. Y. 389. 6 Nichols V. Ins. Co., 1 Allen (Mass.), 63. «City Five Cents Sav. Bank v. Ins. Co., 122 Mass. 165. ^Hastings v. Ins. Co., 73 N. Y. 141 ; Eliot Five Cents Sav. Bank v. Com. U. Association Co., 142 Mass. 142. 8 Graham v. Ins. Co., 87 N. Y. 69. II INSUEABLE INTERESTS. 591 the agent to disclose to the insurers an increased hazard, places the mortgagee in the same position as if he had actual knowl- edge of the increased hazard.^ He must inform the insurers of the increased hazard.^ If this clause for the protection of the mortgagee is not in- serted in the policy, then any act of the mortgagor which will avoid the policy as to him will avoid it as to the mortgagee,^ such as an increase of insurance.* But the acts of the mort- gagor that invalidates the policy are those performed before loss, and not after the property is destroyed.^ If the mortgagors take out insurance, and the policy provides against over-insurance, and then one of the partners takes out more insurance, it avoids the policy.^ But after taking out insurance by a partnership the partner- ship is dissolved, and one partner sells his interest to the other, this is not such an alienation as to avoid the policy/ The policy is void when a pre-existing mortgage has been given, though not recorded.^ Under the condition that if any change takes place in the title and interest of the property, whether by sale, transfer, or convej^ance, in whole or in part, the policy shall become void, the execution of a mortgage avoids the policy.^ ^Dresser r. Norwood, 10 Jur. (N. S.) 854. ^Colev. Ins. Co., 99N.Y. 36. ^Merwin v. Ins. Co., 7 Hun (N. Y.), 659. * Buffalo Steam-Engine Works v. Ins. Co., 17 N. Y. 401. * Browning v. Ins. Co., 71 N. Y.508. "Gillett V. Ins. Co., 73 Wis. 203. 'Dresser v. Ins. Co., 45 Hun (N. Y.), 298. ® Packard v. Insurance Co., 2 Gray (Mass.), 334. See Manhattan F. Ins. Co. V. Weill, 28 Gratt. (Va.) 389. *Sossaman v. Ins. Co., 78 N. Car. 145 ; Edmands v. Ins. Co., 1 Allen (Mass.), 311 ; Sherwood v. Ins. Co., 73 N. Y. 447 ; Germond v. Ins. Co., 2 Hun (N. Y.), 540 ; East Texas F. Ins. Co. v. Clark, 79 Tex. 23 ; Dwelling-House Ins. Co. v. Butterly, 33 111. App. 626, affirmed in 133 111. 534 ; Loomis v. Ins. Co., 77 Wis. 87. 592 relative rights of the parties to insurance. Article 3. Misrepresentation and Concealment by Mortgagor. §558. Concealment. §560. Knowledge of the Agent § 559. Waiver by Insurers. Affects the Principal. § 561. Divisibility of the Contract. § 558. Concealment. — Policies of insurance provide that if the insured shall misrepresent the true condition of the prop- erty or conceal any material fact as to incumbrances, it shall invalidate the polic}^ So the existence of any substantial in- cumbrance upon the property is material, and a misrepresen- tation or concealment of the same avoids any insurance, "whether the statements of the assured are made warranties or not.^ When the mortgagor states the incumbrance as $1,000 when it is $5,000, he makes a material misrepresentation, which avoids the policy.^ So a statement that the mortgage is $6,600 when it was in fact for $6,684 is a misstatement that will invalidate the in- surance.^ And a statement of a mortgage incumbrance of $1,000 when it is for $1,400, is a material misstatement and renders the policy void.* So where the mortgagors take in- surance in favor of the mortgagee with the original stipulation in the mortgage as to over-insurance, and then one of the mortgagors takes additional insurance, it avoids the mortgage.^ Any material misrepresentation as to an incumbrance on the property, such as the concealing the same, will avoid the policy.^ So the failure to disclose a large amount of accumu- lated interest due on a mortgage, invalidates the policy,^ but 1 .Etna Ins. Co. v. Resh, 40 Mich. 241. •^ Smith V. Ins. Co., 118 N. Y. 518. See, also. Brown v. Ins. Co., 11 Cush. (Mass.) 280. 3 Abbott r. Ins. Co., 3 Allen (Mass.), 213. * Falls V. Ins. Co., 7 Allen (Mass.), 46. 5 Gillett V. Ins. Co., 73 Wis. 203. « Van Buren v. Ins. Co., 28 Mich. .398 ; Hay ward v. Ins. Co., 10 Cush. (Mass.) 444 ; Draper v. Ins. Co., 2 Allen (Mass.), 569 ; Smith v. Ins. Co., 17 Pa. St. 253 ; Titus v. Ins. Co., 81 N. Y. 410 ; Byers v. Ins. Co., 35 Ohio St. 606. ^Jacobs V. Ina. Co., 7 Allen (Mass.), 132. INSURABLE INTERESTS. 593 if the interest is not due the rule is otherwise.^ If a mortgage has been paid or is fraudulent, the failure to disclose it by the mortgagor does not make void the insurance.^ A policy is avoided by a gross understatement of the amount of the incumbrance/ but an insignificant misrepresentation will not avoid it/ In construing warranties contained in insurance policies, Chief Justice Champlin says : " It may be asserted that the prime object to be reached is the intention of the parties, and, if that can be found, such intention must control. The rules in the interpretation of such warranties are the same as those which apply to the interpretation of other mercantile contracts. All written instruments, where the provisions are clear and una mbiguous, are entitled to a literal interpretation, and wher- ever in a policy of insurance there is a clear breach of the warranty contained -therein, however immaterial it may be, the policy will be avoided. " It may be said that the warranties contained in the policy are somewhat different from representations made, in this : That while a representation may be satisfied with a substan- tial, or even an equitable, compliance, a warranty requires a strict and literal fulfillment. As it is stated by Mr. Arnould on Marine Insurance : " ' Whatever the warranty avers must be literally true, and what it promises must be actually performed.' " The reasons for such literal construction appear to be that insurance is granted on the faith of the accuracy of the state- ments made by the assured, the information concerning which is generally, and often exclusively, within the knowledge of the assured ; and it is only just to the insurer, when he asks for positive and accurate information, that it should be given him. It is in reliance upon the facts given that the contract • Titus V. Ins. Co., 81 N. Y. 410. •" Lycoming iris. Co. r. Jackson, 83 111. 302. ■''O'Brien v. Home Ins. Co., 79 AVis. 399. * McNamara v. Dakota F. & M. Ins. Co. (S. Dak.), 47 N. W. Rep. 288. See, also, Copeland r. Ins. Co., 77 Mich. 554 ; Tubbs v. Dwelling-House Ins. Co., 84 Mich. 646 ; Vankirk v. Ins. Co., 79 Wis. 627. 38 694 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. of insurance is made, and the purpose of requiring a warranty is to dispense with inquiry, and cast upon the insured the obh- gation that the facts shall be as he represents them." ^ § 559. Waiver by Insurers. — The insurance company by its acts or those of its agent may waive the wrongful acts of the mortgagor in misstating or concealing facts which arc material. Thus, if when an application is made for insurance in which the premises are represented as free from incum- brance, but the insurers know of an incumbrance upon the property, they will be deemed to have waived, as respects such incumbrance, a condition of the policy that misrepresentations in that respect should avoid the contract." If the insurer is chargeable with knowledge of the fact of the incumbrance he will be deemed to have waived the con- ditions of the policy making the misstatement of such fact to avoid the policy.^ And so knowledge on the part of the in- surer of the existence of a mortgage may be inferred from the circumstances of the case, though not actually disclosed by the mortgagor.* Hence, where the insurers place insurance on the property for the owner and then for the mortgagee of the property, and afterward renew the policy for the mortgagor, they must know of the mortgage from the surrounding circum- stances.^ The same rule holds as to the mortgagee when he insures his interest in the property, and the concealment of the exist- ence of a prior mortgage by him invalidates his policy.'' However, if the incumbrance is not disclosed and is not made material by an inquiry in relation to the incum- brance, the mortgagor is not bound to disclose it.^ But ^ Hoose V. Ins. Co., 84 Mich. 309, 317, 318. See, also, Insurance Co. v. Huntzinger, 98 Pa. St. 41. 2 Wilson V. Ins. Co., 36 Minn. 112. ^Shafer v. Ins. Co., 53 Wis. 361. * Woodward v. Ins. Co., 32 Hun (N. Y.), 365. 5 State Ins. Co. v. Todd, 83 Pa. St. 272. « Smith V. Ins. Co., 17 Pa. St. 253. ' Norwich Fire Ins. Co. v. Boomer, 52 111. 442 ; Lycoming F.Ins. Co. v. Jack- eon, 83 III. 302. INSURABLE INTERESTS. 595 when a concealment that is material is made it will avoid the policy.^ § 560. Knowledge of the Agent Affects the Principal. — The knowledge and conduct of the agent bind the insurers, and for misrepresentations known to the agent, they cannot avoid liability on the policy on account of the false statement in the application, although the policy provided that any such false statement should render it void.^ So the local agent of the insurers may, before contract of insurance has become complete and binding, name the conditions of the policy as to incumbrances then existing.^ The insurers must stand respon- sible for the knowledge of their agent as to incumbrances.'* His acts are those of the insurer, and if he receives an applica- tion filled up by him, stating that there is no incumbrance, when he knew the property was incumbered, his acts in this respect will bind his principal, who will be liable for any loss under such policy.^ If the agent agrees to do an act in regard to filling up an application, in the scope of his business, the principal is responsible.^ So an insurance company is bound by a verbal statement made to its agent, and upon which it issues a policy and receives the premium ; and it cannot repu- diate in such policy the authority of the agent, or responsibil- ity for his acts. Thus, on making a verbal application for insurance, the agent was informed that the applicant held the land on which 1 Horsford v. Ins. Co., 127 U. S. 399 ; German Ins. Co. v. Churchill, 26 111. App. 206 ; Phcenix Ins. Co. v. Fulton, 80 Ga. 224. ^Key V. Ins. Co., 77 Iowa, 174 ; Lamb v. Ins. Co., 70 Iowa, 240 : Carrigan v. Ins. Co., 53 Vt. 418 ; Russell v. Ins. Co., 78 Iowa, 216 ; Dwelling House Ins. Co. V. Hoffman, 125 Pa. St. 626. ^ Hankins v. Ins Co., 70 Wis. 1 ; Renier v. Ins. Co., 74 Wis. 89 ; Cannon v. Ins. Co., 53 Wis. 585 ; Hollis v. Ins. Co., 65 Iowa, 454 ; Wilson v. Ins. Co., 36 Minn. 112 ; Carrigan v. Ins. Co., 53 Vt. 418. * Holmes V. Drew, 16 Hun (N. Y.), 491. ^Boetcher v. Ins. Co., 47 Iowa, 253; Woodward v. Ins. Co., .32 Hun (X. Y.), 365 ; Key v. Ins. Co., 77 Iowa, 174 ; Carrigan r. Ins. Co., 53 Vt. 418 ; Renier v. Ins. Co., 74 Wis. 89 ; Westchester Ins. Co. v. Weaver, 70 Md. 536. *Copeland v. Iris. Co., 77 Mich. 554; Dunbar v. Ins. Co., 72 Wis. 492; Con- tinental Ins. Co. V. Pearce, 39 Kan. 396. 596 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. the building stood under a land contract, and that it was in- cumbered by a mortgage. The policy insured the applicant to the amount of $1,000 on a certain building against loss or damage by fire, not exceeding the interest of the assured in the property, which interest was stated. The policy was to be void, unless consent in writing was indorsed by the company, if the assured was not the sole and unconditional owner of the property ; or if any building intended to be insured stood on ground not owned in fee-simple by the assured ; or if the inter- est of the assured in the property was not truly stated ; or if any change took place in the title, interest, location, or posses- sion of the property, by sale, transfer, or conveyance, in whole or in part. In a suit upon the policy the company defended because of the violation of the foregoing conditions. It was held that, if the company had desired to know what interest it was insuring, it should have stated it in that portion of the policy pertaining to the risk ; and that, to give any reasonable force and effect to the clause requiring the indorsement of its con- sent in the cases stated, it must be held to apply to changes in ownership arising after the delivery and acceptance of the pol- icy.^ The knowledge of the agent estopped the company from setting up a breach of the condition.^ Notice to the agent is notice to the principal.^ However, a mortgage was placed on insured property without giving the required notice to the insurance company, but the agent of the company was informed of the fact. The owner never inquired of the company's agent what was necessary to keep the policy alive, nor did it appear that he requested the agent, nor that the agent undertook to do anything to that end. It was held that the case did not come within the provisions of the statute,^ which make mutual fire insurance companies liable for the acts and negligence of their agents while in the performance of their duties as agents of such companies.^ 1 Hoose V. Ins. Co., 84 Mich. 309. ^ Insurance Co. v. Hall, 12 Mich. 213 ; Baker v. Ina Co., 70 Mich. 199 ; Cope- land V. Ins. Co., 77 Mich. 554 ; Crouse v. Ins. Co., 79 Mich. 249. ^ Kitchen v. Ins. Co., 57 Mich. 145 ; Insurance Co. v. Fay, 22 Mich. 472. ^ Rev. Stat., sect. 3617. ^Tarbell v. Vermont Ins. Co., 63 Vt. 53. ■ INSURABLE INTERESTS. 597 § 561. Divisibility of the Contract. — Where a policy is issued on a gross premium for a gross sum, and covers both realty and personalty, and warrants against incumbrances on the realty, which fails, such failure of the warranty will invalidate the policy as to the realty, but not as to the personalty covered by it, when the personalty has a separate valuation.' So where, by a policy upon several separate and distinct classes or species of property, each of which is separately valued, the sum total of the valuation is insured on payment of a pre- mium in gross, the contract is severable ; and a breach of a condition avoiding the policy as to one of the items does not affect it as to the others ; at least when there is nothing in the terms, in the nature of the contract or of the different subjects of the insurance, or in the surrounding circumstances, from which it can be inferred that the insurer would not have been likely to have assumed the risk on one or several of the sub- jects of the insurance, unless induced by the profit or advan- tage of having a risk upon all.^ So a policy was written upon a building and also upon per- sonalty, which articles had a separate valuation. No specific personal property was named, though it was located on the farm, and not exceeding a certain amount on each class. The policy also contained a provision to the eff'ect that if any sub- sequent incumbrance was placed on the property insured, or the title changed without the written consent of the secretary of the insurers, the policy should be void. Prior to the loss the insured executed a mortgage upon the real estate. It was held that the execution of the mortgage would not prevent a re- covery for the loss occasioned by the destruction of the personal property.* Chief Justice Reese said : " Now it cannot be contended that the fact of mortgaging the real estate would in any degree affect the risk so far as the personal property was concerned. It did ^ Crook t;. Ins. Co., 38 Mo. App. 582. V '^Merrill y. Ins. Co., 73 N.Y. 452. ' State Ins. Co. v. Schreck, 27 Nebr. 527 ; German Ins. Co. v. Fairbank (Nebr.), 49 N. W. Rep. 711. 598 RELATIVE EIGHTS OF THE PARTIES TO INSURANCE. not affect the title in the assured, neither did it cause the prop- erty to be any more likely to be destroyed by fire, and it seems to be that the most common principles of justice and fair dealing are in the line of the large number of authorities cited by defendant in error holding that the contract of insur- ance on personal property would not be avoided by the execu- tion of such mortgage." Judge Folger says : " It is plain from the fact of a separate valuation having been put by the parties upon the subjects of the insurance, that they looked upon them as distinct matters of contract. The effect of the separate valuation was to make them so. No matter how much value there might have been in any one of these subjects, even to the whole amount of the policy, had it been totally destroyed the defendant could not have been made liable to an amount greater than that named ill the policy as the valuation of it. Thus it was, at the incep- tion of the contract, distinguished from the other subjects of insurance and the contract so made, as to be capable of appli- cation to it alone." ^ When the valuation is placed upon the different kinds of property, it would seem that the contract was divisible, and a breach of its condition made by the insured would affect only that class of property which was the immediate subject of the act of incumbrance.^ A contract for insurance should receive a reasonable construc- tion. Such a contract is to be sustained if possible to do so.* 1 Merrill v. Ins. Co., 73 N. Y. 452, 463. 2 Clark V. Ins. Co., 6 Cush. (INIass.) 342 ; Commercial Ins. Co. v. Spankneble, 52 111. 53 ; Hailford Ins. Co. v. Walsh, 54 111. 164 ; Knight v. Ins. Co., 26 Ohio St. (KM ; Lcehner r. Ins. Co., 17 Mo. 247 ; Crook v. Ins. Co., 38 Mo. App. 582 ; Koontz V. Ins. Co., 42 Mo. 126 ; Date v. Ins. Co., 14 U. C. C. P. 549 ; Phillips v. Ins. Co., 46 U. C. Q. B. 334 ; Goring v. Ins. Co., 10 Ont. 236 ; Trench v. Ins. Co., 7 Hill (N. Y.), 122 ; Moore v. Ins. Co., 28 Gratt. (Va.) 508 ; Perry v. Ins. Co., 11 Fed. Rep. 478 ; Quarrier v. Ins. Co., 10 W. Va. 507 ; Phcenix Ins. Co. v. Law- rence, 4 Met. (Ky.) 9 ; Schuster v. Ins. Co., 102 N. Y. 260 ; Holmes v. Drew, 16 Hun (N. Y.), 491 ; 1 Phillips on Ins. 381-2 ; Wood on Ins., sect. 350 ; Flan- ders on Ins. 425. 'Phoenix Ins. Co. v. Bamd, 16 Nebr. 90; Rolker v. Ins. Co., 4 Abb. App. Dec. (N. Y.) 76 ; Reed v. Ins. Co., 95 U. S. 23. INSURABLE INTERESTS. 599 However, that there is a great conflict upon this question of divisibility of the insurance contract cannot be disputed. It is held, on the other hand, that where several distinct kinds of property are insured in the same policy, and there is a false statement in the application as to some of them, it avoids the policy as to all, as the policy is one entire and indivisible contract.^ And such contracts are generally considered one and indivisible, although there is no lien, simply for the reason that the promise is single and the consideration one and entire.^ So where a mortgagor takes out insurance on personalty and building, the building not being his, upon a written application in which the building was represented to be his, the policy is void as to both real estate and personal property.' When the rules have come to be applied to a contract on different pieces of property there has been a contrariety of opinion. It seems to be conceded in general terms that where the contract is entire, a breach of condition affects all the prop- erty at risk ; but as to what makes an entire contract there is no uniformity of opinion, and herein comes the conflict which cannot be reconciled.* Article 4. The Right of the Mortgagee to Insure for his own Indemnity. ?562. The Mortgagee has an Insurable ^563. TheNatureof His Insurance. Interest in the Property. ^ 564. Subrogation of Insurer to the Rights of Mortgagee. § 562. The Mortgagee has an Insurable Interest in THE Property. — There can be no question that a mortgagee ' Cuthbertson v. Ins. Co., 96 N. Car. 480. ' Lee V. Ins. Co., 3 Gray (Mass.), 583, 594 ; Day v. Ins. Co., 51 Me. 99 ; Bald- win V. Ins. Co., 60 N. H. 422 ; Gottsman v. Ins. Co., 56 Pa. St. 210 ; Hinman V. Ins. Co., 36 Wis. 159 ; Bowman v. Ins. Co., 40 Md. 620 ; Havens v. Ins. Co., Ill Ind. 90 ; Garver v. Ins. Co., 69 Iowa, 202 ; Plath v. Ins. Co., 23 Ttlinn. 479 ; Schumitsch v. Ins. Co., 48 Wis. 26 ; Biggs v. Ins. Co., 88 N. Car. 141 ; Todd v. Ins. Co., 11 Phila. (Pa.) 355 ; IMcGowan v. Ins. Co., 54 Vt. 211 ; ,^tna Ins. Co. v. Resh, 44 Mich. 55 ; Bleakley v. Ins. Co., 16 Grant's Ch. (U. C.) 198 ; Russ v. Ins. Co., 29 U. C. Q. B. 73. 'Essex Sav. Bank v. The Meriden Ins. Co., 57 Conn. 335. *See Merrill v. Ins. Co., 73 N. Y. 452, 459. GOO RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. has an interest separate and independent of any other inter- est, which may be the subject of insurance general or specific, and in case of loss the amount of loss which his policy covers will be paid to him.^ So a trustee, a reversioner, factor, and agent with the custody of goods, to be sold upon commission, may insure them, but with the caution that the nature of the property be distinctly specified,^ The mortgagee may insure as general owner, without disclos- ing his particular interest, unless he is questioned concern- ing it.^ Neither reason, authority, nor contract of insurance requires the mortgagee, unless interrogated, to state the nature of his interest in the property.* But when inquiry is made as to his interest, he must dis- close it, or the policy may be avoided, if his concealment is material.^ A trustee in a deed of trust in the nature of a mortgage has an insurable interest in the mortgaged property distinct from that of the mortgagor, and a conversance by the mortgagor of his interest in no way affects the trustee's right to insure his interest.'' If the mortgagee obtains insurance according to agreement with the mortgagor, the mortgagor paying the premiums, then there is an implied obligation that the insurance money, when paid, shall be applied to the mortgage debt.^ An executory contract by a mortgagee to convey or assign his interest in a mortgage does not deprive him of the right to insure, nor limit 1 Haley v. Ins. Co., 120 Mass. 292; Fox v. Ins. Co., 52 Me. 333; Kellar v. Ins. Co., 7 La. Ann. 29 ; Foster v. Van Reed, 70 N. Y. 19. 2 Carpenter v. Prov. Washington Ins. Co., 16 Pet. (U. S.) 495. 3 Norwich F. Ins. Co. v. Boomer, 52 111. 442. *Buck V. Ins. Co., 76 Me. 586. See, also, Curry v. Ins. Co., 10 Pick. (Mass.) 535, 542. * Richardson v. Ins. Co., 46 Me. 394 ; Campbell v. Ins. Co., 98 Mass., 381, 403 ; Williams v. Ins. Co., 107 Mass. 379. «Dick V. Ins. Co., 10 Mo. App. 370, affirmed in 81 Mo. 103. ' Waring v. Loder, 53 N. Y. 581 ; Holbrook v. Ins. Co., 1 Curtis, C. C. 193 ; Clinton v. Ins. Co., 45 N. Y. 454 ; Honore v. Ins. Co., 51 111. 409 ; Stinchfield v. Milliken, 71 Me. 567 ; Pendleton v. Elliott, 67 Mich. 496. INSURABLE INTERESTS. 601 his right of recovery to the amount of the unpaid purchase- money/ And when he agrees to pay the premium if the mort- gagor does not, he will be bound to do it.^ § 563. The Nature of His Insurance. — In insuring the mortgagee's interest, the insurer does not insure the debt, but the interest of the mortgagee in the property, upon the safety of which depends the security.^ So the insurance of a specific property to secure a particular interest, covers a loss happening by the destruction of such property only as so held in that particular right, and to the extent only of the injury to that interest.* It is the interest in the property which gives the right to obtain insurance, and the ownership of the debt, a lien upon the property, creates that interest.* The insurable interest of the mortgagee is measured by the value of his lien, if this does not exceed the value of the property.^ He may recover according to his interest at the time of the loss.'' Upon payment of the mortgage debt, his interest is extin- guished ; upon part payment the interest is extinguished pro tanto.^ § 564. Subrogation of Insurer to the Rights of Mort- gagee. — The interest of the mortgagee in an estate is entirely separate as an insurable interest from that of the mortgagor ; ^ ' Haley v. Ins. Co., 120 Mass. 292. See 32 Cent. L. Jour. 506. ''St. Paul Fire and Marine Ins. Co. v. Upton (N. Dak.), 50 N. AV. Rep. 702. 'Excelsior F. Ins. Co. v. Ins. Co., 55 N. Y. 343. * Smith V. Ins. Co., 17 Pa. St. 253. See, also, Kernochan v. Ins. Co., 17 N. Y. 428; Carpenter r. Prov. Washington Ins. Co., 16 Pet. (U. S.) 495, 501. * Excelsior F. Ins. Co. v. Ins. Co., 55 N. Y. 343, 357. "Sussex Co. Mut. Ins. Co. v. Woodruflf, 26 N. J. L. 541 ; Kernochan r. Ins. Co., 5 Duer (N. Y.), 1 ; 17 N. Y. 428; Tillou v. Ins. Co., 7 Barb. (N. Y.) 570; Slocovich V. Ins. Co., 13 Daly (N. Y.), 264. ^Mix V. Ins. Co., 9 Hun (N. Y.), 397. 8 Sussex Co. M. Ins. Co. v. Woodruff, 26 N. J. L. 541. ® Carpenter r. Prov. Washington Ins. Co., 16 Pet. (U. S.) 495 ; Foster r. Van ' Reed, 70 N. Y. 19, overruling 5 Hun (N. Y.), 321 ; Excelsior Ins. Co. v. Ins Co., 55 N. Y. 359 ; Cone v. Ins. Co., 60 N. Y. 619 ; Honore v. Ins. Co., 51 111. 409. ()02 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. and in case of loss the insurer in most of the States having paid the mortgagee the amount of the debt, may be subrogated to the rights of tlie mortgagee. Where there is a stipulation for such subrogation as one of the conditions of the policy, there can be no question of its validity in every jurisdiction.^ This rule is founded upon the analogy of the situation of the insurer to that of a surety.^ The insurer is entitled to sub- rogation after paying the amount to the mortgagee, and may then recover on the note.^ However, when the mortgagor pays the premium or agrees to pay, and this agreement is known by the insurer, he is not entitled to subrogation in the place of the mortgagee, as a mere matter of equity, in the absence of a stipulation therefor in the policy.* It appears, however, that if the mortgagee agrees to allow the amount thus received to be applied to the mortgage debt, the equitable liability of the mortgagee to the mortgagor for the money received is a sufficient consideration, and an action may be maintained on such promise.^ The same law governs a trustee as to subrogation in this re- spect as applies to a mortgagee. Hence, when a trustee insures his ow^n interest in the mortgaged property, and the policy of insurance stipulates that he shall, in case of loss, assign to the » Excelsior Ins. Co. v. Ins. Co., 55 N. Y. 359 ; Cone v. Ins. Co., 60 N. Y. 624 ; ^tna Ins. Co. v. Tyler, 16 Wend. (N. Y.) 385 ; Springfield Ins. Co. v. Allen, 43 N. Y. 392 ; Hastings v. Ins. Co., 73 N. Y., 141 ; Croft v. Moore, 9 Watts (Pa.), 451 ; Eddy v. Traver, 6 Paige (N. Y), 521 ; Hart v. Western Railroad Co., 13 Met. (Mass.) 99 ; Thornton v. Ins. Co., 71 Pa. St. 2.34, 236 ; Sussex Co. Ins. Co. V. Woodrulf, 26 N. J. L. 541 ; Hall r. Railroad Co., 13 Wall. (U. S.) 367 ; McDonald v. Black, 20 Ohio, 185 ; Honore r. Ins. Co., 51 111. 409. ^Honorct). Ins. Co., 51 111. 409; Norwich F. Ins. Co. ?•. Boomer, 52 111. 442 ; Dick v. Ins. Co., 81 Mo. 103 ; Bound Brook Mut. Ins. Co. v. Nelson, 41 N. J. Eq. 485 ; Sussex Co. Mut. Ins. Co. v. Woodruff, 26 N. J. L. 541, 555. ^Excelsior Fire Ins. Co. v. Ins. Co., 55 N. Y. 343; Kernochan v. Ins. Co., 17 N. Y. 428 ; /Etna Ins. Co. v. Tyler, 16 Wend. (N. Y.) 385, 397 ; Foster, v. Van Reed, 70 N. Y. 19; De Wolf v. Ins. Co., 16 Hun (N. Y.), 116; Concord Mut. Fire Ins. Co. v. Woodbury, 45 Me. 447 ; Callahan v. Linthicum, 43 Md. 97. * Kernochan v. Ins Co., 17 N. Y. 428, 441 ; Cone v. Ins. Co., 60 N. Y. 619, 624. * Callahan v. Linthicum, 43 Md. 97. I INSURABLE INTERESTS. 603 insurer an interest in the deed of trust equal to the amount of loss paid, provided such assignment shall in no way prejudice the beneficiary's claim in the trust to recover the full amount of his loan and proper charges, the trustee cannot recover for a loss until he shall have performed his agreement to assign, and that in such case the subrogation clause is material, and there can be no recovery against the insurer till this condition is complied with, even though the mortgaged property is not worth the amount of the debt secured less the amount the in- sured is liable to pay.^ In Massachusetts the mortgagee is entitled, in case of loss, before payment of the mortgage, to recover the amount of the loss of the insurance to his own use without his assigning his mortgage or any part thereof to the insurer.^ On payment to the mortgagee, according to stipulation, the insurance company does not become subrogated to his rights unless it is in fact not liable on the policy as against the mortgagor.^ To entitle the insurance company to an assign- ment and subrogation, it must claim such right in good faith, and its claim based upon a state of facts which, under the con- tract of insurance, would entitle it to exemption from liability. The rights of a party insured cannot be made to depend upon the arbitrary claim of the insurer.* ^ Dick V. Ins. Co., 81 Mo. 103, opinion by Norton, J. '^Kingr. State, 7 Cash. (Mass.) 1. See, also, Graves v. Ins. Co., 10 Allen (Mass.), 281. 3 Traders' Ins. Co. v. Race (111.), 31 N. E. Rep. 392, affirming 29 N. E. Rep. 846. * Van Arman v. Byington, 38 111. 433 ; Furlong v. Cox, 77 111. 293 ; Daven- port V. Ledger, 80 111. 574. 604 relative rights of the parties to insurance. Article 5. Enforcement of Contract in Case of Loss. § 565. Parties. § 572. Condition Against Other Insur- g 566. Right of Mortgagor to Have ance. tiie Money Applied on His § 573. Waiver by the Insurer. Debt. § 574. The Mortgagee Must Pay the § 567. Subrogating the Insurer to Premium of Insurance on His the Rights of the Mortgagee Own Account. by Agreement. § 575. Statutory Provisions tliat the § 568. Independent Contract to Pro- Mortgagee shall have Pre- tect the Mortgagee Against miums Paid by Him Ee- Actsof Mortgagor. funded. ^ 569. The Mortgagee May Assign § 576. Under Condition. His Insurance to the In- § 577. The Mortgagee May Become surer. an Insurer. § 670. Application of Money When § 578. Rebates on Account of the the Debt is Not Due. Premature Termination of the i 571. Protection of Mortgagee Risks. Against Alienation by Mortgagor. § 565. Parties. — A contract of insurance is one of in- demnity, which requires an insurable interest in the property to give it vahdity. The mortgagor who obtains the insurance, pays the premium, and takes a policy in his own name, is the party insured, although, in case of a loss, payment is to be made to the mort- gagee.^ The contract, nevertheless, is with the owner, for the insurance of the property, and not with the mortgagee, for the insurance of his interest.^ The direction to pay the sum in which the insurance was effected to the mortgagee, in case of loss, is collateral to the principal contract, and is not an assignment of the policy. The legal effect of such a clause in favor of a third person in a policy, in terms between the insurer and the owner, is that of a direction in advance as to the mode of payment, which, when made, is performance of the contract in the man- ner assented to by the insured, and discharges the obligation 1 Sanford v. Ins. Co., 12 Cush. (Mass.) 5-41. » Grosvenor v. Ins. Co., 17 N. Y. 391 ; Bidwell v. Ins. Co., 19 N. Y. 179. INSURABLE INTERESTS. 605 pro tanto} Judge Depue says : " Under such a direction, if assented to by the insurer, the person in whose faver the ap- pointment is made acquires equitable rights, which the in- surer is bound to regard, but the contract with the insured is not thereby merged or extinguished. If the appointment be in favor of a mortgagee, it will not operate pro tanto as an ex- tinguishment of the mortgage debt. The mortgagee may be content with the security of the remaining property in his mort- gage, or with his remedy on the bond. The interest of the owner in the property, and in having the mortgage debt satis- fied, remains, notwithstanding the direction in the policy, to pay the insurance to the mortgagee in case of a loss. The interest so remaining in the owner is an insurable interest for the protec- tion of which he may resort to his contract with the insurer." ^ So the owner who insures his property by a policy payable to a mortgagee in case of loss, may maintain an action on the policy in his own name, by the consent of the mortgagee, and such consent may be shown at the trial, or even before judg- ment is entered.'^ And an action may be maintained in the name of the party with whom the contract was made, with or without the consent of the person in whose favor the appoint- ment is made, in all cases where an insurable interest remains in such party.* There are cases in conflict with this doctrine, but, in the main, they are cases where the insured had parted with his insurable interest, or made a regular assignment of the policy, which had been ratified by the insurer, under its charter or by-laws, or the question has been as to the right of the person to whom the insurance money is appointed to be paid to sue in his own name. ' Fogg r. Ins. Co., 10 Cush. (Mass.) 346 ; Hale v. Ins. Co., 6 Gray (Mass.), 169 ; Turner v. Ins. Co., 109 Mass. 573 ; Grosvenor v. Ins. Co., 17 N. Y. 394. ' INIartin v. Ins. Co., .38 N. J. L. 140, 143. * Jackson v. Ins. Co., 5 Gray (Mass.), 52 ; Farrow v. Ins. Co., 18 Pick. (Mass.) 53 ; Turner v. Ins. Co., 109 Mass. 508 ; Martin v. Ins. Co., 38 N. J. L. 140. * :srartin r. Ins. Co., .38 N. J. L. 140, 143. See, also, Davis v. Boardman, 12 Mass. 80; Ward ?-. Wood, 13 Mass. 5.39; Rider v. Ins. Co., 20 Pick. (Mass.) 259; Ketcham v. Ins. Co., 1 Allen (N. Bruns.), 136. 606 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. The mortgagor can, as held by all the courts, with the consent of the mortgagee, sue on the policy in his own name.^ If the policy has been taken by the mortgagee, he is the party to bring suit ; ^ but the amount of his insurance must not exceed his interest.^ So if the policy has been assigned to him.* Under the code of some of the States, the mortgagee may maintain the suit in his own name, as he is the real party in interest.^ But this is not the rule when the code practice does not prevail." At common law the assignee of the policy cannot maintain an action upon it in his own name, unless authorized so to do by general law, or by the act of incorporation of the insurance company ; the suit must be brought in the name of the insured for the use of the assignee.^ If, however, the mortgagee is recognized as a distinct party in interest, and not a mere appointment to pay the loss to him, he may sue in his own name.^ If a mortgagee takes out a policy in favor of the mortgagor, with an agreement that, in case of loss, the amount may be applied on the mortgage debt, the mortgagor must bring the suit.^ If the policy taken out by the mortgagor for the benefit of the mortgagee, covers property in part not subject to the mort- 1 Patterson v. Ins. Co., 64 Me. 500 ; Continental Ins. Co. v. Hulman, 92 111. 145 ; IMeriden Sav. Bank v. Ins. Co., 50 Conn. 396. 2 Chamberlain v. Ins. Co., 55 N. H. 249 ; Westchester Ins. Co. v. Foster, 90 111. 121. » Hopkins ]\Ianuf. Co. v. Ins. Co., 48 Mich. 148 ; Hartford Fire Ins. Co. v. Davenport, 37 Mich. 609. * Hadley v. Ins. Co., 55 N. H. 110. *Hammcl v. Ins. Co., 50 Wis. 240; Strohn v. Ins. Co., 33 Wis. 648. « Fire Ins. Co. v. Felrath, 77 Ala. 194. ' New England Fire & M. Ins. Co. v. Wetmore, 32 111. 221 ; 111. Fire Ins. Co. V. Stanton, 57 111. 354 ; Norwich Fire Ins. Co. v. Boomer, 52 111. 442 ; Con- cord Union Mut. Ins. Co. v. Woodbury, 45 Me. 447. 8 Hartford Fire Ins. Co. r. Olcott, 97 111. 439 ; Hastings v. Ins. Co., 73 N. Y. 141 ; Westchester F. Ins. Co. v. Foster, 90 111. 121 ; Meriden Sav. Bank v. Ins. Co., 50 Conn. 396. 9^tna Ins. Co. v. Baker, 71 Ind. 102. INSURABLE INTERESTS. 607 gage, no one but the mortgagor can sue upon it.^ Under the code practice, however, in some of the States, persons having several interests in such a contract may join in the suit.^ In some poUcies a provision is made that the insurer may rebuild or pay the loss. Under such a policy, after the insurer has elected to rebuild, but fails so to do, the mortgagor may in his own name enforce specific performance. The action is upon the contract to rebuild, and not strictly upon the policy, and the cause of action is then in the mortgagor, and not in the mortgagee.^ Generally under the code practice, the mortgagee may sue alone where his claims exceed the amount of the insurance,* and if the mortgagor claims any part of the insurance money, the insurer may protect itself by interpleader. But the better practice is for the mortgagor and the mortgagee both to sue.'"' Whore the statute declares that the real party in interest may sue, in such policies the mortgagee may bring the suit alone. Thus, a policy w^hich contains this clause, " loss, if any, payable to mortgagees as their interests may appear," author- izes the mortgagee to bring suit alone in his own name.^ § 566. Right of Mortgagor to Have the Money Applied ON His Debt. — When the mortgagor takes a policy on the property payable to the mortgagee, in case of loss, an inf[3lied obligation arises therefrom that the insurance money, when paid to the mortgagee, shall apply on the mortgage debt ; '^ and ' Stearns v. Ins. Co., 124 Mass. 61. ^Strohn v. Ins. Co., 33 Wis. 648. * Heilmann v. Ins. Co., 75 N. Y. 7. ♦ Hammel v. Ins. Co., 50 Wis. 240 ; Cone v. Ins. Co., 60 N. Y. 619 ; Martin w. Ins. Co., 38 N. J. L. 140 ; Coates v. Ins. Co., 58 Md. 172 ; Travelers' Ins. Co. v. Ins. Co., 1 N. Dak. 151. ^SeeWinne v. Ins. Co., 91 N. Y. 185; Appleton Iron Co. r. Ins. Co., 46 Wis. 23. «Bartlett v. Ins. Co., 77 Iowa, 86. See, also, Hall v. Ins. Co., 64 N. H. 405. ^ ' Waring v. Loder, 53 N. Y. 581 ; Concord Union Mat. Fire Ins. Co. v. Woodbury, 45 Me. 447 ; Clark v. Wilson, 103 Mass. 219, 221 ; King v. Ins. Co., 7 Cush. (Mass.) 1. I 608 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. even if the mortgagee procures insurance for the benefit of both parties, he must apply it to the debt.* However, when the mortgagee insures his own interest with- out any agreement between him and the mortgagor therefor, and a loss accrues, the mortgagor is not entitled to the allow- ance of the insurance paid upon such loss, to be applied to the reduction or discharge of his mortgage debt, but the mort- gagee may recover th^ whole amount due.^ But when the mortgagor insures the property for the benefit of the mortgagee, or the policy provides that the mortgagee may insure for his own benefit, at the expense of the mort- gagor, then the insurance money must be applied to the debt.* In the absence of any such contract the mortgagee can insure only his own interest, and for his own benefit.* § 5 07. Subrogating the Insurer to the Rights of the Mortgagee by Agreement. — In policies where the mortgagor insures for the benefit of the mortgagee, a stipulation may be inserted subrogating the insurer, after payment of loss, to the rights of the mortgagee. Thus, where the policy provides that the amount due for a loss after a forfeiture shall not be a fund for the payment of the mortgage debt, but that, upon payment of the loss, the mortgage shall be a fund for tlie reimbursement of -the insurer, it is valid ; the contract is, that after a forfeiture the insurance shall be exclusively for the benefit of the mort- gagee ; that the mortgagor and those claiming under him shall have no beneficial interest in the policy, and that the payment to the mortgagee shall not discharge the mortgage, but subro- gate the insurer to the mortgagee's rights in it,^ and the owner 1 Buflalo Steam-Engine Works v. Ins. Co., 17 N. Y. 406 ; Clinton r. Ins. Co., 45 N. Y. 467. 2 White V. Brown, 2 Cush. (Mass.) 413 ; King v. Ins. Co., 7 Cash. (Mass.) 1 ; Clashing v. Thompson, 34 Me. 496. nVilcoxr. Allen, 36 Mich. 160; Fowley v. Palmer, 5 Gray (Mass.), 549; Mix V. Hotchkiss, 14 Conn. 32. * King r. Ins. Co., 7 Cush. (Mass.) 1 ; Dobson v. Land, 8 Hare, 216 ; Bellamy V. Briokenden, 2 Johns & H. 137 ; Russell r. Southard, 12 How. (U. S.) 139, 157 ; Ely i: Ely, 80 111. 532 ; Clark v. Wilson, 103 Mass. 219, 221. * Davis V. Ins. Co., 10 Allen (Mass.), 113: Springfield Ins. Co. v. Allen, 43 INSURABLE INTERESTS. 609 of redemption cannot redeem without paying the full amount of the debt to the insurer.^ If the policy stipulates that the mortgagee shall assign the mortgage to insurers, after payment of loss, he must comply with this condition before he can recover.^ Such a policy in- suring the interest of the mortgagee is an absolute and inde- pendent coijtract inuring to his sole benefit, and he is free from liability to account in respect of it to tke mortgagor or his assigns,^ and, under the stipulation in the policy the insurer is entitled to be subrogated to his rights and interest after pay- ment of the loss/ No arrangement, agreement, or statement by the insured could change the meaning and force of the stipulation.^ It is settled that when a mortgagee is insured at his own expense, upon his motion, and for his sole benefit, and a loss happens to the property, the insurer in making compensation is entitled to an assignment of the insured — that is, the insurer may be subrogated to the right of the mortgagee.^ But in Massachusetts, where there is no express stipulation for subrogation, the insurer is not entitled to subrogation from a mortgagee who had insured as such at his own expense and for his own benefit/ The insurers upon paying a loss upon a policy taken out by the mortgagor payable to the mortgagee, or assigned to him, have no right to be subrogated to the rights of the mortgagee.® N. Y. 389 ; Fos^ter v. Van Reed, 70 N. Y. 19 ; Thornton v. Ins. Co.. 71 Pa. St. 234 ; Honore v. Ins. Co., 51 111. 409 ; Ulster County Savings Institution v. Leake, 73 N. Y. 161. ' Allen V. Ins. Co., 132 Mass. 480. * Dick r. Ins. Co., 10 Mo. App. 376 ; Foster v. Van Reed, 70 N. Y. 19. nvilljams v. Ins. Co., 107 Mass. 377 ; Smith v. Ins. Co., 17 Pa. St. 253 ; Car- penter V. Providence Washington Ins. Co., 16 Pet. (U. S.) 495. * .Etna Ins. Co. v. Tyler, 16 Wend. (N. Y.) 385 ; Norwich Ins. Co. v. Boomer, 52 111. 442 ; Cone v. Ins. Co., 60 N. Y. 619, 624. ^Clinton v. Ins. Co., 45 N. Y. 461 ; ^tna Fire Ins. Co. v. Tyler, 16 Wend. (N. Y.) 385. « Excelsior Fire Ins. Co. v. Ins. Co., 55 N. Y. 359 ; Cone v. Ins. Co., 60 N. Y. 624. ' King V. Ins. Co., 7 Cush. (Mass.) 1 ; Graves v. Ins. Co., 10 Allen (:Mass.), 281. «Cone V. Ins. Co., 60 N. Y. 619, 624 ; Mercantile Mut. Ins. Co. v. Calebs, 20 N. 39 610 relative rights of the parties to insurance. § 568. Independent Contract to Protect the Mortgagee Against Acts of Mortgagor. — Whether the mortgagee can make an independent contract to protect himself against the acts of the mortgagor is not decided the same way by all the courts. In New York the mortgagee may make a contract with the insurer, that the loss shall be payable to the mortgagee, and annex to the polic}^ a clause agreeing that the insurance as to the interest therein of the mortgagee only shall not be invali- dated by any act or neglect of the mortgagor or owner, and that whenever the insurer shall pay the mortgagee any sum for loss, claiming that as to the mortgagor or owner no liability existed therefor, the insurer shall be subrogated to all the rights of the mortgagee in any securities held for the mortgage debt, not affecting, however, the right of the mortgagee to recover the whole of the claim ; such agreement operates as an independent insurance of the mortgagee's interest, and gives him the same benefit as if he had taken out a separate policy.^ In Connecticut such an agreement is regarded as a contract relating to an existing policy, by which certain conditions are dispensed with and certain privileges are secured to the insurers which they would not otherwise have, and the mortgagee is made a party to the contract of insurance.^ In Massachusetts the view of the New York courts is repudi- ated and the mortgagee cannot maintain an action against the insurer. The New York doctrine that the stipulation for sub- rogation to the legal rights of the mortgagee, upon payment to him to the extent of such payment is a consideration, is not concurred in by the Massachusetts courts.^ But if there be no stipulation for the mortgagee's protection the mortgagor may so violate the provisions of the policy as Y. 173 ; Kernochan r. Iuf. Co., 17 N. Y. 428. See Niagara F. Ins. Co. v. Scammon (111.), 28 N. E. Rep. 919. ' Hastings v. Ins. Co., 73 N. Y. 141 ; Ulster County Savings Inst. v. Leake, 73 N. Y. 161. 2 Meriden Sav. Bank v. Ins. Co., 50 Conn. 396. ^ Davis V. Ins. Co., 135 Mass. 251. INSURABLE INTERESTS. 611 to vitiate the insurance as to himself and to the mortgagee.' If the pohcy be assigned to the mortgagee and he makes a new contract of insurance, such as giving a deposit note and becoming Kable to assessments, then he is protected against the acts of the mortgagor.^ § 509. The Mortgagee May Assign His Insurance to the Insurer. — If the mortgagee takes a pohcy of insurance upon his interest, stipulating that, in case of loss, he will assign to the insurer an interest in the mortgage equal to the amount of loss -paid, the insurer is entitled to the subrogation according to the agreement. The consent of the mortgagor is not essen- tial to the validity of such a provision of subrogation. Hence, when such a policy has been issued by the insurer, and loss having occurred, the insurer pays to the mortgagee the amount thereof, together with the premiums paid, and takes an assign- ment of the mortgage, in an action to foreclose the mortgage, the mortgagor or his grantee cannot claim an application of the amount of the insurance as payment upon the mortgage.^ Such contract embraces both mortgage and bond, though the bond is not expressly named, because in the assignment of the mortgage it is evident that the parties meant to include the bond.* Such contract of insurance is paramount to, and inde- pendent of, the contract, between the mortgagor and mortgagee, and the rights of the insurer cannot be thereby affected.'^ § 570. Application of Money When the Debt Is Not Due. — The money paid to a mortgagee by the insurer in pur- suance to an agreement with the mortgagor cannot be applied by him to the payment of the debt secured by the mortgagee if it be not due, without consent of the mortgagor. So where the mortgaged premises are injured by fire and the amount of ' Van Buren v. Ins. Co., 28 Mich. 398 ; Franklin Savings Inst. v. Ins. Co., 119 Mass. 240; Loring v. Ins. Co., 8 Gray (Mass.), 28; Fogg v. Ins. Co., 10 Cush. (Mass.) 337. 2 Foster v. Ins. Co., 2 Gray (Mass.), 216. ' Foster v. Van Reed, 70 N. Y. 19. * Springfield F. & M. Ins. Co. v. Allen, 43 N. Y. .394. 5 Waring v. Loder, 53 N. Y. 581 ; Thornton v. Ins. Co., 71 Pa. St. 234. 612 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. loss is paid by the insurer in pursuance of such agreement to a first mortgagee, who pays the amount to the mortgagor to be aj^phed in repairing the premises so as to make them as valu- able as before the loss, and he so applies it, a holder of a sec- ond mortgage on the premises has no equity to have the amount received applied in reduction of the debt secured by the mortgage.^ § 571. Protection of Mortgagee Against Alienation ■BY Mortgagor. — One of the conditions of most policies is that in case of any change or transfer of title in the property in- sured the property shall be void and cease. But when the in- surance is for the benefit of the mortgagee, he may be pro- tected from this condition by stipulation. So when the mort- gaged premises are sold prior to their injury by fire, and the amount of the insurance money paid to the mortgagee by the insurer, it cannot be considered a payment on the mortgage.^ Where a special interest, rather than the general property, is the subject of insurance, no such condition is necessary to the protection of the insurer, for the reason that with a loss of interest the insurance ceases,^ and an interest in the policy does not pass by a transfer of the interest insured.* When a special interest is insured, as in favor of a mort- gagee, and it is designed to save the policy from the effect of a breach of the condition forbidding a change of title, it is done by a special clause of exception.^ The object of such special stipulation to protect the mort- gagee's interest is to secure the insurance of his interest as mortgagee, and to avoid his defeat by any sale or transfer of the property ; and by a fair interpretation of the contract it means that his right to recover shall not be vitiated by any of the natural consequences or incidents of a sale and transfer.^ 1 Gordon v. Bank, 115 Mass. 588. 2 Springfield F. & M. Ins. Co. v. Allen, 43 N. Y. 389. Compare King v. State, 7 Cush. (Mass.) 1. 3 Carpenter v. AVashin^on Prov. Ins. Co., 16 Pet. (U. S.) 495. * Columbia Ins. Co. v. Lawrence, 10 Pet. (U. S.) 507. ^Graves v. Ins. Co., 10' Allen (Mass.), 281. See, also, Grosvener v. Ins. Co., 17 N. Y. 391 : Jackson v. Ins. Co., 23 Pick. (Mass.) 418. «City Five Cents Savings Baiik v. Ins. Co., 122 Mass. 165, 167. I INSURABLE INTERESTS. 613 The mortgaging of insured property, even to secure a debt not due, is an increase of the risk and avoids the policy under the condition, and it makes no difference tliat a right of action had not accrued upon the mortgage.^ Where the mortgaged property is insured while involved in litigation, after the commencement of foreclosure proceedings for the benefit of the mortgagee and his assigns, a loss occur- ring after the foreclosure sale, the insurer cannot defend on the ground of change of interest or ownership of the property, ^ because such proceedings and sale must have been contem- plated wdien the policy was issued for the benefit of the mort- gagee, and because the insurer, cognizant of the situation, did not cancel the policy, and retained the unearned premium, and is therefore estopped to deny his liability.^ § 572. Condition Against Other Insurance. — An insur- ance by the mortgagee does not afiect the mortgagor's rights. A condition " if the assured now has, or shall hereafter make, any other insurance on the property hereby insured, or any part thereof, whether valid or not, without the consent of the company written hereon," this policy shall be void, does not avoid a policy taken out by the mortgagor, because the mort- gagee had an insurance on his interest in the same property ; because the mortgagee acted for himself and not in any way as the agent of the mortgagor.* A policy of insurance was issued to the mortgagor, made payable in case of loss to the mortgagee. The policy provided that if the mortgagor should procure any further insur- ance, without the written consent of the insurer, the jDolicy should be null and void, and that in case of such further in- surance the assured should recover only a pro rata proportion of the actual loss. The mortgagor, after the issue of the policy, made a second mortgage on the property, without the consent ^ Lee V. Ins. Co., 79 Iowa, 379. = German Ins. Co. v. Churchill, 26 IlL App. 206. ^ Reaper City Ins. Co. v. Jones, 62 111. 458 ; Williamsburg Ins. Co. v. Gary, '83 111. 453 ; Hollis v. Ins. Co., 65 Iowa, 454. * Titus V. Ins. Co., 81 N. Y. 410. 614 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. of the company, to one who afterward entered to foreclose, and who procured additional insurance in another company on the same, also without such consent. Subsequently the property was injured by fire, and the amount of the loss was adjusted and found to be less than the first mortgage. The mort- gagor in the proofs of loss stated that there was other in- surance on the property, referring to the secpnd policy. It was held, in an action by the first mortgagee, that he was entitled to recover for the full loss ; and that the statement in the proofs of loss did not defeat such right.^ This is upon the ground that the second mortgagee was a stranger as to the rights of the parties to the first policy ; the rights of the parties to the first policy are not to be defeated or limited by the acts of strangers, for which they are not re- sponsible, and of which they have no knowledge."^ Where a mortgagee insures his interest in the property with- out the consent of one of the mortgagors, who was a joint owner of the property, and who on the next day insured his interest in another company, being still ignorant of the prior insurance, the insurance company cannot avoid the policy because of existing or after-acquired insurance, which was against the stipulation in the policy ; the assured did not make any other contract of insurance.^ And it is the general rule that a policy made by a mortgagor, to cover the interest of the mortgagee (which the latter had already insured) without his knowledge or consent, is not other insurance.* And when the mortgagee acts for himself and in his own interest, his procur- ing additional insurance cannot be regarded as the acts of the mortgagor so as to violate the clause of his policy. Such is not other insurance within the meaning of the policy.^ 1 City Five Cents Sav. Bank v. Ins. Co., 122 Mass. 165 ; Niagara F. Ins. Co. t'. Scammon (111.), 28 N. E. Rep. 919. 2 Nichols V. Ins. Co., 1 Allen (Mass.), 6.3. ^ Carpenter v. Ins. Co., 61 Mich. 635. See, also, Weiss' Appeal, 13.3 Pa. St. 84. * Johnson v. Ins. Co., 1 Holmes, C. C. 117. See, also, Phillips v Carpenter, 79 Iowa, 600. 5 Titus V. Ins. Co., 81 N. Y. 415, 416. See, also. Fox r. Ins. Co., 52 Me. 3.33 ; Williams v. Ins. Co., 15 La. Ann. 651 ; Norwich Ins. Co. v. Boomer, 52 111. 442; INSURABLE INTERESTS. 615 When it is stipulated that the mortgagor shall procure insur- ance in favor of the mortgagee, the mortgagee will then have an equitable lien on other insurance taken out by the mort- gagor in favor of third parties/ § 573. Waiver by the Insurer. — The insurer can waive any of the conditions in the policy. Where there has been a breach of a condition in an insurance policy, the insurance company may not take advantage of such breach and claim a forfeiture, if in any negotiation or transaction with the insured, after knowledge of the forfeiture, the insurer recognizes the continued validity of the policy or does acts based thereon, or requires the insured by virtue thereof to do some act or incur some trouble or expense, the forfeiture is as matter of law waived. Such a waiver need not be based upon any new agreement or an estoppel.^ Thus, the policy contained a con- dition declaring it void in case foreclosure proceedings were commenced against the insured property. Such proceedings having been commenced, the policy was avoided, but the in- surers, after a loss and after they had notice of the proceed- ings, required the insured to appear and be examined, and as they had the right to make such examination only by virtue of the policy, this was a recognition of its validity, and was a waiver of the forfeiture.^ § 574. The Mortgagee Must Pay the Premium of Insur- ance ON His Own Account. — If a mortgagee obtains insurance Tyler v. Ins. Co., 12 Wend. (N. Y.) 507 ; Nichols v. Ins. Co., 1 Allen (Mass.), 63; Burbank v. Ins. Co., 2-4 N. H. 550 ; Burton r. Ins. Co., 12 Grant {U. C), 150 ; .Etna Fire Ins. Co. v. Tyler, 16 Wend. (X. Y.) 380 ; Carpenter v. Ins. Co., 61 Mich. 635. » Wilson V. Hakes, 36 111. App. 539. ^ Allen w.Ins. Co., 12 Vt. 360; Webster v. Ins. Co., 36 Wis. 07 ; Cans v. Ins. Co., 43 Wis. 109 ; Insurance Co. v. Norton, 96 U. S. 234 ; Goodwin v. Ins. Co., 73 N. Y. 480, 493 ; Prentice v. Ins. Co., 77 N. Y. 483 ; Brinks. Ins. Co., 80 X. Y. 108 ; Titus v. Ins. Co., 81 X. Y. 410, 419. See, also, Lloyd v. Crispe, 5 Taunt. 249 ; Doe v. Miller, 2 Car. & P. 348. 3 Titus V. Ins. Co., 81 X. Y. 410. See, also, Gans r. Ins. Co., 43 Wis. 109; Lasher v. Ins. Co., 55 How. Pr. (X. Y.) 318 ; Sherman r. Ins. Co., 46 X. Y. 526 ; vVan Schoick v. Ins. Co., 68 X. Y. 4.39 ; Pennsylvania Fire Ins. Co. v. Kittle, 39 Mich. 51 ; Lyon v. Ins. Co., 55 Mich. 141 ; Carpenter v. Ins. Co., 61 Mich. 635. 616 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. on his own account, without any stipulation that the mortgagor shall pay the premium, he cannot charge it to the mortgagor/ So, if the premium of such insurance is not to be charged to the mortgagor, the mortgagee cannot claim the benefit of a payment of the insurance.^ When the mortgage stipulates that, upon the failure of the mortgagor to keep up the insurance for the benefit of the mort- gagee, the mortgagee may insure, upon failure of the mortgagor to insure, the mortgagee may take out a policy on the property and charge the same to the mortgagor ; ^ but he cannot charge for a larger amount than is stated in the condition.* Whatever insurance the mortgagee takes out upon his own account, with no agreement with the mortgagor, nor stipula- tion in the mortgage that the mortgagor shall pay the premium, he must pay it himself.^ If, however, the policy contains no stipulation for subroga- tion in case of payment to the mortgagee, and there is any arrangement between the mortgagor and mortgagee, either verbal or written, by which the mortgagor becomes liable to pay for the insurance, he is entitled to the benefit thereof, and to have the insurance applied in liquidation of the mortgage debt 2oro tanfo in case of loss. His right in this respect does not depend upon the fact that he has paid for the insurance, nor whether the mortgagee procured the insurance, intending to look to the mortgagor for reimbursement of the premium, but it depends upon whether he is liable to the mortgagee therefor under any agreement, express or implied.^ ^Dobson V. Land, 8 Hare, 216; Nordyke r. Gery. 112 Ind. 535 ; Saunders v. Frost, 5 Pick. (Mass.) 259^ 2 Pendleton v. Elli(itt, (37 Mich. 490 ; Insurance Co. v. Woodbury, 45 Me. 447; White v. Brown, 2 Cush. (Mass.) 412; Stinchfleld ?'. Milliken, 71 Me. 567. 'Overby v. Build. & Loan Asso., 81 N. Car. 56; Fowley v. Palmer, 5 Gray (Mass.), 549; Barthell v. Syverson, 54 Iowa, 160. * Conover v. Grover, 31 N. J. Eq. 539. 5 Pierce v. Faunce, 53 Me. 351 ; Clark v. Smith, Saxt. (N.J. Eq.) 121 ; Faure V. Winans, Hopk. (N. Y.) 283. « Pendleton v. Elliott, 67 Mich. 496 ; Cone v. Ins. Co., 60 N. Y. 619, 624 ; Kernochan v. Ins. Co., 17 N. Y. 428, 441. insurable interests. 617 § 575. Statutory Provisions that the Mortgagee shall HAVE Premiums Paid by Him Refunded. — In Connecticut it is provided by statute that premiums paid on insurance of any property by the mortgagee, for insuring his interest therein against loss by fire, shall be deemed to be a part of the mort- gage debt, and shall be refunded by him before he can be re- quired to release his mortgage.^ So in England a statute provides that the premiums paid by the mortgagee, which, by the terms of the deed should be paid by the mortgagor on the insurance, shall be added to the prin- cipal sum secured by the mortgage.^ § 576. Under Condition. — The mortgagee has no right to add the cost of insurance of his interest to the debt, where there is no condition, and no direct covenant, that the mortgagor shall keep the premises insured for the benefit of the mort- gagee, and in case of default the latter may insure at the former's expense. The rule is the same under a condition as under a direct covenant.^ Neither has the mortgagee any right to add the cost of repairs to the mortgage debt, unless a stipulation so declares.* §577. The Mortgagee May Become AN Insurer. — Where the mortgagee charges the mortgagor with premiums for an insurance for a certain time as part of the loan, and includes the amount in the mortgage as a part of the principal, he is bound to keep the policies alive ; if in consequence of his neg- lect to pay the premiums the policies become extinguished, he is liable as an insurer. If the mortgagee be a bank and it is claimed that therefore it cannot be an insurer for want of power, then it may be held liable for its neglect in not keeping the insurance in force.^ If the mortgagee sees fit for the purpose of gain to take the place of the insurer, he can make no change in the liability.® > Gen. Stat. L875, p. 358. * 23 & 24 Vict., ch. 145, sects. 11. 12. , 'Nichols c. Baxter, 5 R.I. 491. *Barthell v. Syverson, 54 Iowa, 160. *Soule r. Bank, 45 Barb. (N. Y.) 111. *Ex parte Andrews, 2 Rose, 410 ; Morland v. Isaac, 20 Beav. 389. 618 relative rights op the parties to insurance. § 578. Rebates on Account of the Premature Termina- tion OF the Risks. — Insurance companies, in case of a premature termination of the risks, give a rebate to the in- sured, in which case the company retains the customary short rates for the time the poHcy has been in force. But in order to avail one's self of this rebate he must comply with the con- ditions of the insurance. If the mortgagor sells the property, and the policy has a condition that such sale will avoid the insurance, he cannot then ask for the rebate. In order to avail himself of the re- bate, he should have surrendered the policy innnediatoly be- fore the sale, with the consent of the insurer, or he should have sold the policy to the purchaser, and obtained the con- sent of the insurer to the assignment. If he does neither, he has no right to a rebate, as the policy, after sale of the property, is null and void.^ If, however, the mortgagee enters and forecloses and sells the property under a power contained in the mortgage, and cancels the policy which was assigned to him by the mortga- gor as collateral security, and receives a rebate, the amount re- ceived belongs to the mortgagor — that is, the mortgagee would have to account for it to the mortgagor.^ Where a policy of insurance is assigned to a mortgagee as collateral security for the mortgage debt, he is entitled to the deposit premiums, if upon sale of the mortgaged premises upon a foreclosure there is not enough realized to satisfy the debt.^ It is clear that an assignment to the mortgagee of the policy does not alter the effect or nature of it, which remains as it was at first, an insurance of the mortgagor's estate as the equit- able owner of the premises, and that what the mortgagee ac- quires is not an interest in the insurance as such, but a right to appropriate the amount which may become due under the contract to the payment of the mortgage debt.* 1 Parker v. Ins. Co., 127 Mass. 499, 501. "^ Felton V. Brooks, 4 Gush. (Mass.) 203 ; Merrifield v. Baker, 9 Allen (Mass.), 29. ^Rafsnyder's Appeal, 88 Pa. St. 436. *See State Ins. Co. v. Roberts, 31 Pa. St. 438; Carpenter t'. Washington insurable interests. 619 Article 6. Alienation of Mortgaged Property. § 579. Stipulation Against Alienation. I 584. Entry to Foreclose. § 580. Expiration of the Right to Re- | 585. Alteration of Ownership. deem. § 586. Sale of Premises After Assign- § 581. Provisions In Policy Against ment of Policy to Mortgagee. Incumbrance. § 587. A Conveyance by the Owner § 582. Deeds Absolute Given as a with a Mortgage Back. Mortgage. § 588. Parol Evidence. I 583. Change of Title by Foreclos- ure. § 579. Stipulation Against Alienation. — Insurance poli- cies generally stipulate that the owner shall not alienate the insured property, and that in case he does the policy shall be void. The question often arises whether a mortgage of the property insured is an alienation. The answer is in the neg- ative. The term alienation has a legal technical meaning, and any transfer of real estate, short of a conveyance of title, is not an alienation of the estate, no matter in what form the sale may be made ; unless the title is conveyed to the purchaser the estate is not alienated.^ So a mortgage of the insured property is not an alienation or change of title, whether executed before or after the insur- ance ; there can be no alienation until the mortgagor's title is divested by foreclosure.^ Providence Ins. Co., 16 Pet. (U. S.) 495, 512 ; Conover v. Ins. Co., 17 N. Y. 391 ; Macomber v. Ins. Co., 8 Cush. (Mass.) 133 ; Hale v. Ins. Co., 6 Gray (Mass.), 169. 1 Niagara F. Ins. Co. v. Scammon (111.), 28 N. E. Rep. 919, affirming 35 111. App. 582 ; Commercial Union Assn. Co. v. Scammon, 126 111. 355 ; ^Masters v. Ins. Co., 11 Barb. (N. Y.) 624 ; Allen v. Ins. Co., 19 Barb. (N. Y.) 445 ; Tillou V. Ins. Co., 5 N. Y. 405 ; Folsom v. Ins. Co., 9 N. H. 355 ; Lazarus v. Ins. Co., 5 Pick. (Mass.) 76 ; Jackson v. Ins. Co., 23 Pick. (Mass.) 418 ; Adams v. Ins. Co., 29 Me. 294. 2 Friezen v. Ins. Co., .30 Fed. 352 ; Aurora F. Ins. Co. v. Eddy, 55 111. 213 ; Hartford Ins. Co. v. Walsh, 54 111. 164 ; Com. Ins. Co. v. Spankneble, 52 111. 53 ; Hanover F. Ins. Co. v. Connor, 20 111. App. 297 ; Kronk v. Ins. Co., 91 Pa. St. 300 ; Conover v. Ins. Co., 3 Denio (N. Y.), 2.54 ; 1 N. Y. 290; Shepherd v. Ins. Co., 38 N. H. 232 ; Smith v. Ins. Co., 50 Me. 96 ; Powers v. Ins. Co., 136 Mass. 108; Indiana Mut. F. Ins. Co. v. Coquillard, 2 Ind. 645. Compare M'Culloch V. Ins. Co., 8 Blackf. (Ind.) 50 620 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. So a policy is not void by a mortgage given upon the prop- erty after the insurance is obtained by the mortgagor, and the foreclosure of such mortgage by sale of the property does not avoid the policy if the period of redemption has not expired, and no change has taken place in the possession.^ A mortgage does not effect a change in the title within the meaning of the clause " change ... by sale, transfer, or conveyance." ^ But a sale of an interest in the property, with a mortgage back to secure the purchase-money, effects a change in the title, and is therefore an alienation which avoids the policy.^ But a policy upon farm stock and implements covers the Ijroperty on hand at the place mentioned when the loss occurs, even though no one of the identical articles destroyed was there when the policy issued, and a sale or incumbrance of any such property avoids the policy only as to the specific articles themselves.* Without the words " or any part thereof," a sale of a part does not affect the remainder.^ § 580. Expiration of the Right to Redeem. — If the fore- closure has been complete, and the right to redeem has expired, there has been an alienation.^ But so long as the period of redemption has not expired, a foreclosure sale is not an alien- ation.'' And when the sale is complete but invalid, there has been no alienation.* 1 IjOJ v. Ins. Co., 24 Minn. 315 ; Com. Ins. Co. v. Spankneble, 52 111. 53 ; Aurora F. Ins. Co. v. Eddy, 55 111. 213 ; Byers v. Ins. Co., 35 Ohio St. 606 ; Smith V. Ins. Co., 50 Me. 96 ; Judge v. Ins. Co., 132 Mass. 521. 2 Ayres v. Ins. Co., 17 Iowa, 176 ; Judge v. Ins. Co., 132 Mass. 521 ; Shep- herd V. Ins. Co., 38 N. H. 232 ; Howard Ins. Co. v. Bruner, 23 Pa. St. 50 ; Pol- lard V. Ins. Co., 42 Me. 221 ; Byers v. Ins. Co., 35 Ohio St. 606: Aurora Fire Ins. Co. V. Eddy, 55 111. 213. 3 Home Mut. F. Ins. Co. v. Hauslein, 60 111. 521. *Dwelling-House Ins. Co. v. Butterly, 33 111. App. 626; American Ins. Co. V. Kothchild, 82 III. 166 ; City Fire Ins. Co. v. Mark, 45 111. 482. ^Dacey v. Ins. Co., 21 Hun (N. Y.), 83; Merrill v. Ins. Co., 73 N. Y. 452; Com. Ins. Co. v. Spankneble, 52 111. 53. See, also, Loy v. Ins. Co., 24 Minn. 315 ; Judge v. Ins. Co., 132 Mass. 522 ; Shepherd v. Ins. Co., 38 N. H. 240. « Loy V. Ins. Co., 24 Minn. 315. 'Hopkins Manuf. Co. v. Ins. Co., 48 Mich. 148. ^ Scammon v. Ins. Co., 20 111. App. 500 ; Insurance Co. v. Sampson, 38 Ohio St. 672. INSURABLE INTERESTS. 621 So when a sale and foreclosure had been entered, but no deed had been delivered, it was held there had been no alienation/ And if the policy was issued during foreclosure proceedings, and a loss happens after sale, the insurer is liable.^ § 581. Provisions in Policy Against Incumbrance. — Some policies provide against incumbering the property insured. Where there is such a provision a mortgage of the property after insurance will avoid the policy. The policy often provides against incumbrance at the time it is issued. Under such a provision, a concealed mortgage existing at the time of the insurance or one taken after will avoid the policy.^ § 582. Deeds Absolute Given as a Mortgage. — Many courts hold that a conveyance by a deed absolute, though in the nature of a mortgage and meant for a mortgage is an alienation within the terms of the policy, and therefore invali- dates the policy.* If a defeasance be executed at the time of the conveyance, if not recorded with the deed, it makes no difference, and the policy will be avoided.^ But this is not the general rule and is not with the current of authority. If the deed absolute was not to convey an abso- lute estate, but to give security for the performance of a duty by the mortgagor, such a transaction is a mortgage, although the bond to reconvey is not recorded.'' The rights of the parties under a contract of insurance are to be settled according to the relations which are in fact created between the parties to the conveyance, and hence, such a conveyance is onl}^ a mortgage and not an alienation.^ 1 Marts V. Ins. Co., 44 N. J. L. 478. 2 German Ins. Co. v. Churchill, 26 111. App. 206. ^ Mallory v. Ins. Co., 65 Iowa, 450 ; Schumitsch v. Ins. Co., 48 Wis. 26 ; Ellis V. Ins. Co., GS Iowa, 578. * Western INIass. Ins. Co. v. Riker, 10 Mich. 279; Dreher v. Ins. Co., 18 Mo. 128 ; Dix V. Ins. Co., 22 111. 272. ^Tomlinson ?-. Ins. Co., 47 Me. 2.32. . 6]\Iun3hy V. Calley, 1 Allen (Mass.), 107 ; Foote v. Ins. Co., 119 Mass. 259 ; Walsh V. Ins. Co., 127 Mass. 38.3. 'Walsh V. Ins. Co., 127 Mass. 383. u 622 KELATIVE RIGHTS OF THE PARTIES TO INSURANCE. Chief Justice Morton says that the vendor is in the position of one who, after a policy is issued to him, mortgages the property insured, and the question is whether such mortgage avoids a policy under the provision that it shall be void " if the said property shall be sold " without the written assent of the insurer. This would not be the effect of a mortgage, and as such a sale is only a mortgage, and, hence, it cannot avoid the policy. Alienation is a broader term than sale. A mortgage is not a sale, and it cannot fairly be contended that a policy on such property is avoided by absolute sale with a bond to reconvey which was never recorded,^ And, generally, a conveyance which equity treats as a mort- gage does not avoid the policy.^ § 583. Change op Title by Foreclosure. — When a mort- gagee, whose interest has been insured, forecloses and acquires a complete title to the property, his interest is not diminished and the policy is not avoided by a provision in it providing that when all interest on the part of the assured has ceased the policy shall terminate.^ And when a policy provides that it shall be void in case of transfer or change of title of the property insured, or foreclos- ure of mortgage thereon, the execution of a trust deed on the property after the insurance was made, but no sale had been made at the time of the loss will not avoid the policy.* But when foreclosure has taken place and the sale has been made and the time of redemption has expired, then a change of title has occurred which is an alienation within the terms of the policy.^ However, w^hen there is a right of redemption after sale, and ^ Bryan v. Ins. Co., 145 Mass. 389. ''Hodges V. Ins. Co., 8 N. Y. 416; Holbrook v. Ins. Co., 1 Curtis, C. C. 193; Smith V. Ins. Co., 58 Me. 96. See, also, Tittemore v. Ins. Co., 20 Vt. 546 »Esch. V. Ins. Co., 78 Iowa, 334 ; Bragg v. Ins. Co., 25 N. H. 289. *Nease r. Ins. Co., 32 W. Va. 283. ^Macomber v. Ins. Co., 8 Cush. (Mass.) 133; McKissick i). Ins. Co., 50 Iowa, 116 ; Mt. Vernon Manuf. Co. v. Ins. Co., 10 Ohio St. 347 ; Georgia Home Ins. Co. V. Kinnier, 28 Gratt. (Va.) 88 ; McLaren v. Ins. Co., 5 N. Y. 151. INSURABLE INTERESTS. 623 the possession remains the same until the time of redemj)tion expires, there has been no change of title within the meaning of the provision of the policy/ A foreclosure of a mortgage is such a transfer or sale of the property as will violate a condition " if any change shall take place in the title or possession of the property," or " if the property is disposed of, so that all interest on the j^art of the assured has ceased," and render the policy void.^ § 584, Entry to Foreclose. — In many policies a con- dition is inserted avoiding a policy if entry is made to fore- close. In such case an entry will avoid the policy.^ Such entry avoids the policy without any further formality or process on the part of the mortgagee, and it will deprive the assured of all right and title under the policy.* So when fore- closure proceedings, under this condition, are commenced upon a mortgage covering the property insured, it avoids the policy.^ So where the proceedings are commenced and the sale of the property advertised.^ A condition in a policy that the entry to foreclose the mortgage shall be deemed an alienation of the property and avoid the policy, does not act when the sale and decree are set aside by the court.^ §585. Alteration of Ownership. — A mortgage is a material alteration in the ownership of property insured ; and, under a by-law of an insurance company which provides that " all alienation and alterations in the ownershij), situation, or state of the property insured by this company, in any material particular, shall make void any policy covering such property, unless consented to or approved by the directors in writing ' Loy r. Ins. Co., 24 Minn. 315 ; Brunswick Savings Inst. v. Ins. Co., 68 Me. 31.3 ; Campbell v. Ins. Co., 51 Me. 69. ^ Bishop r. Ins. Co., 45 Conn. 4.30. 'Armstrong v. Ins. Co., 56 Hun (N. Y.), 399. *McIntire v. Ins. Co., 102 Mass. 230. * Meadows v. Ins. Co., 62 Iowa, 387 ; Titus v. Ins. Co., 81 N. Y. 410. « Titus V. Ins. Co., 81 N. Y. 410. ^ Georgia Home Ins. Co. v. Kinnier, 28 Gratt. (Va.) 88. 624 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. within thirty days," a mortgage will avoid a policy issued " under tlie conditions and limitations expressed in the by- laws," unless so consented to or approved.^ A mortgage is an alteration in the ownership. It alters a legal to an equitable ownership. It introduces a new owner, to the extent of the sum secured by the mortgage, and to the same extent it takes away the direct interest of the assured. It is not necessary that the mortgage should affect the lien of the insurers in order to make it material.^ So a mortgage is a violation of a condition against an aliena- tion " in whole or in part," and avoids such policy.^ An undischarged mortgage in some States is held to be an incumbrance, though wholly paid, and may avoid the policy where incumbrances are stipulated against by the insurers.* But the doctrine generally is that, if the mortgage debt has been paid, the undischarged mortgage is not an incumbrance, and will not, therefore, avoid the policy.® When the condition is that the insurance shall be null and void " if the property shall hereafter become mortgaged or in- cumbered," a part may be mortgaged without invalidating the policy.® § 586. Sale of Premises after Assignment of Policy to Mortgagee. — An absolute assignment or sale of insured prop- erty after insurance is effected, takes away the insurable interest of the vendor, and creates a bar to the right of action on the policy, unless by some means its existence has been preserved for the benefit of the assignee. However, after the assignment of the policy of insurance, lEdmands v. Ins. Co., 1 Allen (Mass.), 311. ^ Davenport v. Ins. Co., 6 Cush. (Mass.) 340 ; Packard v. Ins. Co., 2 Gray (Mass.), 3.34. 3 Abbott r. Ins. Co., 30 Me. 414 ; Bates v. Ins. Co., 2 Cin. Sup. Ct. (Ohio) 195 ; Gould r. Ins. Co., 16 Hun (N. Y.), 538. * Warner v. Middlesex Mut. Asso. Co., 21 Conn. 444 ; Muma v. Ins. Co., 22 Up. Can. Q. B. 214. 5 Murrill v. Ins. Co., 73 N. Y. 452 ; Hawkes v. Ins. Co., 11 Wis. 188 ; Smith V. Ins. Co., 60 Vt. 682. 6 Phoenix Ins. Co. v. Lorenz (Ind.), 29 N. E. Rep. 604. INSURABLE INTERESTS. 625 with the consent of the insurer, the assured can do no act affecting the rights of the assignee without the privity of the latter/ Thus, if a mortgagor has assigned the policy to the mort- gagee, with consent of the insurers, and then sells the property, this violation of the condition does not affect this assignee, the mortgagee.^ After the assured has parted with all his interest in the property insured, he stands as though he never had any right in the subject of insurance, and therefore cannot effect a valid policy upon it. The contract of insurance is one of indemnity, and nobody can recover in respect to the loss who is not really interested.^ § 587. A Conveyance by the Owner with a Mortgage Back. — Notwithstanding a conveyance of the insured property, if it be in the nature of a mortgage or in trust, with a resulting trust to the insured, so that he has an insurable interest in the property, he may, nevertheless, recover to the extent of his actual loss, provided it does not exceed the sum insured. The transfer of the property will onl}'^ prevent a recovery on his policy by the assignor so far as it deprives him of his insurable interest, without regard to the inquiry whether the interest which remains after assignment be of the same nature and character as that which existed before it was made. Hence, the owner of real estate, which he has sold after insurance, who retains the legal title as a security for the purchase-money, may maintain an action for a loss after the contract of sale.* So where the owner of insured property sold it to a party who simultaneously reconveyed it to a trustee to secure the owner for the purcbase-money, the owner has an insurable in- terest, and may recover, in case of loss, not to exceed the sum ' Boynton v. Ins. Co., If) Barb. (N. Y.) 254 ; Traders' Ins. Co. v. Robert, 9 Wond. (N. Y.) 404 ; Conover ?■. Ins. Co., 1 N. Y. 290. 'Foster v. Ins. Co., 2 Gray (Mass.), 216; Bragg v. Ins. Co., 25 N. H. 289; Eogg r. Ins. Co., 10 Cu.*. (Mass.) 337. ^ Morrison v. Ins. Co., IS Mo. 262. * Trumbull v. Ins. Co., 12 Ohio, 305 ; Stetson v. Ins. Co., 4 Mass. 330. 40 626 RELATIVE RIGHTS OF THE PARTIES TO INSURANCE. insured.^ So if the transaction be a mere conditional sale, it will not avoid the policy. Thus, where the holder of the property executed a warranty deed of the premises, and at the same time received back a deed of the same premises, with a condition annexed that if the grantor in that deed should pay to the grantee the sum of $2,000 within three years, and should allow the grantee in that deed to retain possession of the premises until that sum should be paid, then the second deed should be void, otherwise in force, and it appeaued that the grantor in the second deed never, in any form, agreed to pay the sum mentioned, but it was wholly optional with him whether to do so or not, it was held, that this amounted merely to a conditional sale, and was not such an alienation as would avoid the policy.^ But when the policy has a clause avoiding it, provided the property is alienated "by sale or otherwise," tlien if the vendor sells it, and takes back a mortgage to secure the purchase-money, the policy is invalidated, though the vendor retains possession until the purchase-money is paid.^ And when the whole transaction is not a mortgage in fact, the policy is invalidated.^ But a conveyance and reconveyance, when simultaneous, do not divest the title of the vendor at all, and hence no alienation which could vitiate the policy.^ So a deed of conveyance and a mortgage back constituting one contract, when contemporaneous, is not an alienation,* When the owner retains the legal title as a security for the purchase-money, he may maintain an action for a loss, after the contract of sale7 § 588. Parol Evidence. — Parol evidence is admissible to show what the agreement was between the mortgagor and the J Morrison v. Ins. Co., 18 Mo. 262. 'Tittemore v. Ins. Co., 20 Vt. 546. ^Tittemore v. Ins. Co., 20 Vt. 546. See, also, Moulthrop v. Ins. Co., 52 Vt, 123; German-American Bank v. Ins. Co., 8 Mo. App. 401. * Porter v. Nelson, 4 N. H. 130. ^Tittemore v. Ins. Co., 20 Vt. 546, 553. *Bi Rev. Stat., ch. 30, sect. 32. "^ Reed v. Kemp, 16 111. 445. ^ Battenhausen v. Bullock, 11 111. App. 265. *Stebbins v. Duncan, 108 U. S. 32. MVorcester Bank v. Cheney, 87 111. 602. ' « Pry V. Pry, 109 111. 466. ^ Boone v. Clark, 129 111. 466. 41 642 REGISTRATION OF THE INSTRUMENT. Mortgages must be executed and acknowledged in the same manner as deeds. A mortgage for purchase-money has preference over a prior judgment against the purchaser/ The indorsement by the recorder of deeds on a mortgage in the usual form, though not expressly authorized by the statute, is admissible in the absence of better evidence, over objection, to show that the mortgage was recorded, there being also evi- dence presenting reasonable inference that the mortgagee took the land with actual knowledge of the existence of the mort- gage.' Where two mortgages are fully executed on the same day, but at different hours, the one first executed in point of time is en- titled to priority of payment ; ^ and when executed to different parties on the same day, the one first executed and delivered will have priority.* And a mortgage recorded after the time limited in the statute is constructive notice to all persons who subsequently purchase the property.^ Whore two notes identical in date, amount, and time of maturity, but made to two different persons, are secured by the same mortgage, it is proper in decreeing foreclosure to give priority to neither.^ § 605. Indian Territory. — The title to all real estate in this Territory is in the United States, and the Indians hold their reservations in common. Citizens of the United States cannot hold land in this Territory, but can only occupy their homes as tenants of some Indian landlord. As to mortgages of chattels, the laws of Arkansas apply .^ § 606. Iowa. — Deeds and mortgages must be acknowledged, and recorded in the office of the county recorder at any time, »Rev. Stat., 1888, sects. 2931, 2932. ^ Moore v. Glover, 115 Ind. 367. ^Wood V. Lordier, 115 Ind. 519. * Gibson v. Keyes, 112 Ind. 568, distinguishing Cain v. Hanna, 63 Ind. 408, and Moffitt v. Roche, 76 Ind. 75. * Gilchrist v. Gough, 63 Ind. 576; Wyman v. Russell, 4 Biss. C. C. 307. « Chaplin v. Sullivan, 128 Ind. 50. 'See Mansfield, Dig. of Arkansas, ch. 110. REGISTRATION. 643 but no instrument affecting real estate is of any validity against subsequent purchasers for a valuable consideration without notice, unless recorded in the office of the recorder of deeds in the county in which the land lies. It shall not be deemed lawfully recorded unless it has been previously ac- knowledged or proved as provided by law.^ The record of two mortgages does not constitute notice of the superior equity of the junior mortgage, unless there is something in the record which indicates that the junior mort- gage was intended as the senior lien.^ The delivery by the mortgagor of two mortgages in the re- corder's office by handing the register first one and immedi- ately afterward the other, is substantially one and the same act, and neither mortgage in the absence of notice to the respective mortgagees has priority over the other, although at the time the mortgagor filed them for record he wished and meant, but did not say so, to give priority to the one first de- livered. It is immaterial which was first executed when both were de- livered by the mortgagor simultaneously. And a mistake in one of two mortgages, both simultaneously delivered and re- corded, in the description of the land is immaterial as affecting the lien on the property of the person secured by the other mortgage. As between two mortgages simultaneously delivered and re- corded, one for the unpaid purchase-money, and one for money borrowed by the mortgagor to make the cash payment, the fact that the vendor surrendered his lien accepting the mort- gage, does not give the first mortgage any superior equities over the second.^ § 607. Kansas. — A mortgage of real estate to be valid as against subsequent bona fide purchasers must be acknowledged and recorded in the office of the register of deeds of the county where the land lies, and from the time of filing the same for I Rev. Code, sects. 1941, 1942. " Powers V. Lafler, 73 Iowa, 283. ' Koevenig v. Schmitz, 71 Iowa, 175. 644 REGISTRATION OF THE INSTRUMENT. record imports notice to all persons of the contents thereof, and subsequent purchasers and mortgagees shall be deemed to pur- chase with notice. It is not valid except between the parties thereto, and such as have actual notice thereof, until de- posited for record.^ The recording of an unacknowledged assignment of a mort- gage will not import constructive notice of such assignment. It is not an instrument authorized to be recorded under the statute, although made on the back of the mortgage which had been duly acknowledged, certified, and recorded.^ A mortgage duly executed but not recorded is not void. It is valid as between the parties thereto, and as to others who have actual notice.^ The effect of the recording acts is to give priority of lien to a recorded mortgage to secure a pre- existing indebtedness over an unrecorded mortgage given to secure the payment of machinery furnished in the construction of a mill, of which a mortgagee of the recorded mortgage had no notice.* § 608. Kentucky. — Mortgages are executed and acknowl- edged in the same manner as deeds. No deed of trust or mortgage conveying any title to or interest in land, shall be valid against a purchaser for a valuable consideration without notice, or any creditor, until such deed shall be acknowledged or proved according to law, and lodged for record. The record is made in the clerk's office of the county in which the property or a greater part of it is situated.^ An unrecorded deed of trust or mortgage will prevail against a creditor who has notice thereof, before he acquires a legal title." But mortgages and deeds of trust not recorded are not valid 1 Comp. Laws, ch. 22, sects. 3, 11, 19, 21-24 ; Taylor's Comp. L., sects, 1128- 1130. '^ Fisher v. Cowles, 41 Kan. 418. 3 Northwestern Ford. Co. v. Mahaffy, 36 Kan. 152. * Hayner /). Eberhardt, 37 Kan. 308. * Gen. Stat., ch. 24, sect. 10. « Forepaugh v. Appold, 17 B. Mon. (Ky.) 625. EEGISTRATIOX. 645 at law against creditors, nor against any legal right to the property, which creditors acquire in good faith.^ If executed by an attorney under a power, the record of the mortgage is not constructive notice unless the power of attorney is also recorded.^ Unless the mortgage of a homestead be recorded or lodged for record, it is ineffectual to convey the interest of either hus- band or wife.^ § 609. Louisiana. — Deeds, conveyances, mortgages, privi- leges, or pledges must be recorded in order to be effective against third parties. They take effect from the date of their inscription in the office of the parish recorder, in the parish where the property is situated. If in New Orleans, record must be made in the office of the recorder of conveyances and mortgages. Judgments recorded in this office of parish re- corder, operate as mortgages upon all real estate of the debtor from the date of the record.^ The lien of a mortgage expires for failure to renew the in- scription thereof under the code, which provides that the registry preserves the evidence of the mortgages and privi- leges during ten years, reckoning from the day of its date, and its effect ceases if the inscriptions have not been renewed before the expiration of this time in the manner in which they were first made.^ A judicial mortgage to be effective as to third persons — that is, persons who are not parties to the act or judgment on which the mortgage was founded — must be inscribed with the recorder of mortgages, and no lien arises until it is so registered.*' A judicial mortgage takes effect from the date of the recordation of the judgment in the mortgage book of the parish where the immovables of the debtor are situated, and this rule ap- * Swigert v. Bank, 17 B. Mon. (Ky.) 268. =* Graves v. Ward, 2 Duv. (Ky.) 301. ' Hensey v. Hensey (Ky.), 17 S. W. Rep. 333. *Rev. Laws, 1884, sect. 2388. ' * Civil Code, art. 3369. ^Lovell V. Cragin, 136 U. S. 130. 646 REGISTRATION OF THE INSTRUMENT. plies to cases where the judgments are rendered in a country parish at the same term of court. Article 555, Code of Practice, has no bearing on the question, and it is not in conflict with the articles of the civil code on the subject of judicial mort- gages.^ An unrecorded mortgage has no effect as to third per- sons, not parties to the act of mortgage or judgment, even though they had full knowledge of it.^ The right of the mortgage creditor is lost by a failure to reinscribe within ten years, although previous to the expira- tion of that delay the mortgagor had died. But no reinscrip- tion is necessary when the mortgage property is sold within ten years.^ Notice is not equivalent to registry.* A new act of mort- gage does away with the necessity of reinscription.^ In 1808 the first code was adopted, and in the section relat- ing to registering of mortgages, it was declared that to protect the good faith of third persons ignorant of the existence of mortgages, and to prevent fraud, conventional and judicial mortgages should be recorded in a public book kept for that purpose within six days from their date, when made in New Orleans, and one day more for every two leagues' distance therefrom ; and that if such recording was made within that time, it should have effect against third persons from the date of the mortgage ; but if not, the mortgage should have effect against third persons, being bona fide, only from the day of such recording.® The effect of this article was to dispense with inscription as against third persons having notice of the mortgage ; because they could not take in good faith a subsequent incumbrance antagonistic to the mortgage. On March 24, 1810, an act was passed providing that no mortgage, and no notarial act concerning immovable property, should have any effect against 1 Chaffee v. Walker, 39 La. Ann. 35. 2 Ridinjjs v. Johnson, 128 U. S. 212. ' Succession of Gagneux, 40 La. Ann. 701. * Boyer v. Joffrion, 40 La. Ann. 657. *Hart V. Caflfery, 39 La. Ann. 894. 6 Code of 1808, p. 464, art. 52. I REGISTRATION. 647 third persons until recorded in the office of the judge of the parish.^ Then the code of 1825 ^ declared that mortgages are only- allowed to prejudice third persons when they have been pub- lich^ inscribed on records kept for that purpose ; that the words " third persons " are to be understood all who are not parties to the act or judgment on which the mortgage is founded, and who have dealt with the debtor either in igno- rance of the right or before its existence. On March 20, 1827, an act was passed relating to conveyances in New Or- leans, declaring that, whether executed before a notary or by private act, they should have no effect against third persons but from the day of their being registered.^ In 1855 an act w^as passed declaring that no notarial act concerning immovable property should have any effect against third persons until the same should have been recorded in the office of the parish recorder or register of deeds of convey- ances of the parish where the property was situated ; and that all sales, contracts, and judgments not so recorded should be utterly null and void except between the parties thereto ; and that the recording might be made any time, but should only affect third persons from the time of the recording/ On the revision of the code of 1870, the last clause of article 3315 — now 3343 — which made the ignorance of third persons a factor in the requirement of registry, was omitted, and the provisions of the act of 1855 were inserted as new articles in the code under the numbers 2264, 2265, 2266. Under these varying and inconstant conditions of the statutes, the decisions of the Louisiana courts were often con- flicting with dissenting opinions, but sustained the doctrine that actual knowledge of a prior unrecorded title or mortgage is equivalent to the registry of it, or to notice resulting from ^ 3 Martin's Dig. 138 ; 2 Moreau-Lislet, 285. .'Articles 3314, 3315. ' 2 Moreau-Lislet, 303. * Acts of 1855, p. 335 ; Rev. Stat. 1870, p. 617. 648 REGISTRATION OF THE INSTRUMENT. such registry, so far as the person having such knowledge is concerned.^ In Swan v. Moore,^ Chief Justice Merrick dissented, and held to the literal interpretation of the statute of 1855, as " the last expression of the legislation upon the subject." The United States Supreme Court followed these Louisiana decisions in the interpretation of the laws in that State upon this subject.^ In 1869 the dissenting opinion of Chief Justice Merrick was accepted by the Louisiana Supreme Court and held to the strict construction of the law — that is, that an unrecorded mort- gage was void as against third persons even though they knew of such mortgage.* In all these cases the prior mortgages were actually recited in the subsequent ones, and yet lost their rank as against sub- sequent mortgages by reason of not being reinscribed in proper time. These decisions have been followed by others of the same purport.^ Since the passage of the law of 1855 an unrecorded mort- gage has no effect as to third persons not parties to the act of mortgage or judgment, even though they had full knowledge of it. And this doctrine is consonant with the French jurists',^ which declares that " between creditors, a mortgage, whether legal, judicial, or conventional, has no rank except from its inscription by the creditor on the records of the custodian, in the form and manner prescribed by law." ^ Swan r. Moore, l-t La. Ann. 833, decided in 1859 ; Smith ?'. Lambeth, 15 La. Ann. 5fi6, decided in 1860. See Hennen's Dig. (ed. 1861) tit. Registry III (a), (1), D, for other cases. 2 14 La. Ann. 833. » Patterson v. De La Ronde, 8 Wall. (U. S.) 292. * Britton v. Jannej^ 21 La. Ann. 204 ; Harang v. Plattsmier, 21 La. Ann. 426. See, also, Rochereau v. Dupasseur, 22 La. Ann. 402. * Levy V. Mentz, 23 La. Ann. 2(51 ; Succession of Simon, 23 La. Ann. 533, 534 ; Gaiennie v. Gaiennie, 24 La. Ann. 79 ; Rochereau v. De la Croix, 26 La. Ann. 584; Villavaso i'. Walker, 28 La. Ann. 775; Adams v. Daunis, 29 La. Ann. 315; Watson v. Bondurant, 30 La. Ann. 1, 11. ^Code Napoleon, art. 2134. See, also, Paul Pont, Privileges et Hypothe- ques, arts. 727, 728. i i REGISTRATION. 649 Privileges affecting immovable property have undergone much the same legislative restrictions as that imposed upon mortgages. The law now declares that no privilege shall con- fer a preference over creditors who have acquired a mortgage unless recorded on the day the contract was made.' All these laws have been interpreted and administered by the courts of Louisiana so as to give them their full literal effect.=^ The vendor's lien or privilege must be recorded within the time allowed by law — that is, within six days from date — prior to 1870; and on the day of the date, since 1870, in order to give it priority over a mortgage recorded before it ; this rule applies to mortgages given by the vendee as well as mortgages given by the vendor. The act of sale passes the property to the purchaser whether recorded or not, so that he can make valid mortgages on it, as well as subject it to judgments against him ; but, unless recorded in the office of the register of mort- gages, it does not preserve the vendor's privilege. At one time it was held otherwise, namely : that, if the vendor's privilege was recorded simultaneously with the act of sale, which is the case when it is contained in the act of sale, the privilege was reasonably recorded to preserve it in full force ; ^ but these de- cisions have been overruled in subsequent cases.* No inscription or reinscription is necessary as against the parties or their heirs.^ The object of the reinscription is to obviate the necessity of searching for mortgages more than ten years back. To effect 1 Rev. Code, art. 3274 ; 1870, art. 3241. ^ Lombas v. Collet, 20 I>a. Ann. 79 ; Maniiillon v. Archinard, 24 La. Ann. 610; Gay v. Bovard, 27 La. Ann. 200; Bank r. Fortier, 27 La. Ann. 243; ]\forriw)n r. Bank, 27 La. Ann. 401 ; Succession of Marc, 29 La. Ann. 412; Logan V. Herbert, 30 La. Ann. 727 ; Slocomb v. Eogillio, 30 La. Ann. 833 ; Gay r. Daigre, 30 La. Ann. 1007 ; Gallaugher v. Hebrew, 35 La Ann. 829 ; Givano- vitch V. Hebrew, 3() La. Ann. 272. * Rochereau v. Colomb, 27 La. Ann. 337 ; Jumonville v. Sharp, 27 La. Ann. 461. V * Gallaugher v. Hebrew, 35 La. Ann. 829 ; Givanovitch v. Hebrew, 36 La. Ann. 272. ^Cucullu V. Hernandez, 103 U. S. 105. 650 REGISTRATION OF THE INSTRUMENT. it, a new description of the property is necessary, and a mere reference to the previous mortgage is not sufficient.' The law requiring a mortgage to be reinscribed within ten years after the original inscription has been made is peremp- tory in case of succession, whether solvent or not ; if a creditor has failed to reinscribe, he may remain an original creditor.^ § 610. Maine. — Mortgages are executed in the same manner as deeds, and must be acknowledged and recorded in the registry of deeds for the county or district where the land lies, in order to be effectual against any person except the grantor, his heirs and devisees, and persons having actual notice. A separate defeasance must be recorded in order to take effect as against third persons. Mortgages are generally made by war- ranty deed with defeasance inserted.^ A party having notice of a prior unrecorded mortgage, even though such notice came through his agent, is affected with such notice of the unrecorded mortgage, so as to postpone his subsequent levy upon the property, though the levy was first recorded/ § 611. Maryland. — Mortgages are executed and acknowl- edged as deeds, and must be recorded within six months from date in the county or city in which the land lies, and when acknowledged and recorded shall take effect as between the parties from date.^ To make them valid as against third par- ties without actual notice, an affidavit of the mortgagee or his agent must be indorsed thereon and recorded therewith. Recording a mortgage without such affidavit does not operate as constructive notice.^ The code^ provides that to entitle a deed to registration it must contain the names of the grantor and the grantee. A mortgage executed to a ^Hyde v. Bennett, 2 La. Ann. 799 ; Poutz v. Reggio, 25 La. Ann. 637. ^ Succession of Myrick, 43 La. Ann. 884. »Rev. Stat., 1883, ch. 73, sects. 8, 9. * Bunker v. Gordon, 81 Me. 66. 6 Code, 1888, art. 21, sect. 14. «Byles V. Tome, 39 Md. 461. ^ Gen. Code, art. 24, sect. 9. REGISTRATION. 651 firm in the firm name, omitting the Christian names of the partners, is entitled to registration, though the code ' provides that after the clerk records a deed, he shall enter the Christian names and surnames of the parties.^ And when a mortgage is not recorded within six months, as required by the registra- tion laws, other liens of third parties without notice will take precedence.^ Unless the affidavit required by law is indorsed and re- corded, the mortgage does not Operate as constructive notice to a subsequent mortgagee unless he has actual notice of such mortgage.* If a mortgage is not recorded within six months from its date it is nevertheless an equitable lien, and takes precedence of those who were general creditors at its date, but not over subsequent creditors.^ § 612. Massachusetts. — Mortgages are executed and ac- knowledged as deeds and recorded in the registry of deeds for the county or district where the land lies. The conveyance is not valid against any person other than the grantor and his heirs and devisees, and persons having actual notice, unless so recorded.® When an absolute deed is made, with a defeasance separate from the mortgage, the defeasance must be recorded to be effectual against third persons.^ This defeasance is valid between the parties without record.^ The defeasance should be acknowledged before record.^ § 613. Michigan. — Every conveyance of real estate which shall not be recorded according to the provisions of the statute * Gen. Code, art. 18, sects. 54, 55. ^ Bernstein v. Hobelman, 70 Md. 29. ' Harding v. Allen, 70 Md. 395. *Reiff ?;. Eshleman, 52 Md. 582. = Dyson v. Simmons, 48 Md. 207 ; Harding v. Allen, 70 Md. 395 ; Sixth Ward Build. Asso. v. Willson, 41 Md. 506; Pfeaff v. Jones, 50 Md. 263. 6 Pub. Stat., 1882, eh. 120, sect. 4. ^ Pub. Stat., 1882, ch. 120, sect. 23. *Bayley v. Bailey, 5 Gray (Mass.), 505, 510. ' » Dale r. Thurlow, 12 Met. (Mass.) 157, 163. Compare Stetson v. Gulliver, 2 Cush. (Mass.) 497. I 652 REGISTRATION OF THE INSTRUMENT. is void as against any subsequent purchaser in good faith and for a valuable consideration of the same premises, or any por- tion thereof, whose conveyance is first duly recorded. Mort- gages must be recorded in the office of the register of deeds for the county where the land lies. A deed absolute in terms, but intended to be made defeasible by force of a deed of defeasance or other instrument for that purj^ose, is not defeated or affected thereby as against any person than the maker, his heirs, or devisees, or persons having actual notice, unless the defeasance is recorded.^ When an assignment is made on the back of the mortgage, properly acknowledged and recorded in the same volume as the mortgage, but not on the same page, and the register of deeds makes a cross-reference on the margin of each record, calling the attention to each instrument, and clearly indicating the two records, it is a sufficient record of the assignment ; ^ but if the instrument had made no reference to any other record by cross-reference it would be uncertain and therefore void.* If the mortgage is recorded according to law, it is not necessary that, the bond secured by it, and an agreement re- ferred to in the mortgage, and adopted and made a part of it, should also be recorded in order to be valid against the mort- gagor.^ No mortgage shall be recorded which does not give the name and residence of the mortgagee.^ When the assignment of a mortgage is executed in another State, the officer taking the acknowledgment must be vouched for b}'' a certificate of magistracy'^ or the assignment will not be entitled to record ; to be valid as to third parties, the as- signment and mortgage must be entitled to record as well as recorded.^ 1 Howell's Stat., sects. 5674-5689. 2 Soule V. Corbley, 65 Mich. 109. * Bassett v. Hathaway, 9 Mich. 31. * Bacon v. Ins. Co., 131 U. S. 258. = Act 262 of 1887, sect. 12. « How. Stat., sect. 5660. ' Dohrn V. Haskin, 88 Mich. 144. J REGISTRATION. 653 § 614. Minnesota. — Every conveyance by deed, mortgage, or otherwise of real estate must be recorded in the office of the register of deeds of the county where the land is situated ; and unless so recorded shall be void as against subsequent pur- chasers in good faith for a valuable consideration w^hose con- veyance is first recorded ; or as against any attachment levied, or judgment lawfully obtained against the person in whose name such lands appear of record prior to the recording of such conveyance. When a deed purports to be an absolute conveyance in terms, but is made or intended to be piade defeasible by force of a deed of defeasance or other instrument for that purpose, the original conveyance is not defeated or affected as against any person other than the maker of the defeasance, or his heirs or devisees, or persons having actual notice, unless the instrument of defeasance is recorded.^ A defeasance need not be recorded with the deed intended as a mortgage, when it is delivered to the grantor.^ §615. Mississippi. — All deeds of trust and mortgages what- soever, title-bonds and written contracts in relation to lands must be recorded in the office of the clerk of the Chancery Court for the county wherein the property is ; and unless so recorded, the conveyance is voidable by any subsequent bona fide purchaser or creditor. The record cannot be made unless the deed or other writing is either acknowledged or attested by subscribing witnesses, whose signatures, or that of the grantor, must be properly proven. When the record is made it gives constructive notice to all the world as of the date of the filing for record. Actual possession and occupancy of property conveyed by the grantee is equivalent to record. As between the parties and their heirs, and as to all subse- quent purchasers with notice, or without valuable considera- tion, mortgages are valid and binding without record. They ' Gen. Stat., 1878, ch. 40, sects. 20, 21. * Marston v. Williams, 45 Minn. 116. 654 REGISTRATION OF THE INSTRUMENT. take effect and are valid as to third persons from the time they are delivered to the clerk to be recorded/ Under the registry law a judgment lien of land previously conveyed by an unrecorded mortgage of the debtor, of which the judgment creditor had not actual notice, and nothing to put him upon inquiry before the recovery of his judgment, is superior to the title of the mortgage.^ Under the code,^ providing that persons doing business in Mississippi shall take out a license, a mortgage given to secure a debt to a mercantile house, which has not obtained such license, is void.* § 616. Missouri. — Mortgages and deeds of trust must be executed and acknowledged like other deeds, and, to be effective against purchasers without notice in fact thereof, must be re- corded in the county where the land lies, in the office of the recorder of deeds. Every deed, mortgage, conveyance, deed of trust, bond, or other instrument of writing affecting real estate authorized by law to be recorded, in order to be recorded, must be acknowledged before some officer authorized to take acknowledgments of deeds. No such instrument in writing shall be valid except between the parties thereto, and such as have actual notice thereof, until the same shall be deposited with the recorder for record.^ So when an agreement is made at the time of executing a deed of trust wherein the beneficiaries promise that they will not sell under the deed until they have sustained a loss as sureties on the creditor's bond in a criminal proceeding, such suretyship being the consideration for the note secured by the deed of trust, is a part of the deed and is an instrument in writing affecting real estate, and must be acknowledged and recorded to be valid as to others than the parties thereto and 'Rev. Code, 1880, sects. 1209, 1212, 1213. "^ Mississippi Valley Co. v. Railroad Co., 58 Miss. 846, Taylor v. Miller, 13 How. (U. S.) 287, 292. 3 Rev. Code, 1880, sect. 589. * Deans v. Robertson, 64 Miss. 195. 5 Rev. Stat. 1879, ch. 20, sects. 691-694. REGISTRATION. 655 those affected with actual notice.^ So one accepting a convey- ance of land with knowledge of a prior unrecorded deed of trust takes subject to the incumbrance.^ The statute applies to a mortgage of personal property and of leashold estate in lands as an instrument aifecting real estate.^ Under the statute * the husband may, until filing of the notice of the homestead, mortgage it without the wife's joining.^ § 617. Montana. — Mortgages must be executed and acknowl- edged as deeds, and recorded in the office of the recorder of deeds of the county where the real estate is situated. Every such recorded instrument, from the time of its filing for record, imparts notice to all persons of its contents, and subse- quent purchasers and mortgagees are deemed to purchase and take with notice. Unrecorded mortgages are void as against any subsequent purchaser in good faith and for a valuable consideration, whose conveyance is first recorded. Mortgages given by a corporation must be verified like a chattel mort- gage. Mortgages are deemed a conveyance, whatever their terms, but they may be in the form of a trust deed.^ An unrecorded mortgage has priority over a judgment docketed after the execution of the mortgage.^ § 618. Nebraska. — Mortgages must be executed and ac- knowledged in the same manner as deeds and recorded in the office of the register of deeds in the county where the land is situated, but in case the county is not organized, then in the county to which it is attached for judicial purposes. They are in force from and after they are delivered to the recording officer in the county in which the land lies, as to all creditors ' Mun?on v. Ensor, 94 Mo. 504. See, also, Fox v. Hall, 74 Mo. 315 ; Willing- ham V. Hardin, 75 Mo. 429 ; Campbell v. Gas Co., 84 Mo. 352. ■^ Johnston v. Shortridge, 93 Mo. 227. ''Jennings v. Sparkman, 39 Mo. App. 663. * Rev. Stat. 1879, sect. 2689. * Tucker v. Wells, 20 S. W. Rep. 114. «Com. Laws, 1887, p. 661. ' Vaughn v. Schmalsle, 10 Mont. 186. 656 REGISTRATION OF THE INSTRUMENT. and subsequent purchasers in good faith without notice, and are void as to creditors and purchasers without notice whose instruments are first recorded.^ Register of deeds is elected in all counties having a popula- tion of at least eighteen thousand, who has the power to perform all the duties relative to papers, writings, and instruments per- taining to real estate heretofore enjoined by law on county clerks.^ The certificate of the proof or acknowledgment of every deed and the certificate of the genuineness of the signature of every officer where such certificate is required must be recorded together with the deed.^ It shall be no objection to the record of a deed that no official seal is appended to the acknowledgment or proof, if the same purports to be taken by an officer with official seal of office, in which case it will be presumed that the seal was attached to the original.* Deeds are not deemed lawfully recorded unless previously acknowledged or proved.^ And all certificates of entry of government lands and all letters-patent of land from the United States, of land lying within the State, must be recorded in the county in which the land lies." Every deed, though absolute, shown by any other instru- ment in writing to be intended as a security in the nature of a mortgage, is considered a mortgage, and no advantage can be derived from the record thereof by the person for whose benefit it is made, except the defeasance be also recorded. Deeds of trust to secure the payment of money are con- sidered and treated as mortgages.' After seasonable acceptance of an option contained in a lease, the lessee's possession becomes that of an owner, and 1 Com. Stat., 1881, p. 389, sect. 16. *Lawsof 1887, p. 362. ^ Com. Stat., p. 389, sect. 16. * Com. Stat., p. 390, sect. 20. * Com. Stat., p. 390, sect. 17. « Laws of 1883, p. 265. ' Com. Stat., pp. 390, 394. REGISTRATION. 657 gives notice of his rights as such to a subsequent mortgagee of the vendor or lessor, who takes the mortgage subject thereto/ The record of a real estate mortgage, which is not legally acknowledged, does not operate as constructive notice.^ § G19. Nevada. — Mortgages must be executed and acknowl- edged in like manner as deeds, and recorded in the office of the recorder of the county in which the real estate is situated. Every conveyance is void as against any subsequent purchaser, in good faith, and for a valuable consideration, whose convey- ance shall be first duly recorded, but is binding as between the parties thereto without record.^ The record of a deed absolute upon its face, though intended as a mortgage, gives no notice to a subsequent bona fide mort- gagee. Both subsequent purchasers and mortgagees have con- structive notice under the statute of other properly recorded conveyances affecting the same real estate.* § 620. New Hampshire. — All deeds and mortgages of real estate must be recorded in the registry of deeds of the county wherein the real estate is situate. Conveyances required by law to be recorded have no effect whatever until they are placed in the office of the register or clerk for record, so far as third parties are concerned, unless such third parties have actual notice or constructive notice thereof. The official hav- ing charge of the county records is called the register of deeds. Trust deeds must be executed with the same formalities and are subject to the same statutory provisions as conveyance in fee. Mortgages of real estate can secure only the liability existing at the time of their execution, and the condition must be expressed, stating distinctly the sum of money to be se- cured or the thing to be done, and they must be executed with the same formalities as deeds.^ ^ Smith V. Gibson, 25 Nebr. 511. * Keeling v. Hoyt, 41 Nebr. 45.3. ' Comp. Laws, 1873, sects. 252, 254. * Grellet v. Heilshorn, 4 Nev. 526. *Gen. Laws, 327; G. L. 1878, ch. 136, sect. 2; Pub. Stat. 1892, ch. 136, sect. 3. 42 658 REGISTRATION OP THE INSTRUMENT. § 621. New Jersey. — Formerly deeds not recorded within fifteen days after sealing and delivering the same were void, .and of no effect against a subsequent judgment creditor or ■bona fide purchaser or mortgagee without notice. Now, the record is notice, although the deed was not recorded within fifteen days; and all deeds made after July 4, 1883, are void until they are recorded against all subsequent judgment cred- itors without notice, and against all subsequent bona fide pur- ,chasers or mortgagees for a valuable consideration, not having notice thereof, whose deed or mortgage has been first duly re- corded or registered.^ The records are kept by the clerk of the county in all the counties except Essex, Camden, and Hudson, in which a register officiates. Trust deeds in the nature of a mortgage are not generally used. Leases for more than ten years, or mortgages thereof not recorded within fifteen days after sealing and delivering the same are void and of no effect against a subsequent judgment creditor or bona fide purchaser or mortgagee without notice, but are valid between the parties.^ A mortgage taken under order of court to secure a fund having been to the chancellor in his official capacity, is suffi- cient notice to the purchaser of the equity of redemption to put him on his guard as to the contents of those orders.^ And when a purchaser, being put on inquiry by the circumstances of the case, takes real estate subject to a mortgage, his right is subor- dinate to the mortgage lien.* Section 14 of the act concerning conveyances requiring deeds or conveyances of land to be recorded, does not apply to leases for years, nor does the mortgage registry act apply to mortgages of such leasehold estates.^ 1 Act of 1883, March 23. ^ Laws of 1887, ch. 161 ; Act of April 21. See Laws of 1888, oh. 199 ; Laws of 1881, ch. 147. 3 Chancellor v. Bell, 45 N. J. Eq. 538. * Anglesey v. Colgan, 44 N. J. Eq. 203. ^ Hutchinson v. Bramhall, 42 N. J. Eq. 372, reversing Deane v. Hutchinson, 40 N. J. Eq. 83. The act of April 21, 1887, provides that leases for more than ten years or mortgages thereof not recorded within fifteen days after REGISTRATION. 659 A prior mortgage to the State, not recorded until after the recording of a subsequent mortgage, which was given in good faith, is postponed to the junior mortgage. Tlie recording act makes no exceptions in favor of the State.^ Tlie records are kept by the clerk of the county, in all the counties except Essex, Camden, and Hudson ; in these by a register. § 622. New Mexico Territory. — Mortgages must be exe- cuted in the same manner as deeds of conveyance and re- corded in the office of the clerk of the probate court of the county where the real estate is situate, and such record is notice to all persons of the contents of such instruments. All conveyances of real estate to bind purchasers for value without notice must be recorded. The records of deeds and mort- gages are kspt in separate books. The record is notice from the time of deposit for record. An unrecorded instrument does not affect the title or rights of third persons without notice.^ § 623. New York. — Every conveyance of real estate is void as against a subsequent purchaser in good faith and for a valuable consideration of the same real estate, or any portion thereof, whose conveyance shall be first duly recorded in the office of the clerk of the county where the land is situated, except in tlie counties of New York, Westchester, and Kings, where it must bo recorded in the register's office. This applies to real estate mortgages. An absolute conveyance shown by any other written instrument to be intended as a mortgage is considered as a mortgage, and must be recorded among the mortgages at the same time and together with such instrument of defeasance, and the recording the conveyance has no effect unless such other instrument be also recorded therewith and at the same time.' Separate books are kept for the record of mort- sealing and delivering the game are void and of no eflFect against third par- ties without notice. • Clement v. Bartlett, 33 N. J. Eq. 43. * Laws of 1887, ch. 10. ^ 1 Rev. Stat. 756. 660 REGISTRATION OF THE INSTRUMENT. gages. An assignment of a mortgage must be recorded to protect the assignee against subsequent assignments duly recorded. Mortgages are void as against bona fide purchasers for value without notice, unless within one year prior to expiration of every term of twenty years from record thereof a statement, referring to the mortgage, and showing the amount due, date of last payment, name of mortgagee and of owners of property, and names and residences of owners of the mortgage — is filed with the clerk or register of the county where the property is situated.^ Knowledge of an agent can be charged to his principal only when clear proof is made that the knowledge was present in the agent's mind at the time of the transaction, which is the subject of the consideration, in relation to notice of a prior unrecorded mortgage.^ After land had been conveyed to a party, but before the deed was recorded, a mortgagee of the property foreclosed his mortgage, became the purchaser at the sale, and then con- veyed the property for a valuable consideration to another party. , Held, that the last vendee was entitled to protection against the conveyance to the first vendee, without regard to the question whether the grantor had or had not notice thereof.'* When a recorded mortgage recites that it was given to secure an annual payment for the benefit of a minor until she became of age, a purchaser for a valuable consideration, after the mortgage is discharged, and before the minor comes of age, is charged with notice of the terms of the trust.* The fact that a mortgage is not upon record, is no defense to the mortgagor when suit on the covenants in the mortgage is brought, the mortgage property having passed to a purchaser for value without notice.* 1 Laws of 1890, ch. 282. ^Constant v. University, 111 N. Y. 604 ; Slattery v. Schwannecke, 118 N. Y. 543. 3 Slattery v. Schwannecke, 118 N. Y. 543. ♦McPherson v. Rollins, 107 N. Y. 316. * Forrester v. Parker, 14 Daly (N. Y.), 208. REGISTRATION. 661 § 624. North Carolina. — No deed of trust or mortgage of real estate shall be valid at law to pass any property as against creditors or purchasers for a valuable consideration from the donor, bargainor, or mortgagor, but from the registration of such deed or mortgage in the county where the land lies, in the office of the register of deeds.^ No purchase shall avail against an unrecorded deed when the person claiming or holding under such deed is in actual possession, either in person or by his tenant at the time of the execution of a subsequent deed, or when the person claiming under such subsequent deed had actual or constructive notice of such unregistered deed.^ A mortgage takes effect only from its registration. Under the code ^ declaring that no mortgage shall be valid to pass any property as against creditors or purchasers for a valuable consideration from the mortgagor until registered, a mortgage not recorded till after the recording of a subsequent one, in the absence of fraud is invalid as against it, though the mortgagee had actual notice of the earlier unrecorded mortgage.* So when one who knows of a prior unrecorded mortgage or deed of trust procures a mortgage for his own benefit on the same property which is recorded first, he gets the first lien on the property unless he uses fraud to prevent registration of the mortgage which is first in date.^ Under the statute ^ a mortgage conveying land which is not registered in the county where the land lies is not valid as against creditors and purchasers for value.^ Mortgages and trust deeds take effect only from and after the registration. No notice, however full, and formalities will supply the place of registration.^ ' Code, sect. 1254. ' Laws of 1885, ch. 147, sect. 1. ^Code, sect. 1254. *Hinton r. Leigh, 102 N. Car. 28. * Traders' Nat. Bank v. Woodlawn Manuf. Co., 96 N. Car. 298. * Bat. Rev., ch. 35, sect. 12. ' King V. Portis, 77 N. Car. 25. * Robinson v. Willoughby, 70 N. Car. 358. 662 REGISTRATION OF THE INSTRUMENT. When the execution of the mortgage is not denied, an ob- jection to the sufficiency of the probate on the ground of variance in the name of the subscribing witness as attached to the mortgage is properly overruled/ § 625. North Dakota. — Every con-veyance of real property other than a lease for a term not exceeding one year is void as against any subsequent purchaser or incumbrancer, including an assignee of a mortgage, lease, or other conditional sale of the same property, or any part thereof, in good faith and for a valuable consideration, whose conveyance is first duly re- corded. All instruments of conveyance of real property must be recorded in the office of register of deeds of the county in which the land lies.^ A mortgage of real estate can be created, renewed, or ex- tended only by writing, with the formalities required in the case of a grant of real estate. § 626. Ohio. — Mortgages are executed in the same manner as deeds. The mortgage first presented must be first recorded, and the first recorded has preference. Mortgages of real estate are not good against subsequent lien-holders or purchasers, unless delivered to the recorder of the county where the land is situate, for registration, and then only from that time, even though such purchaser or lien-holder has actual notice of the existence of said mortgage. Between the parties thereto an unrecorded mortgage is valid. And until so recorded or filed for record the same shall be deemed fraudulent so far as relates to a subsequent bona fide purchaser having at the time of pur- chase no knowledge of the existence of such former deed or instrument.^ A mortgage takes effect only from the time it is left for record.* ' Simpson v. Simpson, 107 N. Car. 552. '^ Civil Code of Procedure, sects. 651, 671. » Rev. Stat., sect. 4134, 82 Ohio L. 230, Laws of 1885 ; Tousley v. Tousley, 5 Ohio St. 78. *Sturgessi). Bank, 3 McLean, C. C. 140. REGISTRATION. 663 A mortgage duly executed and deposited with the recorder and recorded in the "record of deeds " instead of the "record for mortgages," but indexed in both, and indexed in the general index with the letters " mtg.," is valid against a subsequent purchaser for value without actual notice of such mortgage.' A deed absolute in form, intended' however to secure the payment of money due from the maker to the grantee, and upon the payment of which by a certain time the grantee agreed to reconvey the property to the grantor, though in equity a mortgage is not a legal one ; and to make it valuable against creditors of the grantor, it need not be recorded under the sec- tion ^ providing for registration of mortgages. It is sufficient for such purpose if it be registered within the time prescribed by the section ^ making provisions for the registration of all other deeds and instruments in writing for the conveyance or incumbrance of lands other than as provided in the previous section, 4133.* The purchaser from the mortgagor of lands incumbered by an unrecorded mortgage takes title thereto free from such in- cumbrance, even if he has full knowledge and notice of its existence, and that it is unpaid at the date of his purchase ; and if the mortgage is then recorded and a creditor takes judg- ment against the vendee, his judgment will take precedence over the mortgage.^ The dactrine that the delivery of a mort- gage for record is a part of the execution of the instrument, and that before the filing for record a mortgage is not valid either in law or in equity, as decided in Holliday v. Bank,® must be received with the qualification that it has exclusive reference to the effect of the instruments as to those not parties to it.^ The omission of an officer to certify a privy examina- ' ' Smith V. Smith, 13 Ohio St. 532. "^ Rev. Stat., sect. 4133. ' Rev. Stat., sect. 4134. ♦ Kemper r. Campbell, 44 Ohio St. 210. *Buildin Shape V. Schaffner (111.), 30 N. E. Rep. 872. * Shape r. Schaffner (Ill.),;50 N. E. Rep. 872. Many of the States provide that if lands are purchased by the husband durintr mai-riage, who gives a mortgage to secure the purchase-money, the widow has dower only in the equity of redemption, if she did not join in the mortgage : Stims. Am. Stat. Law, sect. .321.3 : Georgia, Oregon, Arkansas, North Carolina, West Virginia, Nebraska, Wisconsin, Michigan, Illinois, In- diana, and New York. The same law holds as to the husband's curtesy in the wife's lands in some of the States : Stims. Am. Stat. Law, sect. 3113 : Delaware. ' Thompson v. Lyman, 28 Wis. 266 ; Birnic r. Main, 29 Ark. 501 ; Hinds v. Ballon, 44 N. H. eio. 46 722 REGISTRATION OF THE INSTRUMENT. veyaiice, and the wife was affected with a trust for a reconvey- ance.' § 685. Judgments. — A prior judgment against the mort- gagor is subordinate to the mortgagee's hen in a purchase- money mortgage. Thus, where the purcliase-money mortgage is executed and dehvered concurrently with the deed for the land, a judgment obtained against the mortgagor before the purchasa does not take priority over the lien of the mortgage, thougli the mortgage in Illinois be not acknowledged and re- corded for some time after the recording of the deed.^ The mortgage is the paramount lien.^ It is a familiar principle of law that a mortgage given for the purchase-money of land and executed at the same time the deed is executed to the mortgagor, takes precedence of a judg- ment against the mortgagor.* So, too, where in pursuance of an executory contract the same lands are conveyed at the same time and mortgage thereon given by the purchaser for a por- tion of the purchase-money, the sale is subject to the lien for the unpaid purchase-money which attaches eo instanti as a part of an invisible transaction ; and the purchaser cannot give to another a lien which will take priority to such mortgage.^ The lien of such a mortgage is prior to that of any judgment against the purchaser. The same rule applies where a third person, who holds a mortgage on the property, receives from the purchaser as a part of the same transaction, and as part of the purchase price, a mortgage on such property in place of a previous mortgage.^ The priority over judgments is not restricted to a mortgage t ' Ogle V. Ogle, 41 Ohio St. 359. " Roane v. Baker, 120 111. 308. ' Bradley v. Bryan, 43 N. J. Eq. 396. *■ Curtis V. Root, 20 111. 513. It is true that this judgment which was affirmed in Curtis v. Root, 20 111. 518, was afterward reversed in the same case as reported in 28 111. 367 and 38 111. 192, upon other grounds, but it still stands as authority for the doctrine announced in this section when the deed for purchase-money is executed at the same time. ^Dusenbury v. Hulbert, 59 N. Y. 541. « Ward V. Carey, 39 Ohio St. 361. THE LIEN. 723 given to the grantor of the land.' It is not essential for a mortgage to show on its face that it was given for the pur- chase-money, in order to have it preferred, if the fact that it ■ was so given was known to the mortgagors and mortgagees.^ Article 3. Mechanic's Lien. I 686. Creature of the Statute. | 691. Commencement of the Lien. l 687. Railroad Company's Contracts. § 692. Purchase-Money Mortgage. I 688. Priority of Mortgage Debt by § 693. The Lienor Must Bring Him- Eailroad Company Sometimes self Clearly Within the Displaced. Statute. ? 689. Lien of After- Acquired Prop- I 694. Proof of Claim. erty. I 695. Extent of Mechanic's Lien. § 690. "Waiver of the Lien. § 686. Creature of the Statute. — The lien of the me- chanic known as a mechanic's lien is exclusively the creature of the statute.^ Such liens may be given priority of mortgages by statutory enactments, executed and recorded subsequently to the date of the contract under which the lien is claimed.* The principle embraced in the statute is founded in natural justice, that the party who has enhanced the value of the prop- erty by incorporating therein labor and materials shall have security on the same, though changed in form and inseparable from the property.' But however equitable the claim may be, the lien does not exist unless the party brings himself within the provisions t)f the statute, and shows a substantial compliance with all the essential requirements." If the mechanic brings himself within the statute, it is but ' Stewart v. Smith, .3() ]Minn. 83 ; Cake's Appeal, 23 Pa. St. 186 ; Wilson v. Smith, 52 Hun (N. Y.),171. •'City Nat. Bank's Appeal, 91 Pa. St. 163. 'Grant v. Vandercook, 8 Abb. Pr. N. S. (N. Y.) 455. * Dunklee v. Crane, 103 Mass. 470. ''Taggard v. Buckmore, 42 Me. 77. * Spencer v. Barnett, 35 N. Y. 96 ; Dore v. Sellers, 27 Cal. 588 ; Noll v. Swine- ford, 6 Pa. St. 187 ; Greene v. Ely, 2 Greene (Iowa), 508. 724 REGISTRATION OF THE INSTRUMENT, just that the mechanic should have the benefit of his labor rather than the mortgagee, who has taken the mortgage during the progress of the work/ The statutes of the different States are not the same. In some Slates a bona fide mortgagee is considered as a purchaser wdio is not affected by a mechanic's lien unless he has received actual or constructive notice of it in a manner prescribed ; and the fact that the mechanic is working upon the building at the time of taking the mortgage is not actual notice of his lien.^ But it is generally held that liens for repairs and improve- ments on buildings already covered by a mortgage or deed of trust are subject to such prior mortgage.^ But after actual no- tice of a mechanic's lien optional advances thereafter made must be held inferior.* § 687. Railroad Company's Contracts. — As a general rule a prior recorded mortgage given by a railroad company, cre- ates a lien whose priority cannot be displaced thereafter either directly by a mortgage given by the company, or indirectly by a contract between the comjjany and a third party for the erec- tion of buildings or other works of original construction. Thus, a mechanic's lien for the construction of a dock on the property of a railroad company is subject to a lien of a mort- gage on the company's property, recorded before the improve- ments were made.^ Registry of a mortgage is notice to the world of the lien, and a contractor must then know it.^ In general railroad mortgages made to secure the payment J Davis V. Bilpland, 18 Wall. (U. S.) 659 ; Equitable Life Ins. Co. v. Slye, 45 Iowa, 615 ; Neilson v. Railroad Co., 44 Iowa, 71. ^Foushee v. Grigsby, 12 Bush (Ky.), 75 ; Gere v. Cushing, 5 Bush (Ky.),304. ^Piingan v. Scott, 37 Mo. App. 66.i ; Choteau v. Thompson, 2 Ohio St. 114, 126, 127. Compare Wimberly v. Mayberry (Ala.), 10 South. Rep. 157; Welch V. Porter, 63 Ala. 232 ■•Finlayson v. Crooks, 47 Minn. 74. See, also, AVetmore r. Marsh, 81 Iowa, 677 ; Reilly v. Williams, 47 Minn. 590 ; Haxtun Steam-Heater Co. v. Gordon (N. Dak.), 50 N. W. Rep. 708 ; 34 Cent. L. Jour. 196, and note. ^Toledo, etc.. Railroad Co. v. Hamilton, 134 IT. S. 296. « Dunham v. Railway Co., 1 Wall. (U. S.) 254, 267. THE LIEN. 725 of bonds issued for the purpose of realizing means with which to construct the road, stand upon the same footing as ordinary mortgages ; the weight of judicial determination sanctions this doctrine/ And the fact that the mortgagor has not the legal title to the property gives no priority to a mechanic's lien, where the mortgagor has the full equitable title before the contract for the construction of the improvements is entered into, and the mortgage being one of general description, conveyed land held by a full equitable, as well as that held by a legal title.^ When the work is in original construction, the prior recorded mortgage will take precedence over the mechanic's lien.^ § 688. Priority of Mortgage Debt by Railroad Com- pany Sometimes Displaced. — The mechanic's lieu for original construction gives no equitable lien prior in right to the lieh of a prior recorded mortgage, and does not furnish any equit- able reason why the legal priority belonging to the mortgage should be displaced. The priority of a mortgage debt upon a railroad, says Justice Brewer, has been sometimes displaced in favor of unsecured creditors, when those debts were contracted for keeping up a railroad, already built, as a going concern ; but these cases have no application to a debt contracted for original construction.* It is true cases have arisen in which, upon equitable reasons, the priority of a mortgage debt has been displaced in favor of even unsecured subsequent creditors.^ Justice Blatchford has well enunciated the doctrine which ' Pierce t'. Emery, 32 N. H. 484; Pennock v. Coe, 23 How. (U. S.) 130; Field V. Mayor, 6 N. Y. 179 ; Seymour v. Railroad Co., 25 Barb. (N. Y.) 284 ; Lanprton v. Horton, 1 Hare Ch. 549 ; Noel v. Bewley, 3 Sim. 103. '^ Ma?sey r. Papin, 24 How. (U. S.) 302 ; Farmers' Loan and Trust Co. r. Fisher, 17 Wis. 114 ; Lincoln Building A.sso. v. Hass, 10 Nebr. 581 ; Laughlin V. Braley, 25 Kan. 147 ; Toledo, etc.. Railroad Co. v. Hamilton, 134 U. s! 296, 305. ^Porter v. Pittsburgh Steel Co., 120 U. S. 649, 671. * Toledo, etc., Railroad Co. v. Hamilton, 134 U. S. 296. ^ St. Louis & Alton Railroad v. Cleveland, etc., Railroad Co., 125 U. S. 058, 073 Fosdick V, Schall, 99 U. S. 235 ; Miltenbcrger v. Railroad Co., 100 U. S. 286; Union Trust Co. v. Souther, 107 U. S. 591 ; Burnham v. Bowen, 111 U. S. 776 726 REGISTRATION OF THE INSTRUMENT. controls these cases. He says : " The claims of the appellees are for the original construction of the railroad. This is not a case where the proceeds of the sale of the property of a rail- road, as a complete structure, open for travel and transporta- tion, are to be applied to restore earnings which, instead of having been applied to pay operating expenses and necessary repairs, have been diverted to pay interest on mortgage bonds and the improvement of the mortgaged property, the debts due for the operating expenses and repairs having remained unpaid when a receiver was appointed. The equitable principles upon which the decisions rest, applying to the payment, out of the proceeds of the sale of railroad property, of such debts for operating expenses and necessary repairs, are not applicable to claims such as the present, accrued for the original construction of a railroad while there was a subsisting mortgage upon it. These five appellees gave credit to the company for their work. It was construction work, and none of it was for operating ex- penses or repairs, and none of it went toward keeping a com- pleted road in operation, either in the way of labor or material. When these claims accrued, the road of the company had not been opened for use. The claims accrued, after the mortgage had been executed and recorded, and after $1,000,000 of the bonds secured by it had been issued and pledged to innocent bo7ia fide holders for value. We are not aware of any well- considered adjudged case, which, in the absence of a statutory provision, holds that unsecured floating debts for construction are a lien on a railroad superior to the lien of a valid mort- gage duly recorded, and of bonds secured thereby, and held by bona fide purchasers for value. The authorities are all the other way.'"' ' § 689. Lien of After-Acquired Property. — When after- acquired property, when acquired, is already subject to a mechanic's lien, such lien will take precedence of the prior mortgage covering such property. Dow V. Memphis, etc., Railroad Co., 124 U. S. 652; Union Trust Co.^;. Morri- son, 125 U. S. 591. » Porter v. Pittsburgh Steel Co., 120 U. S. 649, 671. THE LIEN. 727 Thus, after giving a mortgage a railroad company desired to erect a depot on land adjoining its track. The owner of the land agreed to give the company the land provided it would build a depot. Upon the building a mechanic's lien was filed. The owner had never made a conveyance. Upon foreclosure of the mortgage the mechanic's lien upon the build- ing and the ground upon which it was constructed was held prior to the mortgage, because the full, equitable title never passed to the railroad company until the completion of the building, and then it passed, subject to the burden of the mechanic's lien. Therefore, though after-acquired property, and subject to the lien of the mortgage, it was, when acquired, already burdened with a lien.^ The same doctrine is held in New Jersey, In a New Jersey case the defendant railroad company had executed a mortgage with the " after-acquired property " clause in it, duly recorded. It was also the owner of a large majority of the stock of another railroad company, and was in possession of and operating the latter company's road. No consolidation, in fact, of the two companies had taken place ; but being in possession of the latter company's road, it had contracted for the building of certain docks, walls, and piers, at the terminus of that road. Having failed to make payment for such work, a me- chanic's lien was perfected upon the latter company's road. Upon a suit to foreclose the mortgage given by the defendant railroad company, the chancellor, laying hold of the fact that the defendant railroad company was the owner of the large majority of the stock of the latter company — was in possession of and operating the latter compan3^'s road — decreed that such road, with its property and franchises, be- longed to the defendant railroad company, and that the after- acquired property was subject to the mortgage, which was subor- dinate to the mechanic's lien.^ On review in the Court of Errors and Appeals, the decision of the chancellor was sustained, the court saying that until the decree was signed, the right of the 'Botsford V. New Haven, etc., Eailroad Co., 41 Conn. 454. , ' Williamson v. New Jersey, etc., Eailroad Co., 28 N. J. Eq. 277, 728 REGISTRATION OF THE INSTRUMENT. mortgagee in the lands of the latter company under his mort- gage was a mere unexecuted equity to have the benefit of such equities as his mortgage had in the premises, without any legal title in himself or in his mortgagor upon which his mortgage as a conveyance could operate. When the decree of the chan- cellor was signed, which established the lien of the mortgage on the property of the latter company, the lienor had, by force of the provisions of the mechanic's lien act, acquired a lien on the premises which related back to the commencement of the building, and was entitled to priority over all conveyances, mortgages, or incumbrances subsequent thereto. This lien was not displaced by the chancellor's decree, which, in the absence of fraud, could be effective only to bring under the mortgage the lands of the latter company, subject to such liens as were lawfully acquired while the legal estate was in the latter com- pany, and the chancellor's decree was affirmed, giving priority to the mechanic's lien.^ § 690. Waiver of the Lien. — A mechanic's lien may be waived by taking security for the claim. As between the parties themselves, the question of waiver is largely one of intention.^ The fact that a party entitled to a lien for materials fur- nished in the construction of a building took a chattel mort- gage security from the debtor for a part of his claim, does not amount to a waiver of his lien as against one who took a mort- gage upon the premises before the chattel mortgage was given.' And where a duly recorded lien for a building erected on one of two lots is filed against both, a subsequent mortgagee cannot object after a sale under the lien, that it was filed against more than was necessary.* When the lienor takes a mortgage to secure his lien he waives his right to a mechanic's lien.^ ^ Williamson v. New Jersey, etc., Railroad Co., 29 N. J. Eq. 311. 2 Hale r. Railroad Co., 2 McCrary, C. C. 55S ; Peck v. Bridwell, 10 Mo. App. 524; Gilcrest v. Gottschalk, 39 Iowa, 311 ; McCall v. Eastwick, 2 Miles (Pa.), 45 ; ParlDerry v. Johnson, 51 Miss. 291 ; Basher v. Nordyke, 25 Kan. 222. ^Howe V. kindred, 42 Minn. 433. *Harbach v. Kurth, 131 Pa. St. 177. » Trullinger v. Kofoed, 7 Oreg. 228. THE LIEN. 729 If the holder of a first lien mortgage, prior to a mechanic's lien, releases it on taking assignment of a mortgage subsequent to a mechanic's lien, he yields his priority/ § 691. Commencement of the Lien. — There are two sys- tems generally adopted in tlie United States : The New York system and the Pennsylvania system. The former gives to the sub-contractor a lien by way of sub- rogation, which is accomplished by a notice given to the owner by the sub-contractor, which notice specifies the probable value of the services to be performed, or of the materials to be furnished, and the owner is thereupon en- titled to withhold from the contractor money due to the latter to such an amount as will meet the demand. The Pennsylvania system gives a direct lien to the laborer or sub-contractor, either by an agency created by the statute, or by an implied agency vested in the original contractor. It is well to take into consideration these two systems in construing the mechanic's lien laws.^ The commencement of work, within the meaning of the statutes, is when the first labor is done on the site of the build- ing, which is necessary, either by the contractor or sub-con- tractor.^ But the language of the statute has great control of this question. Judge Bach says : " In California and other States the stat- utes on this subject read thus : ' Subsequent to the commence- ment of the work.' It is apparent that in such States the lien is not prior to those mortgages which are recorded prior to the commencement of the very work for which the lien is filed. But tliese authorities are not in point " in IMontana. The Montana law reads that the lien " shall be prior to and have precedence over any mortgage . . . made subsequent to the ^Phoenix Mut. Ins. Co. v. Batchen, 6 III. App. 621. See, also, Lipman v. Jackson Architectural Iron Works, 128 N. Y. 58; Erwin v. Acker, 126 Ind. 133. ^See Hunter v. luodffe, 14 Nev. 24-33, for an able opinion by the learned Chief Justice Beatty on this suVyect. ^^irooks v. Lester, 3G Md. 65, 70; Pennock v. Hoover, 5 Rawle (Pa.), 291; Com-ad v. Starr, 50 Iowa, 470. 730 REGISTRATION OF THE INSTRUMENT. commencement of work on any contract for the erection of such building. " ^ Thus, the work upon the building was commenced by the contractor May 1, 1869, and the mortgage of the premises was filed on June 9, 1869, and the work of the sub-contractor for which the lien was filed was commenced in July, 1869. It was held that the lien dated from May 1, 1869, the date of the commencement of the building, and was prior to the mort- gage.^ So in Montana, a sub-contractor's work dates from the time the principal contractor began work on the building, though the sub-contractor's work was commenced subsequent to a duly recorded mortgage. Judge Bach says that the mort- gagee knew the law. He knew, or could have known, that the work had been commenced on a contract for the erection of a building. He knew that persons other than the original con- tractor would perform work and labor which would improve the property upon which, as security, he advanced the money. He knew of the lien which such sub-contractor could acquire. To hold otherwise would be to destroy the very purpose of the law, which was to give to the sub-contractor a direct lien for the value of liis labor, because it is evident, if the contrary was held, such liens would be made worse than a farce by a so- called blanket mortgage filed the day after the improvement was commenced.^ The law that suD-contractors may have a direct lien, either ^Comp. Stat., gect. 1374. '^ Davis r. Bilsland, 18 Wall. (TJ. S.) 659, appealed from the Montana Su- preme Court. ^Merrigan v. English, 9 Mont. 113. See, also, Mut. Benefit Life Ins. Co. v. Rowand, 26 N. J. Eq. 389 ; Jean v. AVilson, 38 Md. 288, 296 ; Norris's Appeal, 30 Pa. St. 122 ; Parrish's Appeal, S3 Pa. St. Ill ; Knox v. Starks, 4 Minn, 20 ; AVarden v. Sabins, 36 Kan. 165 ; Farmers' Bank v. Winslow, 3 Minn. 8(5 ; Jes- 8up V. Stone, 13 Wis. 466 ; Chapman v. Wadleigh, 33 Wis. 267 ; Hall r. Hinck- ley, 32 Wis. 362; Monroe v. AVest, 12 Iowa, 119; Conrad v. Starr, 50 Iowa, 470; Hahn's Appeal, 39 Pa. St. 409; Gault v. Deming, 3 Phila. (Pa.) 337; Auptin V. Wohler, 5 111. App. 300 ; Kelly v. Rosenstock, 45 Md. 389. A statute declaring that no incumbrance upon land, created before or after the making a contract, or performing laV)or or furnishing material shall oper- ate upon the building erected or material furnished until the lien for laborer material is satisfied, is unconstitutional and void : Meyer v. Berlandi, 39 Minn. 438. See, also, Stockwell v. Carpenter, 27 Iowa, 119. Jl THE LIEN. 731 by an agency created bj^ the statute, or by an implied agency vested in the original contractor, is constitutional.^ But the decisions under the New York system do not apply to a law where the lien of the sub-contractor is a direct lien,^ and must be considered in the adjudication of the priority of mechanics' liens. Clearing away stumps is not a commencement of the build- ing, and a mortgage given before the commencement of the building will take precedence.^ Many statutes provide in substance that the mechanic's lien shall be preferred to all other liens and incumbrances made subsequent to the commencement of said building, erection, or other improvements.* In Massachusetts the lien takes priority of a mortgage made subsequently to the contract, though neither the labor is per- formed nor the materials furnished until after the making of the mortgage.^ § 692. Purchase-Money Mortgage. — A mortgage for the purchase-money executed at the time the deed of conveyance was made takes precedence to a mechanic's lien.^ Thus, the holder of a purchase-money mortgage procured insurance payable to himself, but in the name and upon the interest of the mortgagor. The lien of the mortgage on the insurance-money after the destruction of the building was superior to that of a mechanic for lumber and materials used in the rebuilding, and the rights of the mortgagee was not affected by the fact that he obtained a higher price for the land.^ ' Parker v. Bell, 7 Gray (Masf«.),429 ; Laird v. Moonan, 32 Minn. 358 ; Spof- ford V. True, 33 Me. 283 ; Atwood v. Williams, 40 Me. 409 ; Colter v. Frese, 45 Ind. 9(j-103 ; White v. Miller, 18 Pa. St. 52. ^ Merrifran v. English, 9 Mont. 113. ^ Central Trust Co. v. Cameron Iron and Coal Co., 47 Fed. Rep. 130. *See Neilson v. Railroad Co., 44 Iowa, 71; Meyer v. Construction Co., 100 U. S. 457 ; Dubois v. Wilson, 21 Mo. 213 ; Gordon v. Torrey, 15 N. J. Eq. 112; Parrish's Appeal, 83 Pa. St. 111. * Carew v. Stubbs (Mass.), 30 N. E. Rep. 219. « Campbell's Appeal, 36 Pa. St. 247 ; Clark v. Butler, 32 N. J. Eq. 664. ' Elgin Lumber Co. v. Langman, 23 111. App. 250. 732 REGISTRATION OF THE INSTRUMENT. When the vendor of land has subjected his Hen for the un- paid purchase-money to the Hen of the mechanic and mate- riahncn engaged in erecting a building for the vendee, a sub- sequent mortgagee of tlie premises, whose loan has been a})} lied by thj vendee in paying otf the unpaid purchase-money, is not entitL'd to priority over the mechanic's lien claimants.' A mechanic's lien is postponed to a purchase-money mort- gage,^ except where legal permission has been given by the mortgagee to the i)arty endeavoring to enforce the mechanic's lien, to do the work creating the lien.^ § 693. The Lienor Must Bring Himself Clearly Within THE Statute. — The statute relating to mechanic's liens should be liberally construed, so as to afford the securit}^ intended, but the lienors must not only bring themselves clearly within the statute, but they must be prepared, if the priority of their lien be disputed, to show a compliance with the statute and to fix with certainty the commencement and completion of their work.* Their liens are paramount to those put upon the property after the commencement of the work. Plence, a mortgage recorded before the work is done, but after the commencement of the building is inferior to the vendor's lien.^ It is the duty of the mechanic to see that there is no lien upon the premises before he commences the work. If he does work upon mortgaged property, his" lien is subordinate to that of the mortgagee, although the latter knew of such work and did not object.^ ^Finlaypon v. Crooks, 47 Minn. 74. ''Lamb r. Cannon, 38 N . J. L. 362 ; Wallace r. Silsby, 42 N. J. L. 1 ; Virgin V. Brubaker, 4 Nev. 31 ; Clark v. Butler, 32 N. J. Eq. 664. "Gibbs V. Grant, 29 N. J. Eq. 419 ; Paul ('. Hoeft, 28 N. J. Eq. 11. * Davis V. Alvord, 94 U. S. 545 ; Grant v. Vandercook, 8 Abb. Pr. N. S. (N. Y.) 455. 5 Dubois V. Wilson, 21 Mo. 214; Meyer u. Construction Co., 100 U. S. 457; Getchell r. Allen, 34 Iowa, 559 ; Neilson v. Railway Co., 44 Iowa, 71 ; Con- rad V. Starr, 50 Iowa, 470. 8 Card V. Bank, 23 Conn. 355 ; Hoover v. Wheeler, 23 Misss. 314 ; Pride v. Viles, 3 Sneed (Tenn.), 125 ; Tritch v. Norton, 10 Colo. 337 ; Bridwell v. Clark, 39 Mo. 170. THE LIEN. 733 § 694. Proof of Claim. — ^Mechanics and laborers asserting a lien upon real estate for their work, and claiming priority over a mortgagee and others who have acquired interests in the property, must furnish strict proof of all that is essential to the creation of the lien ; therefore, they must prove when the work was commenced, and the character of the work when it is done.^ It must be proved that the work was done with the intent and purpose then formed to continue it to the completion of the work. Work done on the ground without any design or pur- pose of constructing the building at that time, and which was intermitted, is not sufficient.^ The mortgage must be recorded before the work is com- menced in order to have priority.^ And under the Pennsylva- nia act,* which provides that the mechanic's lien shall be preferred to every other lien or incumbrance attaching to a building or ground-rent after commencement of such pre- paratory work, the work of clearing a place by cutting out stumps and the like is not a commencement of the build- ing.^ § 695. Extent of Mechanic's Lien. — The extent of the mechanic's lien cannot be greater than the title of the owner who contracted for the work. Thus, if owner of the building is a mere occupant with the right of removal of the building, the right of occupancy and removal would pass by a sale under the mechanic's lien. But if the owner of the building as be- tween himself and others having rights in the land, would not have the power to remove it, a purchaser under the mechanic's lien would acquire no right to remove it.^ The right to remove a building to enforce a mechanic's lien depends upon the fact as to whether it is so far an independent * Davis V. Alvord, 94 U. S. 545. Mean v. Wilson, 38 Md. 296 ; Kelly v. Rosenstock, 45 Md. 389. •^ Brooks V. Lester, 36 Md. 65 ; Thielman v. Carr, 75 111. 385. * Act of June 16, 1836, sect. 10. * Central Trust Co. v. Cameron Iron and Coal Co. (Pa.), 47 Fed. Rep. 136, « Jessup V. Stone, 13 Wis. 466. 734 REGISTRATION OF THE INSTRUMENT. structure as to be capable of being removed without materially injuring and destroying that which was removed.* Decree enforcing mechanic's lien and ordering sale where mortgagee is made defendant, bars him of such mortgage on premises, though not referring thereto. Mortgagee's remedy in Illinois for failure of decree to protect his rights is by appeal and enforcement of lien on the funds of sale.^ These conflicting liens can only be adjusted in equity.^ Article 4. After-Acquired Title. I 696. Prevailing Doctrine. § 702. The Doctrine of Equitable Es- § 697. Under Government Grants and toppel is also Applied. Pre-emption — In General. § 703. Who Are Bound. § 698. The Title Must Pertain Only to § 704. Tax Title. the Subject-Matter. § 705. The IVIortgagor is Obligated \ 699. One in Possession of Land. to Pay the Taxes, i 700. Mortgaging Lands Without Ti- | 706. The Rights of One Among tie to Them. Several Owners. § 701. Estoppel of Mortgagor. § 696. Prevailing Doctrine. — The prevailing doctrine is that the after-acquired title inures to strengthen the mortgage lien, but, in the absence of statutory provisions, to have that effect the conveyance must contain covenants of warranty, or something nearly akin to it ; * and a subsequent purchaser from the mortgagor stands in the same position as his vendor of the after-acquired title,* and the mortgagor's heirs take only his rights.^ Some of the States have passed laws concerning the vesting 1 Conrad v. Starr, 50 Iowa, 470 ; O'Brien v. Pettis, 42 Iowa, 293. ''Topping V. Brown, 63 111. S48. ' Wimberly v. Mayberry (AUi), 10 South. Rep. 157. *Gray v. Franks, 86 Mich. 382 ; Howze v. Dew, 90 Ala. 178 ; Kline v. Rag- land, 47 Ark. Ill, opinion by Chief Justice Cockrill. 5 King V. Gilson, 32 111. 348 ; Gochenour v. Mowry, 33 111. 331 ; Jones r. King, 25 111. 383, 388 ; Cockrill r. Bane, 94 Mo. 444 ; Tefft v. Munson, 63 Barb. (N.Y.) 31 ; 57 N. Y. 97 ; M'Crackin v. Wright, 14 Johns. (N. Y.) 193, 194 ; Hitchcock V. Fortier, 65 111. 239. 6 Somes V. Skinner, 3 Pick. (Mass.) 52 ; Wark v. Williard, 13 N. H. 389. THE LIEN. 735 of after-acquired title. Thus, Arkansas has an enactment which declares that an after-acquired title of the grantor of a fee simple, or any estate, shall inure to the grantee.' And in California it is declared that a title subsequently acquired by the mortgagor inures to the mortgagee as security, in like man- ner as if acquired before the execution.^ § 697. Under Government Grants and Pre-emption — In General. — Where a mortgagor has the right to pre-emption to certain lands and mortgages his interest for a valuable considera- tion and then acquires the patent from the government, the full title in fee simple thus acquired inures to the mortgagee's benefit, and the mortgage is a valid lien upon the property.^ So when one having a claim to land in Missouri, under a Spanish grant, before confirmation by Congress, gave a mort- gage upon the land, after which the grant was confirmed, the fee simple thus acquired inures to the benefit of the mortgagee, even over the claim of the mortgagor's heirs.* And this rule is general, whether the title comes from the government or other parties. The after-acquired title inures to the benefit of the mortgagor and his heirs and assigns, by virtue of the cove- nants in the mortgage ^ in tlie absence of statutory provisions.** But when the lien of the mortgage has been discharged, by a judicial sale, it is not revived when the mortgagor acquires subsequently a title to the premises through another as pur- chaser at such sale.^ *Mansf. Dig., sect. 642 ; Kline v. Ragland, 47 Ark. 111. ^ Civil Code, sect. 2930. ' Spiess V. Neuberg, 71 Wis. 279, and cases cited. *Ma?sey v. Papin, 24 How. (U. S.) 362. "Pratt V. Pratt, 96 111. 184 ; Gibbons v. Hoag, 95 111. 45 ; Wells v. Somers, 4 111. A pp. 297; Rice r. Kelso, 57 Iowa, 115^ Toms r. Boyes, 50 Mich. 352; Bush V. Marshall, 6 How. (U. S.) 284 ; Levy v. Lane, 38 La. Ann. 252 ; Flynt V. Hubbard, 57 Miss. 471 ; Parker v. Jones, 57 Ga. 204 ; Brayton v. Merithew, 56 Mich. 166; Wright v. Shumway, 1 Biss. C. C. 23; Huzzey f. Heffeman, 143 Mass. 232; Trope v. Kerns, 83 Cal. 553; Vallejo Land Asso. v. Viera, 48 Cal. 572. *La. Civil Code, art. 3308; Cal. Civil Code, sect. 2930; Ark. Mansf. Dig., sect. 642. 'Ranch v. Dech, 116 Pa. St. 157. 736 registration of the instrument. § 698. The Title Must Pertain Only to the Subject- Matter. — The after-acquired title must pertain to the land which is the subject-matter of the mortgage. Thus, where a co-tenant conveys by mortgage by general warranty an undi- vided one-seventh interest in a tract of land, which is after- ward allotted to him by partition of an estate, such mortgage conveys to the mortgagee title to a one-seventh interest ; the title cannot be extended to the whole allotment.^ And a hus- band of an heir of the mortgagor can claim and hold a title acquired by himself.^ So when a husband and wife own an undivided one-half in- terest in a parcel of land under a common deed, and they mort- gage the entire lot, but without covenants of warranty of title, and the wife, pending foreclosure proceedings in chancery which culminate in the sale of the entire tract, acquires the remaining one-half interest to such land, this acquired title cannot be made to inure to the benefit of the purchaser under the mortgage.^ So, also, the record of the mortgage is notice of the amount specified therein.* § 699. One In Possession op Land. — One in possession of land under a contract to purchase may mortgage his interest. So a mortgage given on real estate in which the only interest of the mortgagor is a contract to purchase, attaches to the free- hold, and is prior to a mortgage given after the mortgagor ob- tains a fee simple title.'' So when he mortgages a lot to which he has no title except an option to purchase, and with the pro- ceeds thereof erects a warehouse thereon, and afterward ob- tains title, and gives a second mortgage, the warehouse is subject to the lien of the first mortgage, and the second mort- gage does not attach to it first.® 1 Howze V. Dew, 90 Ala. 178. See, also, Butler v. Roys, 25 Mich. 53 ; Priinm V. Walker, 38 Mo. 98 ; Markoe v. AVakeman, 107 111. 262. ''Rushton r. Lippincott, 119 Pa. St. 12. SMcOlure r. Holbrook, 39 Mich. 42; Brennan v. Eggeman, 73 Mich. 658. ♦Youngs V. Wilson, 27 N. Y. 351 ; Bean v. De Lezardi, 24 Miss. 424 ; Hinch- man v. Town, 10 Mich. 508 ; Lash v. Edgerton, 13 Minn. 210. "Crane v. Turner, 7 Hun (N. Y.), 357 ; Bank v. Baumeister, 87 Ky. 6. * Bank ?'. Baumeister, 87 Ky. 6. THE LIEN. 737 If a mortgagor makes a mortgage with covenants of war- ranty and then acquires the legal title to the land, such acquired title will inure to the benefit of the mortgagee.^ A mortgage of land executed by the vendor while his vendee is in possession under a contract of purchase the same is sub- ordinate to the vendee's right under a contract, and, unless actual notice of the mortgage, the vendee may safely continue to make payments of the purchase-money to his vendor.^ § 700. Mortgaging Lands Without Title to Them. — When a mortgagor gives a mortgage on land to which he has no title, the mortgage will cover the title afterward acquired by him as against one purchasing from the mortgagor after his acquisi- tion of the title, and before foreclosure, with notice of the mortgage.^ And when one in possession under a parol agree- ment to purchase, mortgages the land in pursuance of an agreement, whereby a mortgage from the vendor to the mort- gagee is cancelled as part of the consideration of purchase, a subsequent quit-claim deed to the vendee inures to the benefit of his mortgagee as against his creditors whose rights accrued subsequently to the deed, though the mortgage contained no covenants of warranty, because the title inures to the benefit of the mortgagee as fully as if the mortgage had contained cove- nants of warranty.* And so where the mortgagor has no title and it is agreed that the mortgage shall not take effect until the mortgagee has procured for the mortgagor a good title to the land, such title when acquired passes under the mortgage, though containing no covenants of warranty, and is, in effect, a purchase-money mortgage.^ And if one sells a parcel of land by warranty deed, a part of which is covered by a mortgage and then becomes a purchaser at a foreclosure sale under the mortgage, the title ^ Judd V. Seeking, 62 N. Y. 266. * Jseger v. Hardy (Ohio), 27 N. E. Rep. 863. 'Cockrill v. Bane, 94 Mo. 444. * Clark V. Daniels, 77 Mich. 26. * Cornish v. Frees, 74 Wis. 490. See, also, Heffron r. Flanigan, 37 Mich. 274 ; Elder v. Derby, 98 lU. 228. 47 738 REGISTRATION OF THE INSTRUMENT. SO acquired to this portion will inure to the benefit of his grantee.^ § 701. Estoppel of Mortgagor. — A mortgagor may be estopped from setting up an after-acquired title against the mortgagee because the mortgage with warranty of title covers that title. So when he mortgages the whole land in fee, he is estopped from denying that the estate mortgaged is less than the estate in fee simple, and the sale under the decree carries any subsequent acquired title ; ^ such mortgage will bind a portion of any lot conveyed to a third person by a conditional grant, made prior to the mortgage, if the title reverts to the mortgagor upon breach of the condition at any time subsequent to the date of the mortgage.^ The estoppel is limited to the effect of the covenant which creates it. So if a mortgagor covenants against all claims ex- cept a prior mortgage, and the lands are sold under this prior mortgage, and he becomes owner of them thereafter, the second mortgagee cannot claim the property, because the mortgagor's title comes from the first mortgage, which was expressly exempted in the second mortgage.* When the covenant of warranty is not placed in the mortgage, but in the habendum clause, its recital that the land shall be held by the mortgagees, their heirs and assigns, " against the lawful claims and demands of all persons whomsoever," is a sufiicient warranty. Chief Justice Cockrill says : " If this is not a specific war- ranty, it is at least a declaration that the mortgagor purports to convey an estate in fee simple, of which he is seized, subject only to be defeated by payment of the amount to him," and the after-acquired title inures to the benefit of the mortgagee with- out any further warranty of title expressed in the mortgage.* ' Huxley v. Rice, 40 Mich. 73. * Vallejo Land Asso. v. Viera, 48 Cal. 572 ; Orr v. Stewart, 67 Cal. 275. 3 Trope V. Kerns, 83 Cal. 553. * Huzzey v. Heffernan, 143 INIass. 232. 5 Kline v. Ragland, 47 Ark. Ill ; Crittenden v. Johnson, 14 Ark. 463. The Arkansas statute must be considered in this decision of Kline v. Ragland, 47 Ark. Ill, which declares that an after-acquired title to the grantor of a fee simple or any estate shall inure to the mortgagee : Mansf. Dig., sect. 642. THE LIEN. 739 Some statutes provide that the after-acquired title shall not inure to the mortgagee. Thus, in Louisiana/ the statute pro- vides that future property can never be the subject of a conven- tional mortgage. Under this provision, a conventional mortgage cannot affect land therefore granted to a company to aid in the construction of a railroad.^ Generally when a party mortgages land not his, with cove- nants of warranty, and afterward acquires a good title, this title comes under the mortgage by operation of law.^ § 702. The Doctrine of Equitable Estoppel is also Applied. — So when a mortgagor has induced another to part with his money for the security, he cannot then repudiate his representations and declare the mortgage void as between him and the prior holder ; * but the representations of one of sev- eral mortgagors will not bind the others.^ If the owner of land represents that the land belongs to another who gives a mortgage on it, he cannot then deny the validity of the lien on the property.® § 703. Who Are Bound. — Only parties to the mortgage and their privies are bound by or can take advantage of an estoppel created by it. The mortgagor is not bound to all the world for his representations, even if others, not parties to the deed, have relied upon the recitals, he made to the mortgagee.'^ ^ Civil Code, art. 3308. "^ New Orleans, etc., Railroad Co. v. Union Trust Co., 41 Fed. Rep. 717, opinion by Pardee, J. ^Jarvis r. Aikens, 25 Vt. 6.35; Philly r. Sanders, 11 Ohio St. 490; AVhite v. Patten, 24 Pick. (Mass.) 324 ; Tefft v. Munson, 57 N. Y. 97 ; Pike v. Galvin, 29 Me. 183 : Wark v. Willard, 13 N. H. 389. Compare 2 White & Tudor's Lead. Cas. in Eq. (4th Am. ed.), p. 212, pt. 1 ; Cross r. Robinson, 21 Conn. 379 ; Kerngood v. Davis, 21 S. Car. 183 ; Fisher v. Milmine, 94 111. 328 ; Lincoln v. Emerson, 108 Mass. 87 ; Usina v. Wilder, 58 Ga. 178 ; Tefil v. Munson, 57 N. Y. 97 ; Bush v. Person, 18 How. (U. S.) 82 ; Floyd County v. Morrison, 40 Iowa, 188; Bailey v. Academy, 12 Mo. 174. *Bush V. Cushman, 27 N. J. Eq. 131; Cabel v. EUis, 86 111. 525; Den v. Baldwin, 21 N. J. L. 395, 403. * Cabel V. Ellis, 86 111. 525 ; Smyth v. Munroe, 84 N. Y. 354. *Parlin v. Stone, 1 McCrary, C. C. 443. See, also, Hartwell v. Blocker, 6 Ala. 581. ^Mershon v. Mershon, 9 Bush (Ky.), 633. 740 REGISTRATION OF THE INSTRUMENT. A stranger shall not be bound or take advantage of estoppel.' § 704. Tax Title. — The mortgagor cannot, as against the mortgagee, set up a tax title upon a default in the condition of the mortgage. So long as the mortgage debt is unpaid, the mortgagor can no more acquire title so as to defeat the mort- gage lien founded upon his default in that part of the condi- tion, than upon a default in any other part of it. So a purchase of the premises by the mortgagor at a tax sale, would under such circumstances as against the holder of the mortgage, operate merely as a payment of the taxes.^ Under a mortgage containing the usual covenants of war- ranty, the mortgagor cannot purchase at a tax sale, the prop- erty and take a good title as against the mortgagee ; such title will inure to the mortgagee.^ Neither can a junior mortgagee, by buying the interest 6f the mortgagor, and redeeming the same at a tax sale, take a title superior to the prior mortgagee, but subordinate.^ Neither can the mortgagor by collusion with other jJ^rties, acquire a title from a tax sale superior to that of the mort- gagee.^ § 705. The Mortgagor is Obligated to Pay the Taxes. — The mortgagor cannot claim credit for paying the taxes. Thus, where a mortgage provides that the taxes shall be deducted from the rents, the taxes constitute a charge on the land, and if paid by the mortgagor he cannot claim credit for such pay- ment.*^ Had the taxes been paid by the mortgagee, they would ^Massure v. Noble, 11 111. 531 ; Bigelow on Estop. 269 ; 7 Bac. Abr. 620. As to mortgagee's estoppel see Preble v. Conger, 66 III. 370. ^ Allison ('. Armstrong, 28 Minn. 276 ; McAlpine v. Zitzer, 119 111. 273 ; Fair V. Brown, 40 Iowa, 209 ; McLaughlin v. Green, 48 Miss. 175 ; Cooper v. Jack- son, 99 Ind. 566. ' Gardiner v. Gerrish, 23 Me. 46; Fuller v. Hodgdon, 25 Me. 243 ; Kezer^). Clifford, 59 N. H. 208 ; Stears v. Hollenbeck, 38 Iowa, 550 ; Porter v. Lafferty, 33 Iowa, 254. * Boyd V. Allen, 15 Lea (Tenn.), 81. 5 McAlpine v. Zitzer, 119 111. 233. See, also, Renshaw v. Stafford, 30 La. Ann. 853 ; Conn. Mut. Life Ins. Co. v. Bulte, 45 Mich. 113. ^ Kilpatrick y. Henson, 81 Ala. 464. THE LIEN. 741 have become an additional lien under the mortgage, and the mortgagor would have been compelled to pay theju on re- demption.^ It must be presumed that when the mortgagor purchases tax titles, they were so purchased for the benefit of the mort- gagee, so far at least as was his interest in the mortgage security.^ A mortgagor holding the property as a tenant at will of another who has acquired a tax title to the mortgaged property, is not affected ; for the tenant at will has no estate which is assignable, and the mortgagee cannot gain by estoppel any greater right than the tenant could assign, and the mortgagee would acquire no right as against the holder of the tax title.^ In ]\Iinnesota a mortgagee may acquire a tax title to the mortgaged premises as against the mortgagor, where he is neither legally nor equitably bound to protect the property against a tax for wdiich the sale is made, since such mortgagee is not among the persons forbidden by the statute to acquire a tax title.* § 706. The Rights of One Among Several Owners. — As a general rule, the law does not permit one interested in land with others deriving their title from a general source, to acquire an absolute title to the land by a tax deed and thus cut off those in interest with him. This rule is applied to tenants in common, mortgagor and mortgagee, so as to prevent the mortgagor acquiring a tax title to the injury of the mort- gagee.'* The payment of taxes by the mortgagee protects his inter- est, and for the protection of his interest he may acquire a tax title, but he cannot set up that title to defeat a prior mortgage lien.^ ^ Morrow v. Turney, 35 Ala. 131. " Fisk V. Brunette, 30 Wis. 102 ; Smith v. Lewis, 20 Wis. 350 ; Sturdevant v. Mather, 20 Wis. 576 ; Avery v. Judd, 21 Wis. 262. ^Coughlin V. Gray, 131 Mass. 56. *Reimer v. Newel, 47 Minn. 237. * Fuller V. Hodgdon, 25 Me. 243 ; Smith v. Lewis, 20 Wis. 350. •Bank v. Bachrach, 46 Conn. 513; Woodbury v. Swan, 59 N. H. 22. 742 REGISTRATION OF THE INSTRUMENT. A mortgagor who has given a mortgage for the purchase- money, with covenants of warranty, cannot set up a title ad- versely to an assignee of this mortgage, although he acquires a title under a sale for taxes assessed upon the land before he purchased it.^ Article 5, Covenants of Mortgagor. 1 707. Assumption of Incumbrances I 708. Construction of Warranty, by Mortgagee. § 707. Assumption of Incumbrances by Mortgagee. — When the grantee assumes and agrees to pay the incumbrances on the property, the grantor is not liable if such incumbrances are not paid. Thus, a grantor conveyed lands covenanting that the premises were free from incumbrances, except two mortgages, which the grantee assumed and agreed to pay, and that he would warrant the same to the grantee, his heirs and assigns forever, against the lawful claims and demands of all persons. This warranty did not include the claims under the mort- gages described therein, it being the evident intention of the parties to except them from the warranty, as the warranty ap- plied to the grantor's equity of redemption only.^ But if the grantee had not assumed the payment of the mortgages, then the warranty would have included the mortgages.^ Upon the assumption of the mortgages, the covenants of warranty must be taken in a limited sense, and such a con- tract applied on to the equity of redemption.* § 708. Construction of Warranty. — Chief Justice Morton says that in construing a deed, as in construing other contracts, the priniary object and duty of the court are to ascertain what is the intention of the parties, and to carry it into effect unless 1 Gardiner v. Gerrish, 23 Me. 46. =* Lively w. Rice, 150 Mass. 171. ^Estabrook v. Smith, 6 Gray (Mass.), 572. * Allen V. Holton, 20 Pick. (Mass.) 458 ; Sweet v. Brown, 12 Met. (Mass.) 175 ; Howard v. Chase, 104 Mass. 249. THE LIEN. 743 there are fixed rules of law which make it impossible. If the intention can be clearly discerned and it is lawful, the court will carry it into effect. It is too clear to admit of any doubt that it is the intention of the parties, when the grantee as- sumes the payment of mortgages on the property purchased, that the covenant of warranty in the deed to the grantee should not apply to the mortgages sj^ecifically excepted. The j)ro- vision that the grantee is to assume and pay the mortgages is consistent only with this intention, and shows clearly that the parties understand that the grantee is buying the equity of re- demption only, and not the land free from the mortgages.^ In a deed where laud is conveyed, subject, however, to cer- tain incumbrances now resting thereon, payment of which is assumed by the grantee, mortgages thereon, as well as unpaid taxes, are excluded from the covenants of special warranty against all persons claiming under the grantor.^ However, when a deed contains a covenant against all in- cumbrances except a certain mortgage to a third person, fol- lowed by a general covenant to warrant and defend, the mortgage is not excepted from the latter covenant, and the grantor is liable for an eviction by the mortgagee.^ The fact that the grantee gave back a mortgage to the grantor containing the same covenants as the deed, cannot affect the grantor's liability to the grantee on his covenants of warranty.* Where a mortgagor gives a second mortgage with covenants of warranty against the first mortgage, and the first mortgage is foreclosed, and the title obtained by the forclosure is after- ward conveyed to the mortgagor, his title thereby acquired inures to the benefit of the second mortgagee.* ' Lively v. Rice, 150 Mass. 171. * Keller v. Ashford, 1.33 U. S. 610. 'Estabrook v. Smith, 6 Gray (Mass.), 572; Hubbard v. Norton, 10 Conn. 422 ; Sumner v. Williams, 8 Mass. 162 ; Rowe v. Heath, 23 Tex. 614 ; Howell V. Richards, 11 East, 633 ; Smith v. Compton, 3 Barn. & Adol. 189 ; Kean v. Strong, 9 Irish L. 74. * King V. Kilbride, 58 Conn. 109. * Ayer v. Philadelphia, etc.. Brick Co. (Mass.), 31 N. E. Rep. 717. 744 REGISTKATION OF THE INSTRUMENT. / Article 6. Extinguishment of the Lien. I 709. Presumption of Extinguish- I 713. Payment by Sureties. ment. ^ 714. Waiving of Lien. § 710. Statutory Provisions. § 715. Waiving Rights. ? 711. Extinguishment. I 716. Pleadings. \ 712. Efiects of the Mortgagee's Buying the Property. § 709. Presumption of Extinguishment. — The law will presume that the lien is extinguished when barred by the stat- ute of limitations. Thus, in South Carolina, where more than twenty years have elapsed since the maturity of the debt, the law will presume that the mortgage has been satisfied.^ And so whenever the mortgagor has remained in possession, with- out making any payment whatever, or by any act recognizing the mortgage debt, for the time required to bar the debt under the statute of limitations whatever period that may be." Whether or not a particular transaction amounts to a release of a lien on real estate is a question of intention on the part of the releaser. In a doubtful case such intention will not be implied ; but when it is clear that such was the intention, a court of equity will enforce the release, although no formal re- lease has been executed.^ When the evidence is conflicting, it should be left to the jury to determine whether the mortgagee has waived his lien.* § 710. Statutory Provisions. — In South Carolina it is pro- vided by statute ^ that no mortgage, judgment, decree, or other 1 Agnew V. Renwick, 27 S. Car. 562 ; Wilson v. Albert, 89 Mo. 537. 2 Owings V. Norwood, 2 H. & J. (Md.) 96 ; Murray v. Fishback, 5 B. Mon. (Ky.) 403; Pattie v. Wilson, 25 Kan. 326; Roberts r. Welch, 8 Ired. Eq. (N. Car.) 287 ; Evans v. Huffman, 1 Halst. (N. J.) Ch. 354 ; Kellogg v. Wood, 4 Paige (N. Y.), 578 ; Lammer r. Stoddard, 103 N. Y. 672; Lynch v. Pfeiffer, 110 N. Y. 33; Cbeever v. Perley, 11 Allen (MaF?.), 584; Inches n Leonard, 12 Mass. 379 ; Chick v. Rollins, 44 Me. 104 ; Blethen v. Dwinal, 35 Me. 556. ^Stribling v. Coal Co., 31 W. Va. 82. * Sibley v. Ross, 88 Mich. 315; Gamble v. Ross, 88 Mich. 315. 5 Gen. Stat. 1882, sect. 183. THE LIEN. 745 lien on real estate shall constitute a lien on real estate after the lapse of twenty years from the date of the creation of the same ; provided that if the holder thereof shall, at any time during the continuance of such lien, cause to be recorded upon the record of such mortgage, or filed with the record thereof, a "note of some payment on account," or some written "ac- knowledgment of the debt," such mortgage shall continue to be a lien for twenty years from the date of the record of such payment or acknowledgment. Under this statute, the recording of an assignment of a mortgage before the expiration of twenty years, is not a " note of some payment on account," or an "acknowledgment of the debt." ' § 711. Extinguishment. — The lien may be extinguished or renewed. Where a claim against an estate is presented, con- tested, and disallowed, the mortgage given to secure it falls with it and cannot afterward be enforced.^ But the cancellation and surrender of a bond secured by a mortgage, and the execution of a new bond in extension of the loan does not, in the absence of an agreement to that effect, re- lease the mortgage lien, but it will continue as security for the new bond.^ So an agreement by a director of a corporation that the proceeds of a second mortgage should be paid him before the same was due, does not constitute a waiver of his prior lien where such proceeds are not in fact paid to him.* A mortgagor may renew one of several notes held by his sureties, and the sureties will not lose the lien of the mortgage as against a junior mortgage existing at the time.^ Where the holder of the legal title mortgages the property in order to pay off prior incumbrances, and subsequently pays the mortgage through another, in order to release his general property from executions issued on judgments taken on the ' Curtis V. Renneker, 34 S. Car. 468. " Sanger v. Palmer, 36 111. App. 485. 'Cook V. Gilchrist, 82 Iowa, 277. *Mullanphy Bank v. Schott, 135 111. 655. * Mullins V. Clark (Ky.), 15 S. W. Rep. 784. 746 REGISTRATION OF THE INSTRUMENT. mortgage bond, and his judgment marked to the use of the person paying it, the mortgage is not extinguished, but may be enforced by the holder of the judgment against the prop- erty which is primarily liable for the payment of the mortgage debt/ When the purchaser takes the land subject to a mortgage, afterward the debt being ascertained and deducted from the purchase-money, this will extinguish the mortgage lien as to the purchaser who was the mortgagee.^ But when one who has contracted to purchase property and pay off the mortgage on it as part consideration for the sale, rescinds the contract for good cause, his subsequent purchase of the mortgage does not extinguish it.^ After a mortgage is paid it cannot be held thereafter for money loaned or advanced by an assignee of the mortgage to the owner of the land, as against purchasers for value from such owner before the advances are made/ And the payment 'of a note extinguishes the mortgage, and it is not revived by a reissue of the note, and one who takes it after its maturity is chargeable with notice of payment of the debt/ But when the mortgagor borrows money from the bank to pay the mortgage, by agreement, the mortgage may be turned over to the bank as a subsisting security/ The holder of a third mortgage on certain real estate was made a party in foreclosure suits of the prior mortgages, in both of which decrees of foreclosure were entered, and the equity of redemption was allowed to expire. It was held that the subsequent acquisition by him of an equitable interest in the property by agreement with the owner of the title, did not reinstate his mortgage as a lien upon the property for the ' Borland v. Meurer, 139 Pa. St. 513. '^Dargan v. McSween, 33 S. Car. 324. See, also, Fouche v. Delk (Iowa), 48 N. W. Rep. 1078. 3 Kuhlman v. Wood, 81 Iowa, 128. * Blake v. Broughton, 107 N. Car. 220. ^ Murphy v. Simpson, 42 Mo. App. 654. See, also, Theisen v. Dayton, 82 Iowa, 74, distinguishing Crosby v. Tanner, 40 Iowa, 136, and Blake v. Koons, 71 Iowa, 356. 6 Morris v. Alston, 92 Ala. 502. THE LIEN. 747 benefit of the holder of the notes secured thereby which he had transferred/ At the request of the mortgagor a certain person paid a first and a second mortgage of his. For the sum so paid and an additional loan, the mortgagor gave him a fourth mortgage, there being a third at the time of the payment. The first and second mortgages were not cancelled but were assigned to and retained by the person paying them. There was no agreement or understanding that the first and the second mortgage should be considered satisfied. It was held that the first and the second mortgages were not extinguished, but, together with the remedy thereto, were suspended until the fourth mortgage became due and unpaid, and that then they were revived and have priority over the third mortgage.^ Where the assignee of a mortgage forecloses the mortgage before recording the assignment, a subsequent refusal by the assignee, believing that he had acquired title by the foreclosure, to accept a tender by the mortgagor of the amount due on the mortgage, exclusive of costs, does not discharge the lien, and the assignee after recording the assignment, may maintain a bill in equity to foreclose the mortgage.^ § 712. Effect of Mortgagee's Buying the Property. — Under the admitted general rule of law, the legal effect of the mortgagee's buying the property from the mortgagor, is to extinguish the mortgagee,* when there is no express covenant inserted in the deed that the mortgage shall remain open to protect against claims of dower, liens, and incumbrances;^ or the parties have taken precaution to protect themselves against the operation of the general rule by some express cove- nant." So, when a mortgage, securing several notes, is fore- closed for those falling due first, and the property sold thereby, ' Sowles V. Hall, 62 Vt. 247. ■^Tolman v. Smith, 85 Cal. 280. 3 Renard v. Clink (Mich.), 51 N. W. Rep. 692. * Agnew V. Renwick, 27 S. Car. 562. 5 Agnew V. Railroad Co., 24 S. Car. 18. ® Bleckeley v. Branyan, 26 S. Car. 424 ; Navassa Guano Co. v. Richardson, 26 S. Car. 401. 748 REGISTRATION OF THE INSTRUMENT. the grantee of the mortgage may redeem the same, and in his hands the property will be divested of the lien of the unsatis- fied portion of the mortgage debt.^ § 713. Payment by Sureties. — Accommodation indorsers having a mortgage indemnity against loss from their indorse- ments, may pay the note at its maturity by giving their indi- vidual obligations therefor, but this action does not extinguish the lien of the mortgage.^ And where insurance money is paid to the mortgagee accord- ing to the terms of the mortgage, it discharges the mortgage lien pro to7i^o,-and the owner of the equity of redemption cannot revive the mortgage as against a junior mortgage then existing, by assigning it to secure a loan or money used in rebuilding.^ And the payment to the mortgagee and the balance due on the mortgage to the owner of the equity of redemption accord- ing to agreement, does not discharge the mortgage, as a person who claims under a bona fide purchase at a sale under such mortgage, has a better title than one who claims under the one owing the equity of redemption.* § 714. Waiving op Lien. — Some of the States have enacted laws providing that but one action shall be had in the re- covery of a debt or the enforcing of any right secured by a mortgage. Thus, in California,^ there can be but one action for any debt secured by mortgage upon real estate ; so where two bonds are for the benefit of the same parties and to secure the same debt, though on different property, they must be in- cluded in the same action for foreclosure, and a failure to in- clude one of such deeds in such action extinguishes the lien given by it." So in Utah Territory, where the holder of a note secured by mortgage sues on the note and obtains an attachment on the ' Harms v. Palmer, 73 Iowa, 446. ^ Man waring v. Jenison, 61 Mich. 117. 3 Peiffer v. Bates, 45 N. J. Eq. 311. * Hermanns ?'. Fanning, 151 Mass. 1. * Civil Code of Procedure, sect. 726. «Hall V. Arnott, 80 Cal. 348. I THE LIEN. 749 creditor's property, the mortgage lien is extinguished/ as there can be but one action in that Territory for the recovery of any debt on the enforcement of any right secured by a mortgage or other lien on real estate.- But where the statute does not con- trol, the mortgagee may attach the j^roperty and obtain a judgment thereon, and this action, per se, is not a waiver of the lien.^ § 715. Waiving Rights. — One holding as first mortgagee may surrender his mortgage and note to a subsequent owner of the land, and take from such owner a mortgage securing both the sum he paid for the assignment of the first mortgage and note, and sums of money which he has advanced to such sub- sequent owner, and if he has the record of the mortgage can- celled, and delivers the note to the party making it and the first mortgage, such first mortgage will be satisfied as to the subsequent mortgagee for value and without notice actual or constructive of the second mortgage.^ And if a mortgage of real estate is executed to secure the payment of a negotiable note and is duly recorded, and afterward released on the record, although when the release was executed the mortgagee liad assigned it and had no interest in either the note or mortgage, a bona fide purchaser of the land described in the mortgage will hold it free from the mortgage lien, even though the note and mortgage are in the hands of an innocent holder and wholly unpaid.^ The foreclosure of a purchase-money mortgage and the ex- piration of the period of redemption, extinguish all the estate or interest of the mortgagor, and consequently of all persons claiming under him.^ § 716. Pleadings. — Where in an action against the mort- gagor to subject the proceeds of a sale of mortgaged lands to ' Bacon v. Raybould, 4 Utah, .357. ^ Comp. Laws 470, sect. 246 ; Laws of 1884, p. 268, sect. 606. ' Lanahan ?'. Lawton (N. J.), 2.3 Atl. Rep. 476. * Edwards v. Thorn, 25 Fla. 222. 5 Lewis V. Kirk, 28 Kan. 497; Fisher v. Cowles, 41 Kan. 418. * Jacoby v. Crowe, 36 Minn. 93. 750 REGISTRATION OF THE INSTRUMENT. the satisfaction of the mortgage, the complaint contains no allegation that the mortgage was recorded, it need not affirma- tively show that the lien of the mortgage has been lost.^ And where an entire tract of land, covered by a mortgage, is partitioned among the joint tenants, in a suit to which the trustee, but not the beneficiary, is made a party, and one por- tion is set apart for the payment of the mortgage, and is sold for that purpose, the lien on the balance of the land is not released, and if this parcel fails to satisfy the mortgage, it may be enforced against the rest of the land.^ 1 Parmerter v. Baker, 24 Abb. N. C. (N. Y.) 104. ^ Brown •;;. Shurtleff, 24 111. App. 569. CHAPTER XVIII. construction of registration laws. Article 1. The Record. I 717. Delivery After Record. I 727. Power of Attorney to Execute I 718. Validity of After-Delivery. a Mortgage. I 719. Doctrine of Relation in Equity. | 728. Defective Record. I 720. Sufficiency of Record. I 729. Other Statutory Provisions — \ 721. Time of Record. Defective Record. § 722. Certificate of the Register Con- § 730. Indexes — Recording of In- clusive, strument. § 723. Statutory Provisions Requiring § 731. The Index Is No Part of the a Record Within a Specified Record. Time. ^ 732. Liability of the Recorder for I 724. Recording After Assignment of Errors in the Index. Mortgagor. § 733. Descriptive Index — Rule in I 725. Recording After Mortgagor's Some States. Death. § 734. Defectively Recorded Mort- l 726. Place of Record. gage. § 717. Delivery After Record. — Filing for record a mort- gage executed to secure an existing debt is a sufficient delivery to the mortgagee, provided he accepts it subsequently, which is a ratification of the act, and gives the mortgage legal effect from the date of filing for record.^ But if not accepted by the mortgagee, it is not a sufficient delivery.^ The doctrine that the delivery may be made to a stranger in behalf of the mortgagee is not a correct statement of the law,^ and should not be accepted.* In Missouri the doctrine is that where an instrument is exe- cuted in favor of the mortgagee, it will be presumed that he assents to the transaction, until he manifests his dissent after ' Hempstead v. Johnston, 18 Ark. 123 ; Camall v. Duval, 22 Ark. 136. ■•' Doe V. Knight, -5 Barn. &. Cres. 671 ; Exton v. Scott, 6 Sim. 31 ; Farmers and Mechanics' Bank v. Drury, 38 Vt. 426. 'Merrills v. Swdft, 18 Conn. 257, and cases cited. *See Johnson v. Farley, 45 N. H. 505. 751 752 REGISTRATION OF THE INSTRUMENT. being duly notified ; ^ but this doctrine is not sustained by other courts, and cannot be followed in other jurisdictions. § 718. Validity of After-Delivery. — It must be consid- ered as settled that an execution and record of a mortgage, is not a delivery in law, as there can be no delivery until the mortgagee is willing to and does accept the same and pays over the consideration.^ At most the record of a deed is only a presumptive evidence of delivery,^ and when this is overcome, the burden is upon the party claiming title under it to show an actual delivery before a levy upon the land by attachment or execution,* In general the recording of a mortgage without an acceptance by the mortgagee is a nullity. But after acceptance it becomes operative, and is equivalent to a delivery of a deed which had been recorded in anticipation of the completion of the same.^ A mortgage recorded and held by the mortgagor ready for delivery when he should obtain a loan, is not recorded so as to be notice as against lien claimants, until the day when the loan was made and the mortgage delivered.^ § 719. Doctrine of Relation in Equity. — Accepting a recorded mortgage and making the loan upon it in execution of a precedent agreement ratify the acts of the mortgagor, and the subsequent adoption of an act of agency relates back to the original transaction, and is the same in law for all purposes as if the authority had previously been conferred.'' Deeds of conveyance, when once delivered, shall have opera- 1 Ensworth v. King, 50 Mo. 477. 2 Houfes V. Schultze, 2 111. App. 196 ; Goodsell v. Stinson, 7 Blackf. (Ind.) 439 ; Parker v. Hill, 8 Met. (Mass.) 449 : Skinner v. Baker, 79 111. 496. ^ Stiles V. Probst, 69 111. 382. * Harmon v. Myer, 55 Wis. 85. 5 Warner v. Winslow, 1 Sandf. Ch. (N. Y.) 430 ; Foster v. Beardsley Scythe Co., 47 Barb. (N. Y.) 505 ; Hood v. Brown, 2 Ohio, 266 ; Jackson v. Richards, 6 Cow. (N. Y.) 617. « Mutual Ben. L. Ins. Co. v. Rowand, 26 N. J. Eq. 389 ; Freeman v. Schroedcr, 43 Barb. (N. Y.) 618. ' Sheldon v. Smith, 28 Barb. (N. Y.) 593 ; Lawrence v. Taylor, 5 Hill (N. Y.), 107. CONSTRUCTION OF REGISTRATION LAWS. 753 tion, by relation, as of a time prior to delivery, if it be neces- sary to effect the intention of parties, and be required for the advancement of justice/ Thus, a mortgage recorded before delivery, in pursuance of a prior contract for a loan on such security, and afterward delivered and accepted by the mortgagee, will take priority in equity over liens of mechanics and materialmen for work and materials furnished after the mortgage is recorded, for the erec- tion of a building on the premises, which was commenced between the recording of the mortgage and its delivery ; the mortgagee having no knowledge of the erection of the build- ing when he paid over the money. In equity, the mortgage, when delivered, will have relation to the agreement for the loan.^ But the doctrine of relation being a fiction of law adopted for the advancement of justice will never be resorted to where it would occasion wrong to third parties.^ The Missouri statute* declares that every instrument certified and recorded in the manner prescribed shall, from the time of filing the same with the recorder, impart notice. This statute gives the effect of notice, by relation back to the time of the filing, only where the instrument has been actually and cor- rectly recorded, thus showing that the record is notice only of what it contains.^ If a deed be deposited with instructions not to file it until further orders, or until a certain date, such deposit is not notice, and the filing when afterward indorsed cannot re- late back to the depositing.^ § 720. Sufficient Record. — In many States the registra- tion of a mortgage is operative from the time of its being de- ' Johnson v. Stagg, 2 Johns. (N. Y.) 510; Shelley's Case, 1 Coke, 99; Heath V. Ross, 12 Johns. (N. Y.) 140; Barncord v. Kuhn, 36 Pa. St. 388. Compare Haufes v. Schultze, 2 111. App. 196. " Jacobus V. Mutual Ben. L. Ins. Co., 27 X. J. Eq. 604. » Butler's Case, 2 Coke, 25 ; Jackson v. Bard, 4 Johns. (N. Y.) 230. * Rev. Stat., 1889, sect. 2419. * Terrell v. Andrew Co., 44 Mo. 309. « Haworth v. Taylor, 108 111. 275 ; Town v. Griffith, 17 N. H. 165 ; Brigham V. Brown, 44 Mich. 59. 48 754 REGISTRATION OF THE INSTRUMENT. posited in the office of the recorder of the proper county, which makes it a hen effective as against the intermediate mortgagee when he has no actual notice/ Such mortgages take effect from the time of their delivery to the recorder to be by him entered on the records.^ But the mere record cannot constitute that a mortgage or contract which would not be a mortgage or contract without it. Its delivery is the creation of it. Recording may be some evi- dence of a previous delivery, or the delivery to the officer for record may, by arrangement between the parties, be the delivery to the grantee.^ When a conveyance has been duly recorded, it will impart notice from the time that it was filed in the proper office, and subject to public inspection.* In many of the States a convey- ance is not notice from the time it is filed in the proper office for record ; so the effect, under these statutes, of continued notice will not be given to the filing only ; therefore, if the instrument be lost, after its filing and before record, the effect of notice is destroyed ; so if it be erroneously or defectively transcribed, the record will impart notice only of what it con- tains.^ In the majority of the States the recording aot states that a conveyance shall be notice, or shall be considered as recorded from the time it is filed or delivered for record, and, hence, under these statutes notice is imparted by the filing alone, irre- spective of the actual record.^ ^ Leslie v. Hinson, 83 Ala. 266; Brooke's Appeal, 64 Pa. St. 127; Kessler^;. State, 24 Ind. 313 ; Magee v. Beatty, 8 Ohio, 396. 2 Brown v. Kirknian, 1 Ohio St. 116 ; Bercaw v. Cockerill, 20 Ohio St. 163. 3 Thayer v. Stark, 6 Gush. (Mass.) 11 ; Hedge v. Drew, 12 Pick. (Mass.) 141 ; Parker v. Hill, 8 Met. (Mass.) 447 ; Barns v. Hatch, 3 N. H. 304. * Kcssler v. State, 24 Ind. 313 ; Bigelow v. Topliff, 25 Vt. 274 ; Steam Co. v. Sears, 23 Fed. Rep. 313 ; Nichols v. Reynolds, 1 R. I. 30 ; 36 Am. Dec. 238. ^Pringle v. Dunn, 37 Wis. 449; 19 Am. Rep. 772; Potter v. Dobley, 55 Vt. 512; Meighen v. Strong, 6 Minn. 177; Hill v. McMchol, 76 Me. 314; Stead r. Grosfie'd, 67 Mich. 289 ; Smith v. Lowry, 113 Ind. 37 ; Jennings v. Wood, 20 Ohio, 261 ; Shepherd v. Burkhalter, 13 Ga. 443 ; 58 Am. Dec. 523; Brydon.f. Campbell, 40 Md. 331 ; Disque v. Wright, 49 Iowa, 538. « Perkins v. Strong, 22 Nebr. 725; Payne v. Pavey, 29 La. Ann. 116; Mer- rick V. Wallace, 19 111. 486 ; Glading v. Frick, 88 Pa. St. 460 ; Mutual Life Ins. 1 CONSTRUCTION OF REGISTRATION LAWS. 755 § 721. Time of Record. — The lien of the mortgage in many- States begins from the time of its reception of the recorder and entered by indorsement on the back. The delay of the recorder in registering it or indexing it will not divest its lien. It is not incumbent upon the mortgagee, as generally held, to supervise the registration and see whether the mortgage is recorded or not.^ It must be considered recorded when filed for record.^ By filing the mortgage with the recorder, the mortgagee has done all that the law requires him to do.^ However, there are exceptions to the general rule, though controlled by substantially the same statute. Thus, in Georgia a mortgage is not recorded until it is spread upon the records,* though it will be valid as against the mortgagor before record- ing;^ and when deposited for record with the recorder, but not spread upon the records, a lien of a judgment rendered since such improper record is prior to that of the mortgage.® § 722. Certificate op the Register Conclusive. — The register's certificate is conclusive as to the time of the receipt and registry of the instrument recorded.^ And generally the certificate of the register upon the instrument is conclusive to all parties that it was recorded at the time named therein.^ But Co. V. Dake, 87 N. Y. 257 ; Booth v. Barnum, 9 Conn. 286 ; 23 Am. Dec. 339 ; Gillespie v. Rogers, 146 Mass. 610; Bedford v. Tupper, 30 Hun (N. Y.), 174; Mangold v. Barlow, 61 Miss. 593 ; Woodward v. Boro, 84 Tenn. 678 ; Poplin v. Mundell, 27 Kan. 158 ; Throckmorton v. Price, 28 Tex. 605 ; 91 Am. Dec. 334 ; Lewis V. Klotz, 39 La. Ann. 259 ; Clader v. Thomas, 89 Pa. St. 343 ; Swepson V. Bank, 9 Lea (Tenn.), 723. ^ McCormack v. James, 36 Fed. Rep. 14 ; Woods's Appeal, 82 Pa. St. 116 ; Kiser v. Heuston, 38 111. 252 ; Throckmorton v. Price, 28 Tex. 605. ''Sinclair v. Slawson, 44 Mich. 123. 3 Merrick v. Wallace, 19 111. 486 ; Polk v. Cosgrove, 4 Biss. C. C. 437 ; Mims V. Mims, 35 Ala. 23 ; Dubose v. Young, 10 Ala. 365 ; Bank v. Haggin, 1 A. K. Marsh. (Ky.) 306. * Code, sects. 267, 1957 ; Benson v. Green, 80 Ga. 230. * Janes v. Penny, 76 Ga. 796. « New England Mort. Security Co. v. Ober, 84 Ga. 294. ' Thorp V. Merrill, 21 Minn. 336 ; Worcester Nat. Bank v. Cheeney, 87 111. 602; Dodge v. Potter, 18 Barb. (N. Y.) 193. « Tracy v. Jenks, 15 Pick. (Mass.) 465 ; Ames v. Phelps, 18 Pick. (Mass.) 314 ; Fuller V. Cunningham, 105 Mass. 442 ; Adams v. Pratt, 109 Mass. 59. 756 REGISTRATION OF THE INSTRUMENT. the certificate is not conclusive that the mortgage is properly recorded ; ^ because recording a mortgage before authority is given is not effectual,^ and when the record as entered upon the index-book, is wrong upon its face, it is invalid.^ The certificate of record shows only that the deed has proba- bly been recorded or duly indexed. Such certificate, as held by some courts, does not release the grantee from the responsi- bility of seeing that the deed is in fact properly recorded.* § 723. Statutory Provisions Requiring a Record Within A Specified Time. — When the statutes prescribe a certain time within which the mortgage must be recorded it must be fol- lowed in order to be valid as against third parties. If not so recorded, a lien of a judgment creditor will be prior to the mortgage.^ If the mortgage is not recorded within that time, it is entitled to priority only over creditors who were such at its date of execution.^ But such mortgage shall not in any manner affect the creditors of the party making such deed, who may trust such party after the date of such deed.^ Such mortgage is void against a bona fide purchaser for valuable consideration and without notice thereof when he made the purchase.^ Of two mortgages of equal equity, recorded within the time specified, the one first recorded takes priority.^ If the statutes specify a time within which deeds may be recorded, the filing, if made wdthin that time, will relate back 1 New York L. Ins. Co. v. Wliite, 17 N. Y. 469 ; Worcester Nat. Bank v. Cheenej^ 87 III. 602. 2 Yerger v. Barz, 56 Iowa, 77 ; Brigham v. Brown, 44 Mich. 59 ; Bowen v. Fassett, 37 Ark. 507. 3 Hay V. Hill, 24 Wis. 235. See, also, Hall v. Tunnell, 1 Houst. (Del.) 320. * Ritchie v. Griffiths, 1 Wash. St. 429. ^ New England Mort. Security Co. v. Ober, 84 Ga. 294 ; Mowry v. Crocker, 33 S. Car. 430. « Sixth Ward Build. Asso. v. Willson, 41 Md. 506 ; Plume v. Bone, 1 Green (N. J. L.), 63. ^Nelson v. Bank, 27 Md. 73 ; Cowan v. Green, 2 Hawks (N. Car.), 384 ; Har- ding V. Allen, 70 Md. 395. »Rootes V. HolUday, 6 Munf. (Va.) 251. 9 Dungan v. Am. L. & Trust Co,, 52 Pa. St. 253. CONSTRUCTION OF REGISTRATION LAWS. 757 to the date or delivery of the instrument, and give it priority from such date/ § 724. Recording after Assignment of Mortgagor. — An unrecorded mortgage is a hen as against an assignment of the mortgagor in trust for the benefit of creditors ; he is neither a creditor nor purchaser.^ The mortgage must be executed and deHvered before the assignment ; if valid in other respects, it is valid against the assignment or bankruptcy, though unrecorded at the time of the assignment.^ § 725. Recording after Mortgagor's Death. — A mort- gage not recorded until after the death of the mortgagor is not for that reason inoperative as against a general creditor of the estate.* So a creditor secured by a mortgage deed, executed and delivered by the mortgagor in his lifetime, but recorded after his death, is entitled to hold his security against all other creditors who have acquired no specific lien on the property.^ But had the administrator sold the property before the record, to an innocent purchaser, the purchaser's title would prevail.® § 726, Place of Record — Special Book. — When a book is provided for the registration of mortgages, as a general rule, they must be recorded therein in order to be constructive notice. So where a mortgage is recorded in the registry of assignments of mortgages, and nowhere else, it is a nullity, so far as notice is concerned.^ Under this rule the statutory provisions are con- sidered mandatory, and must, therefore, be fully complied with, and unless the mortgage is recorded in the book so provided, it is not constructive notice to subsequent bona fide purchasers and mortgagees, even if the mortgage be in the form of an ' Betz V. MuUin, 62 Ala. 365 ; Phifer v. Barnhart, 88 N. Car. 333 ; King v. Fraser, 23 S. Car. 543 ; Webb on Record of Title, sect. 132. ^ Mellon's Appeal, 32 Pa. St. 121. MVyckoflfv. Remsen, 11 Paige (N. Y.), 564. *Gill V. Pinney, 12 Ohio St. 38; Wilson v. Wilson, 13 Barb. (N. Y.) 254; Covell V. Weston, 20 Johns. (N. Y.) 413, 419. * Haskell v. Bissell, 11 Conn. 174. *Mix V. Hotchkiss, 14 Conn. 41. ' Parsons v. Lent, 34 N. J. Eq. 67. 758 REGISTRATION OF THE INSTRUMENT. absolute deed, but is in effect a mortgage given as a security for a loan/ Under this rule, mortgages must be recorded in the mort- gage-books, and are not properly recorded in any other species of books where they cannot be found by means of the mort- gage index.^ Such mortgage, though improperly recorded, is good between the parties,^ and becomes operative in case the mortgagee afterward acquires the equity of redemption/ But in those jurisdictions where the statute is merely direc- tory, the mortgage may be valid without being registered in the mortgage-book of records, provided it is so indexed it can be readily found, though not in its proper record-book/ And in Texas an absolute deed given as a mortgage, though recorded in the book for deeds, is valid against purchasers and creditors of the mortgagor/ § 727, Power of Attorney to Execute a Mortgage. — Several of the States have enacted that the power of attorney given to execute a mortgage shall be recorded with the mort- gage in order to give constructive notice. When this is so provided, a mortgage executed by an attorney in fact, and re- corded without the record of such power, the record is not con- structive notice.'^ But if is not required to be recorded with the mortgage, a record of it would not be notice to any one.^ § 728. Defective Record. — As to what is a defective record of an instrument is a question upon which the authorities do 1 Clute V. Robison, 2 Johns. (N. Y. ) 595 ; Brown v. Dean, 3 Wend. (N. Y.) 208. ''Luch's Appeal, 44 Pa. St. 519 ; M'Lanahan v. Reeside, 9 Watts (Pa.), 510, 511 ; Calder v. Chapman, 52 Pa. St. .359. * James v. Morey, 6 Johns. Ch. (N. Y.) 417 ; Swepson v. Bank, 9 Lea (Tenn.), 713. * Grellett v. Heilshorn, 4 Nev. 526 ; Warner v. Winslow, 1 Sandf. Ch. (N. Y.) 430. 8 Smith V. Smith, 13 Ohio St. 532 ; Boyle Ice Co. v. Gould, 73 Cal. 153 ; An- thony V. Butler 13 Pet. (U. S.) 423. ^ Kennard v. Mabry, 78 Tex. 151. ^ Cornall v. Duval, 22 Ark 136. 8 Williams v. Birbeck, Hoff. (N. Y.) 359 ; Williams v. Sorrell, 4 Ves. 391. CONSTRUCTION OF REGISTRATION LAWS. 759 not agree. The weight of authority holds that when a party has duly deposited his deed with the proper officer for record, he has performed his duty, and consequently a subsequent mistake or malfeasance of the officer will not affect the mort- gage or invalidate his title.^ However, under this rule, the statute generally provides that when a conveyance is delivered to the recording officer, it shall be considered as recorded from the time of such delivery. Hence, after such delivery nothing more need be done to keep the record perfect except at the proper time to record it in its proper order in the proper book.^ And a registration of land is not invalidated by a mere clerical error in transcribing the instrument not affecting the sense or obscuring its mean- ing.^ And the record is notice, if the note is described, but the amount is not stated.* § 729. Other Statutory Provisions — Defective Record. — Other statutory provisions do not provide that an instrument filed shall be, considered recorded from its reception by the clerk or recorder ; and it is held to be the duty of the party filing the instrument, as between himself and a subsequent bona fide purchaser or mortgagee, to see that all of the pre- requisites of validity of the deed as to registration be complied with.^ So where a mortgage is recorded out of its order due to its 1 People V. Bristol, 35 Mich. 28 ; Wolf v. Hunter, 10 111. App. 32 ; Nichols v. Reynolds, 1 R. I. 30 ; Dubose v. Young, 10 Ala. 365 ; Monaghan r. Longfel- low, 81 Me. 298 ; Beverley v. Ellis, 1 Rand. (Va.) 102 ; Dikeman v. Puckhafer, 1 Daly (N. Y.), 489 ; Gorham v. Summers, 25 Minn. 81 ; Chase v. Bennett, 58 N. H. 428. ' Mutual L. Ins. Co. v. Dake, 87 N. Y. 257, 264 ; Simonson v. Falihee, 25 Hun (N. Y.), 570; Bedford v. Tupper, 30 Hun (X. Y.), 174; Curtis v. Lyman, 24 Vt. 338 ; Merrick v. Wallace, 19 111. 486 ; Schell v. Stein, 76 Pa. St. 398. =• St. Croix L. & Lum. Co. v. Ritchie, 73 Wis. 409 ; Wyatt v. Barwell, 19 Ves. 435 ; Ince v. Everard, 6 Term, 545 ; Lybrand v. Haney, 31 Wis. 233 ; Lane v. Duchac, 73 Wis. 646 ; Woods's Appeal, 82 Pa. St. 116 ; Tousley v. Tousley, 5 Ohio St. 78. *Clementz v. Jones Lumber Co., 82 Tex. 424. ^ Frost V. Beekman, 1 Johns. Ch. (N. Y.) 288 ; Hibbard v. Zenor, 75 Iowa, 471 ; N. Y. Life Ins. Co. v. White, 17 N. Y. 469 ; Johns v. Scott, 5 Md. 81 ; Heister V. Fortner, 2 Binn. (Pa.) 40. 760 REGISTRATION OF THE INSTRUMENT. date, and upon a page which should have contained a mort- gage several years antecedent, it is not notice to third per- sons.^ So in some States a defective acknowledgment will make a registration defective and of no validity as a constructive no- tice to third persons.^ So where the record of a mortgage is defective it is not no- tice of the mortgage. Thus, where a mortgage for a security of $2,000 was recorded as one for |200, it is not notice of the $2,000 mortgage.^ The failure of the mortgagee to have an agreement referred to in the mortgage filed for record can be taken advantage of only by third persons.* § 730. Indexes — Recording of Instrument. — In the ab- sence of evidence to the contrary, it will be presumed that the entry in the general index and the actual recording of the in- strument were simultaneous acts ; and if the description of the mortgaged lands is not entered in the general index, yet if the mortgage is clearly recorded, the defect is cured, and the regis- try is complete from the time the instrument is so transcribed.' Judge Lyon says, though the entries in the general index are not made in the consecutive order of the numbers or the dates of receipt of the instruments, and not entered therein immediately as required by the statute,^ that fact does not nec- essarily so impeach the index as to destroy the validity of the registry. If it is made to appear that the entry of such instru- ment was made at a later date, the same presumption arises that the instrument was transcribed upon the records and the 1 N. Y. Life Ins. Co. v. White, 17 N. Y. 469. MVork V. Harper, 24 Miss. 517 ; White v. Denman, 1 Ohio St. 100; Bishop V. Schneider, 46 Mo. 472. 3 Hill V. McNichol, 76 Me. 314 ; Stevens v. Bachelder, 28 Me. 218. See, also, Thompson v. Mack, Harr. (Mich.) 150 ; Terrell v. Andrew, 44 Mo. 309 ; Jen- nings V. Wood, 20 Ohio, 261 ; Gilchrist v. Gough, 63 Ind. 576 ; Disque v. Wright, 49 Iowa, 538. * Bacon v. N. W. Mut. L. and Ins. Co., 131 U. S. 258. * Oconto Co. V. Jerrard, 46 Wis. 317. St. Croix L. & Lum. Co. v. Eetchie, 73 Wis. 409. ® Wisconsin Rev. Stat., sect. 759. CONSTRUCTION OF REGISTRATION LAWS. 761 registry completed at that date.^ And, in general, a mistake of the recorder in entering the description of the mortgaged premises on the numerical index, the mortgage being in all other particulars properly recorded, the index will not vitiate the record as to subsequent purchasers.^ The index is not necessary to the validity of a record of a mortgage ; thus, a mortgage was recorded but not indexed ; a subsequent mortgage was executed and assigned to another party, but without notice ; the first mortgage took precedence.^ But the clerk is liable to creditors or bona fide purchasers for neglecting to record a duly lodged deed of the premises when such indexing is required by statute.^ § 731. The Index is no Part of the Record. — The index is no part of the record of a mortgage for the purpose of con- structive notice.^ The mortgage is just as much an incumbrance upon the land, when one has notice of it, although it be not indexed.^ The index is made for the convenience of those searching the record, and is not a part of the record.^ It appears that the record of a mortgage supersedes the necessity of noting in a book of record, at the time when it was received.^ § 732. Liability of the Recorder for Errors in the In- dex. — The index to a record of a conveyance is not necessary to ^ Lane v. Duchac, 73 Wis. 646. ' Lincoln Build, and Loan Asso. v. Hass, 10 Nebr. 581. ^ Barrett v. Prentiss, 57 Vt. 297. * Barney v. Little, 15 Iowa, 527 ; Reeder v. State, 98 Ind. 114 ; Green v. Gar- rington, 10 Ohio St. 548 ; 91 Am. Dec. 103, 109 ; Dodge v. Potter, 18 Barb. (N. Y.) 193 ; Board v. Babcock, 5 Oreg. 472 ; Hunter v. Windsor, 24 Yt. 327 ; Curtis r. Lyman, 24 Yt. 338. ^ Fort V. Burch, 5 Den. (N. Y.) 195 ; Chatham v. Bradford, 50 Ga. 327 ; Gil- christ V. Gough, 63 Ind. 576 ; Benton v. Nicoll, 24 Minn. 221 ; Board v. Bab- cock, 5 Oreg. 472 ; Schell v. Stein, 76 Pa. St. 398 ; Throckmorton v. Price, 28 Tex. 605 ; Mut. Life Ins. Co. v. Dake, 87 N. Y. 257 ; Green v. Garrington, 16 Ohio St. 548 ; Nichol v. Henry, 89 Ind. 54. « Board v. Babcock, 5 Oreg. 472 ; Throckmorton v. Price, 28 Tex. 605. ^ Mut. Life Ins. Co. v. Dake, 1 Abb. N. C. (N. Y.) 381. *Head v. Goodwin, 37 Me. 181. Compare Speer v. Evans, 47 Pa. St. 141. 762 REGISTRATION OF THE INSTRUMENT. nicake a record effective as constructive notice to a subsequent purchaser, and generally if such purchaser has been misled to his injury by the neglect of the recorder to make such indexes, his remedy is against the recorder ; ^ the recorder is liable to the party aggrieved for the amount of his damages sustained by reason of the failure of the recorder to index the instruments.^ The grantee employs and pays the officer to do the recording properly, and to him the officer is responsible in damages for the loss resulting from any mistake, failure, or negligence of his own in the premises.^ § 733. Descriptive Index — Rule in Some States. — In Iowa an instrument filed for record does not impart construct- ive notice to third persons until the entries are made in the index.* The mere filing of a conveyance in the records of the office, without having it entered in the index or recorded, is not sufficient to impart constructive notice.^ So the record, complete in every respect, except that it is not properly entered in the index, is not constructive notice.*' The statutes of Indiana, Michigan, and Wisconsin are simi- lar to the Iowa statute.^ These statutes say that the indexing shall be constructive notice. It is held in these States that an error in the main record where the index entries do not show or indicate the mistake, vitiates the notice, and the record im- parts notice only of what it contains.* Without the index there is no notice.^ The index and the full record together ' Green v. Garrington, 10 Ohio St. 548. 2 Bishop V. Selmeider, 46 Mo. 472 ; Board v. Babcock, 5 Oreg. 472. 3 Ritchie v. Griffiths, 1 Wash. St. 429. * Code, sect. 1925 ; Hibbard v. Zenor, 75 Iowa, 471. 5 Barney v. McCarty, 15 Iowa, 510 ; Whalley v. Small, 25 Iowa, 184 ; Miller V. Bradford, 12 Iowa, 14. ® Gwynn v. Turner, 18 Iowa, 1 ; Howe v. Thayer, 49 Iowa, 154 ; Scoles v. Wil- sey, 11 Iowa, 261 ; Calvin v. Bowman, 10 Iowa, 529 ; Bostwick v. Powers, 12 Iowa, 456 ; Noyes v. Horr, 13 Iowa, 570 ; White v. Hampton, 13 Iowa, 259. ' Rev. Stat. Ind. 1888, sect. 2951 ; Public Acts. Mich. 1889, p. 337. Eev. Stat. Wis. 1878, sects. 758, 759. ^ Lowry v. Smith, 97 Ind. 466 ; Miller v. Bradford, 12 Iowa, 14. ^Barneyv. McCarty, 15 Iowa, 510; 83 Ann. Dec. 428; Lombard v. Cul- bertson, 59 Wis. 433 ; Noyes v. Horr, 13 Iowa, 590. CONSTRUCTION OF REGISTRATION LAWS. 763 constitute the record, and a mistake in one does not usually vitiate if the other gives the matter correctly/ Notice is not given where the record is not indexed.^ § 734. Defectively Recorded Mortgage. — A defectively recorded mortgage in many States has no priority over any other indebtedness of the mortgagor. Thus, a mortgagee whose deed is defectively registered, or is unrecorded, has no priority over any other creditor.^ And in Ohio, as against subsequent purchasers, mortgages have no effect either at law or in equity until delivered to the register of the proper county for registration.^ Other courts hold that such a mortgage is a good equitable lien, and superior to the claims of creditors under subsequent judgments.^ Generally a purchaser of land is presumed to have notice of any defect of title apparent upon the face of his title papers or by public records, and will be required to take notice of the title or claims of persons in possession ; but he is not required to look for latent defects in the chain of conveyances, when regular on their face and apparently conveying legal title.^ And a purchaser of land who has no notice of any irregularity in the proceedings by which his vendor acquired title will be protected ; ^ so will a purchaser who has no notice that his grantor's deed is but a mortgage.^ Where a mortgage of 2,000 acres, more or less, is incorrectly recorded " 200 acres, more or less," but the boundaries are cor- ^ Shove V. Larsen, 22 Wis. 142 ; Sinclair v. Slawson, 44 Mich. 123 ; 38 Am. Eep. 235 ; St. Croix Land Co. v. Ritchie, 73 Wis. 409 ; Webb on Record of Titles, sect. 143, and cases cited. ^ Ritchie v. Griffiths, 1 Wash. St. 429. ' Henderson v. McGhee, 6 Heisk. (Tenn.) 55. *Betz V. Snyder (Ohio), 28 N. E. Rep. 234 ; Bloom v. Nog^le, 4 Ohio St. 45. ^ Sixth Ward Build. Asso. v. Willson, 41 Md. 506; Gen^ Ins. Co. v. U. S. Ins. Co., 10 Md. 524 ; Nelson v. Bank, 27 Md. 73 ; Nice's Appeal, 54 Pa. St. 200; Abbott v. Godfroy, 1 Mich. 178. * Robbins v. Moore, 129 111. 30 ; Dickerson v. Evans, 84 111. 451 ; Moore v. Hunter, 1 Gilm. (111.) 317. ' Jenkins V. Pierce, 98 111. 646; McHany v. Schenk, 88 111. 357. * Jenkins v. Rosenberg, 105 111. 157. 764 REGISTRATION OF THE INSTRUMENT. rectly described, the record is sufficient, notwithstanding the mistake in quantity, to affect a subsequent mortgagee with notice/ Article 2. Constructive Notice. ^ 735. Records Complying with the ^ 743. General Description. Statutes. § 744. Lis Pendens. § 736. Waiving Priority by Agreement. § 745. Possession by One Not Shown § 737. Waiving Priority. to be the Owner by Eecord § 738. Facts and Circumstances May Title. Control Priority. ^ 746. Mortgage by Absolute Deed — § 739. Priority of Several Mortgages Defeasance Unrecorded. Simultaneously Given. ^ 747. Possession of Part of the § 740. General Recitals. Premises. § 741. Express Recitals. § 748. Actual Possession. ^ 742. Estoppel in Pais Against Mort- § 749. Character of the Possession gagee. Required. § 735, Records Complying with the Statutes. — When the record of a mortgage comphes with the conditions of the stat- utes, then it is constructive notice of its contents to all subse- quent purchasers and mortgagees.^ It is constructive notice to subsequent creditors.^ Every subsequent inquirer is bound to know the existence of the record.* The record of a mortgage containing a power of sale puts subsequent purchasers upon inquiry whether any proceedings have been instituted thereunder.^ The record is constructive notice to all the world that comes after.® So when a purchaser examines the records and finds a good conveyance from the owner of the land to his mortgagor, he is not required to look further.^ 1 Kennedy v. Boykin (S. Car.), 14 S. E. Rep. 809. 2 North V. Knowiton, 23 Fed. Rep. 163 ; Tripe v. Marcy, 39 N. H. 439 ; Gran- din V. Anderson, 15 Ohio St. 286 ; Buchanan v. Bank, 78 111. 500 ; Barbour r. Nichols, 3 R. I. 187 ; Ogden v. Walters, 12 Kan. 282 ; Banton v. Shorey, 77 Me. 48. ' Hickman v. Perrin, 6 Cold. (Tenn.) 135. * Jones V. Smith, 1 Hare, 43, 55 ; Ware v. Egmont, 4 De Gex, M. & G. 460, 473 ; White & Tudor's Lead. Cos. (4th Am. ed.) p. 121. ^Heaton v. Prather, 84 111. 330; Farrar v. Payne, 73 111. 82. «Hendrickson v. AVoolley, 39 N. J. Eq. 307 ; Peters v. Ham, 62 Iowa, 656. ^Connecticut v. Bradish, 14 Mass. 296 ; Morse v. Curtis, 140 Mass. 112; Fal- CONSTRUCTION OF REGISTRATION LAWS. 765 As a general rule, when the mortgagee has traced the title down to his mortgagor, the registry is his protection as showing a good title ; ^ a registration is constructive notice and protects the mortgagee against any subsequent liens." The registration of a deed is notice only to those who claim through but under the mortgagor.^ § 736. Waiving Priority by Agreement. — If all the parties agree as among themselves, the lien of the first mortgage may be subject to the lien of a subsequent mortgage ; ■* and some authorities hold that such agreement is valid as against an in- nocent assignee.^ However, if the assignee takes with notice, he is bound by the equities of such agreement." Such an agreement in writing recorded would not be notice.^ As among themselves, the agreement may be verbal, that a subsequent mortgage shall take precedence.^ § 737. Waiving Priority. — A prior mortgagee may waive his right to priority in favor of a subsequent mortgagee.^ So lass V. Pierce, 30 Wis. 443 ; Bayles v. Young, 51 111. 127 ; Sims v. Hammond, 33 Iowa, 368 ; Hill v. McNichol, 76 Me. 314, 316 ; Mahoney v. Middleton, 41 Cal. 41. 1 Stockwell V. State, 101 Ind. 1 ; Losey v. Simpson, 3 Stockt. (N. J. Eq.) 246 ; Cook V. Travis, 20 N. Y. 400, 402 ; Bingham v. Kirkland, 34 N. J. Eq. 229 ; Tarbell v. West, 86 N. Y. 280. "Davisu. Milligan, 88 Ala. 523; Childs v. Hurd, 32 W. Va. 66; Keith & Perry Coal Co. v. Bingham, 97 Mo. 196 ; Lindley v. Martindale, 78 Iowa, 379 ; Harding v. Allen, 70 Md. 395 ; Use v. Seinsheimer, 76 Tex. 459. » Kaynor v. Wilson, 6 Hall (N. Y.), 469 ; Stuyvesant r. Hall, 2 Barb. Ch. (N. Y.) 151 ; Murray v. Ballon, 1 Johns. Ch. (N. Y.) 566 ; Keller v. Nutz, 5 Serg. & R. (Pa.) 246 ; Lightner v. Mooney, 10 Watts (Pa.), 412 ; Bates v. Norcross, 14 Pick. (Mass.) 224 ; Tilton v. Hunter, 24 Me. 29 ; Crockett v. Maguire, 10 Mo. 34 ; Leiby v. Wolf, 10 Ohio, 83. * Jones V. Phelps, 2 Barb. Ch. (N.Y.) 440; Decker v. Boice, 19 Hun (N. Y.), 152 ; Beasley v. Henry, 6 111. App. 485 ; Poland v. Lamoille Railroad Co., 52 Vt. 144 ; Sparks v. Bank, 7 Blackf. (Ind.) 469. ^ Conover v. Van IMater, 18 N. J. Eq. 481 ; Cable v. Ellis, 86 111. 525 ; Free- man V. Schroedcr, 43 Barb. (N. Y.) 618. «Bank of Savings v. Frank, 45 N. Y. Super Ct. 404. ''Gillig V. Maass, 28 N. Y. 191. ^ New York Chem. Manf. Co. v. Peck, 2 Halst. (X. J. Eq.) 37 ; Bank r. Campbell, 2 Rich. Eq. (S. Car.) 179 ; Rigler v. Light, 90 Pa. St. 235. »Clason V. Shepherd, 6 Wis. 369 ; Mutual Life Ins. Co. v. Sturges, 33 N. J. Eq. 328. 766 REGISTRATION OP THE INSTRUMENT. a first mortgagee may covenant with a third mortgagee, or any- subsequent one, that the third mortgage shall have priority over the first/ But such covenant does not give the subsequent mortgage a priority of lien over the intermediate mortgages, because the interest of the parties to the agreement under which this sub- sequent mortgage was taken was not to place this mortgage ahead of the intermediate mortgages, or to give its owner an interest in the first mortgage, but simply that the liens prior to his mortgage should only be the amount of the intermediate mortgages ; and the agreement would be fully satisfied by a discharge of the first mortgage.^ And when the prior mortgagee has released his mortgage, in order to give the subsequent mortgagee priority,, who had loaned money to make improvements on the land, he cannot then set up liis prior lien because the mortgagor used the money for other purposes.^ But an admission by one of two mort- gagees whose mortgages were simultaneous and recorded on the same day, that there is no priority of one over the other, may be contradicted.* An admission in writing that one mortgage had priority over another, will be admitted in evidence to show that the deeds took effect at the same instant.' And when a mortgagee releases his mortgage and takes a new security, not knowing of a judgment lien, he may have his prior mortgage restored.^ § 738. Facts and Circumstances May Control Priority. — Facts and circumstances may sometimes control in determining priority of two mortgages. So facts may show that the vendor intended to waive his lien.^ And this is the case where a ven- ^ Raleigh Nat. Bank v. Moore, 94 N. Car. 734 ; Frost v. Yonkers Sav. Bank, 70 N. Y. 553. 2 Taylor v. Wing, 84 N. Y. 471. 'Darst V. Bates, 95 111. 493. * Beers v. Broome, 4 Conn. 247 ; Maze v. Burke, 12 Phila. (Pa.) 335. ^ Beers v. Hawley, 2 Conn. 110. «Pearce v. Buell (Oreg.), 29 Pac. Rep. 78. ' Bavley v. Greenleaf, 7 Wheat. (U. S.) 46 ; Tribble v. Oldham, 5 J. J. Marsh. (Ky.) 137. CONSTRUCTION OP REGISTRATION LAWS. 767 dee sells part of the property and takes two mortgages of one date for part of the consideration, intending that one of the mortgages should be assigned to his vendor for the purchase price, or to secure the original consideration of the land, and that it should have priority, both mortgages being registered concurrently, but the one intended for his vendor was first as- signed to him, and afterward the other assigned to another party ; the mortgage assigned to his vendor will take priorit}".^ When two mortgages are given simultaneously upon the same property, each mortgagee taking with notice, neither of them is entitled to a preference in payment under the recording act, although one of them procures his mortgage to be registered.^ A different question might have been presented if the mort- gage which was first recorded had been foreclosed under the statute or otherwise, and the premises had been sold to a bona fide purchaser without notice that the two mortgages were given simultaneously.^ The mortgage first recorded is prima Jade the first lien, and may be shown to be conditionally recorded ; hence, a second mortgage, recorded before the condition was complied with, may be entitled to priority.* Where a mortgage is executed, and before the mortgagor acquires title to the land, the record thereof is not notice to the vendor who takes a subsequent mortgage for the purchase-money.^ § 739. Priority of Several Mortgages Simultaneously Given. — The general principle is that mortgages duly recorded have preference according to the order in which they were made* and executed. This general rule is itself subject to modifica- tions. The priority of registration gives no preference of right against a prior mortgage, of which the junior mortgagee had notice when he takes his mortgage.^ » Stafford v. Van Rensselaer, 9 Cow. (N. Y.) 316. 2 Rhoades v. Canfield, 8 Paige (N. Y.), 545. *3 Waterman's Am. Ch. Dig., p. 40 el seq. * Freeman v. Schroeder, 43 Barb. (N. Y.) 618. ^Schoch V. Birdsall (Minn.), 51 N. W. Rep. 382. * Rogers v. Jones, 8 N. H. 2M ; Copeland v. Copeland, 28 Me. 525. 768 REGISTRATION OF THE INSTRUMENT. Whether one of several mortgages so executed, shall have priority is a matter of fact for the jury to decide from the evidence of such intention.^ The mere act of handing one mortgage to the register an instant before the other does not give it priority.^ But if the mortgages are executed at the same time to secure debts maturing at different times, many courts hold that is a prior lien which secures the note first falling due.^ The rule is the same as it is when one mortgage secures debts maturing at dift'erent times ; * but other authorities hold that the maturity of the debts does not establish priority.^ § 740. General Recitals. — A recital in a deed of a prior unrecorded mortgage as an existing incumbrance is actual notice of such unrecorded mortgage to the grantee, and con- structive notice of its existence to parties claiming under him.^ The recital must explain itself or refer to some deed which will explain it,^ and must be in the course of the title under which the purchaser claims.* When upon the face of the instrument itself, it is apparent for what purpose it was executed, and there is sufficient to j)ut the purchaser upon inquiry as to the title of the holder, he will be bound to make such inquiry.' 1 Gilman v. Moody, 43 N. H. 239. ^ Koevenig r. Schmitz, 71 Iowa, 175. ^ Gardner v. Diedrichs, 41 111. 159 ; Eoberts v. Mansfield, 32 Ga. 228 ; Ma- rine Bank v. Bank, 9 Wis. 57. * Isett V. Lucas, 17 Iowa, 503 ; Bank v. Covert, 13 Ohio, 240 ; Harris v. Har- lan, 14 Ind. 439. 5 Gilman v. IVIoody, 43 N. H. 239 ; Granger v. Crouch, 86 N. Y. 494 ; Coller V. Huson, 34 N. J. Eq. 38 ; Riddle v. George, 58 N. H. 26 ; Shaw v. Newsom, 78 Ind. 335. «Knox County v. Brown, 103 Mo. 223; Merrill v. Ireland, 40 Me. 569; George v. Kent, 7 Allen (Mass.), 16; "White v. Foster, 102 Mass. 375; Buchanan v. Balkum, 60 N. H. 406 ; Gooding v. Riley, 50 N. H. 400 ; San- born V. Robinson, 54 N. H. 239; iElna Life Ins. Co. v. Ford, 89 111. 252; United States Mortgage Co. v. Gross, 93 111. 483 ; Parke v. Neeley, 90 Pa. St. 52 ; Hassey v. Wilke, 55 Cal. 525 ; ^tna Life Ins. Co. v. Bishop, 69 Iowa, 645. 'White V. Carpenter, 2 Paige (N. Y.), 217. 8 Boggs v. Varner, 6 W. & S. (Pa.) 469 ; Mueller v. Engeln, 12 Bush (Ky.), 441. » Foster v. Strong, 5 111. App. 223. CONSTRUCTION OF REGISTRATION LAWS. 769 The purchaser is bound to take notice of all liens shown to exist by his vendor's title-deed.' Notice coming from the record can never be more extensive than the facts referred to or stated.^ § 741. Express Recitals. — If the purchaser takes a deed with notice that the premises are incumbered by a mortgage, he is bound by the recital, though the mortgage is not recorded.^ So when a mortgage refers to a deed of conveyance between the same parties, and describes it as of even date with the mort- gage, the mortgagor is chargeable with notice of the deed and its contents.* And when the second mortgage recites that it is taken subject to a prior mortgage, it cannot take priority, though the first mortgage is corrected as to a mistake in the description of the property.^ So actual notice of a mortgage binds a purchaser with the recitals in that mortgage.® When the mortgaged premises have been sold in parcels to different purchasers at different times, in the absence of any intervening equities, it is gener- ally held that the purchasers must resort to their liens in the inverse order of alienation.^ In Ohio where a mortgage takes effect only from its delivery for record, its priority is not affected by notice of a prior unre- corded mortgage ; so excepting a prior unrecorded mortgage in a subsequent mortgage does not affect the priority given by record.^ But generally when a mortgage is excepted from a covenant ^ McRimmon v. Martin, 14 Tex. 318 ; Ticrnan r. Thurman, 14 B. Mon. (Ky.) 277 ; Major v. Bukley, 51 Mo. 227 ; Daughaday v. Paine, 6 Minn. 452 ; Orrick v. Durham, 79 Mo. 174. ^ Norman v. Towns, 130 Mass. 52 ; Gale v. Morris, 29 N. J. Eq. 222. ' Garrett v. Puckett, 15 Ind. 485 ; Westervelt v. Wyckoff, 32 N. J. Eq. 188 ; Kitchell V. Mudgett, 37 Mich. 81. * Hull V. Sullivan, 63 Ga. 126. * Council Bluff Lodge v. Billups, 67 Iowa, 674. ^ Coppin V. Fernyhough, 2 Bro. C. C. 291 ; Howard Ins. Co. v. Halsey, 8 N. Y. 271. 'Iglehart v. Crane, 42 HI. 261. « Bercaw v. Cockerill, 20 Ohio St. 163 ; Coe r. Eailroad Co., 10 Ohio St. 372, 406. 49 770 REGISTRATION OF THE INSTRUMENT. of warranty in a deed, this charges the purchaser with notice, although the mortgage be unrecorded/ If a purchaser rehes on the statement, and the statements are erroneous, he is bound by the contents of the deed, when fraud does not enter into the transaction.^ But if the mortgagee makes untruthful steatements touching a material fact in relation to a security in the form of an abso- lute deed, such failure to state the truth will postpone such security to that of a subsequent attaching creditor.* But his mortgage will not be postponed merely because he knew that the mortgagor was making a subsequent conveyance of the premises, and did not make known his title. In order to postpone his prior lien, there must be actual or constructive fraud on the mortgagee's part.* In Nebraska the recording of a real estate mortgage which is not legally acknowledged, does not operate as constructive notice.^ § 742, Estoppel in Pais Against Mortgagee. — If the mortgagee does some act, or makes some material representa- tion, to influence the conduct of a third party by inducing a belief of a given state of facts, and such party acts upon such belief and is injured, or M^ould be, the mortgagee is estopped to assert his rights as against such third party.® But the purchaser is bound to know of a mortgage already recorded.'' When the holder of one of two mortgages, exe- cuted on the same da}^, represents to a person who is to take the assignment of the other mortgage, that there is no priority ^ Morrison v. Morrison, 38 Iowa, 73. ^ Jones V. Smith, 1 Hare, 43. Compare Drysdale v. Mace, 2 Sm. & G. 225 ; Short V. Fogle, 42 Kan. 349. ^ Geary v. Porter, 17 Oreg. 465. * Paine v. French, 5 Ohio, 336; Palmer v. Palmer, 48 Vt. 69; Pickard v. Sears, 6 Ad. & El. 469, 471. * Keehng v. Hoyt, 31 Nebr. 433. « Heane v. Rogers, 9 Barn. & Cress. 577, 586 ; Chester v. Greer, 5 Humph. (Tenn.) 26 ; Piatt v. Squire, 12 Met. (Mass.) 494 ; Bailey v. Gould, Walk. (Mich.) 478. ^ Jones V. Smith, 1 Hare, 43 ; Rice v. Dewey, 54 Barb. (N. Y.) 455. CONSTRUCTION OF REGISTRATION LAWS. 771 in the deeds, he is estopped from claiming a priority against such person.^ And an agent cannot take advantage of his principal, where the agent's negligence would give him pri- ority ; he must hold subject to his principal.^ If the first mortgagee combine with the mortgagor to induce another to loan money upon the estate mortgaged, his mortgage will be postponed to the second.^ Where a party having a mortgage upon land, puts it in the power of another to sell or mortgage the property to a third person without notice, he is estopped to assert his title.* Or if the first mortgagee cancels his mortgage, knowing of a subse- quent incumbrance, and takes a conveyance or another mort- gage, he loses his first lien and the subsequent incumbrance will take priority.* § 743. General Description. — The general rule is that one having knowledge of distinct facts affecting the title to land which he is about to purchase, is not at liberty to close his eyes, and then screen himself under a plea of ignorance of other facts connected with those already known to him ; but he is bound in good faith to make reasonable inquiry, and will be presumed to have done so, and will be affected with notice of all such facts as he might learn by such inquiry.^ So one who has knowledge of a prior unrecorded mortgage upon some portion of the premises of which he is about to pur- chase a part, is bound as to the extent of the mortgage and its lien.^ ^ Broome v. Beers, 6 Conn. 198. See, also, Stafford v. Ballou, 17 Vt. 329. 'Mitchell V. Aten, 37 Kan. 33. 3 Peter v. Russell, 1 Eq. Cas. Abr. 322. * Briggs V. Jones, L. R. 10 Eq. 92, 98 ; Rice r. Rice, 2 Drew. 73. ^ Keohane v. Smith, 97 111. 156 ; Skeele v. Stocker, 11 111. App. 143 ; Plutch- inson v. Bramhall, 42 N. J. Eq. 372 ; Holt v. Baker, 58 N. H. 276 ; Woollen v. Hillen, 9 Gill (Md.), 185. See, also, Christie v. Hale, 46 111. 117. * Jackson, etc.. Railroad Co. v. Davison, 65 Mich. 417; Blaisdell v. Stevens, 16 Vt. 179 ; Cox v. Milner, 23 HI. 476 ; Bacon v. O'Connor, 25 Tex. 213 ; Hume V. Franzen, 73 Iowa, 25 ; Stokes v. Riley, 121 111. 116 ; Storrs v. AVal- lace, 61 Mich. 437 ; Converse v. Blumrich, 14 Mich. 109, 120. MVillink v. Morris Can. and Bank. Co., 3 Green (N. J. Eq.), 377 ; 2 White i&^Tudor's Lead. Cas. in Eq. (4th Am. ed.), p. 190, pt. 1 ; George v. Kent, 7 772 REGISTRATION OF THE INSTRUMENT. And in general one having notice of a prior mortgage, can only acquire an interest subordinate to it.^ It is sufficient if the description be correct as far as it goes and full enough to direct attention to the sources of full and correct information, as to the character of the amount to be se- cured. Judge Lewis says that it is generally held sufficient, if it appears that the debt is secured, and that the amount of it may be ascertained by reference to other instruments, or by inquiry.^ A record of the mortgage with a general description of the indebtedness is constructive notice, and sufficient to put all parties interested upon inquiry ; and they must inquire in the proper quarter.^ One who takes a quit claim from the mortgagor of all his interests, takes the mortgagor's equity of redemption.* The record of a purchase-money mortgage is not notice of the unrecorded deed by the vendor,^ but is notice to one claim- ing under the mortgagee.^ § 744. Lis Pendens. — Notice of lis pendens can only affect persons claiming under the mortgagor, and not those claiming by title paramount.'^ When an action in relation to the title of the mortgaged property has been commenced, and a notice of the pendency of the suit has been filed, according to the statute, it is constructive notice.^ But the proceedings to foreclose an unrecorded mortgage Allen (Mass.), 16; Barr v. Kinard, 3 Strobh. (S.Car.) 73; Ijames v. Gaither,93 N. Car. 358, 362 ; Martin v. Cauble, 72 Ind. 67. 1 Wilson V. Vaughan, 61 Miss. 472 ; Simons v. Bank, 93 N. Y. 269. "Morris v. Murray, 82 Ky. 36. * Passumpsic Savings Bank v. Bank, 53 Vt. 82 ; Seymour v. Darrow, 31 Vt. 131 ; Babcock v. Lisk, 57 111. 327 ; Heaton v. Prather, 84 111. 330 ; Dargin v. Beeker, 10 Iowa, 571 ; Hamilton v. Nutt, 34 Conn. 501 ; Locker v. Riley, 30 N. J. Eq. 104. * Smith V. Bank, 21 Ala. 125. 6 Pierce v. Taylor, 23 Me. 246 ; Losey v. Simpson, 3 Stockt. (N. J. Eq.) 246. « Center t). Bank, 22 Ala. 743. ^Shaw V. Barksdale, 25 S. Car. 204, distinguishing Witte v. Clarke, 17 S. Car. 313. ^Ayrault v. Murphy, 54 N. Y. 203; Murray v. Ballon, 1 Johns. Ch. (N. Y.) 566; Bellamy v. Sabine, 1 De G. & J. 566, 580; Tyler v. Thomas, 25 Beav. 47; 2 White & Tudor's Lead Cas. in Eq. (4th Am. ed.), p. 192, pt. 1. CONSTRUCTION OF REGISTRATION LAWS. 773 do not constitute such lis pendens as would be notice to a pur- chaser of the mortgaged property. The notice must be actual, such as would affect the conscience of the purchaser, and charge him with fraud/ But in Alabama it is held that the pendency of a foreclosure suit, from the time when service is perfected, is constructive notice of the mortgage, although it is not re- corded according to the requisition of the statute.^ The general rule is that those persons only are charged with notice or affected by lis pendens who purchase from parties to the suit.^ So a purchaser of land from a mortgagor assuming the mortgage is not affected by the pendency of a suit to which this grantor is not a party.* § 745. Possession by One Not Shown to be the Owner BY Record Title. — A party holding possession of land, the record not showing the title to be in him, is a circumstance to put a purchaser upon inquiry. Purchasers are chargeable with notice of all title or claim under which the land pur- chased is held, or claimed by an occupant in possession.^ So after a reasonable acceptance of an option to purchase con- tained in a lease, the lessee's possession becomes that of owner and gives notice of his rights as such to a subsequent mort- gagee of the vendor or the lessor, who takes his mortgage sub- ject thereto.® And if the occupant claims title by deed, his possession is equivalent to the recording of such deed, and is, therefore, constructive notice, as held by many authorities.^ ^ Douglass V. McCrackin, 52 Ga. 596 ; Newman v. Chapman, 2 Rand. (Va.) 93. "^ Hoole V. Attorney-General, 22 Ala. 190. 'Stuj'vesant v. Hone, 1 Sandf. Ch. (N. Y.) 419; Parks v. Jackson, 11 Wend. (N. Y.) 442. * Green v. Rick, 121 Pa. St. 130. ^MuUins V. Wimberly, 50 Tex. 457; Stagg v. Small, 4 111. App. 192; 2 White & Tudor's Lead. Gas. in Eq. (4th Am. ed.), p. 180, pt. 1. * Smith V. Gibson, 25 Nebr. 511. ' Seymour v. McKinntry, lOfi N. Y. 230 ; Westbrook v. Gleason, 79 N. Y. 23 ; Brainard v. Hudson, 103 111. 218 ; Cowen v. Loomis, 91 111. 132 ; Truesdale v. Ford, 37 111. 210, 213 ; Morrison v. March, 4 Minn. 422; GrofFt;. Ramsey, 19 Minn. 44 ; Emmons v. Murray, 16 N. H. 385 ; Taylor v. Mosely, 57 Miss. 544 ; Perkins v. West, 55 Vt. 265 ; Taylor v. Stibbert, 2 Ves. Jr. 437 ; Moreland v. Richardson, 24 Beav. 33. 774 REGISTRATION OF THE INSTRUMENT. So when a party has made permanent improvements, and cul- tivated the land, his possession is sufficiently open and patent to put a mortgagee on inquiry and charge him with notice of all that he might have learned by such inquiry.^ The possession of land by a third person is notice and a pur- chaser is put upon inquiry and is chargeable with notice, and when thus put upon inquiry, he is bound to inquire of the occupants with respect to their ground, source and right of pos- session. Anything short of this would clearly fail to be due and reasonable inquiry,^ Actual possession is constructive notice.^ The registration of a mortgage affords no notice whatever to a prior purchaser of land who is in possession under a bond for a deed, if the mortgagee had constructive notice of his rights.* When the vendor confers upon the vendee apparent owner- ship of the premises, with apparent authority to mortgage the same, he is estopped from asserting his lien as against a bona fide purchaser of the mortgage ; ^ this possession by the occupant is full notice of all his equities to the full extent of those equities, and in law is equivalent to actual notice to a bona fide purchaser.® § 746. Mortgage by Absolute Deed — Defeasance Unre- corded. — If the defeasance be not recorded, when the mortgage is by an absolute deed, the mortgagor's possession and occupa- tion of the premises, within the knowledge of the grantee of the mortgage, is a constructive notice, as held by some authorities, of the mortgagor's title.^ But on the other hand it is held that such open, notorious possession of the grantor will not be sufficient to impart notice to a purchaser of any unre- corded defeasance.* 1 Bright V. Buckman, 39 Fed. Rep. 243. 2 Kerr v. Day, 14 Pa. St. 112 ; Witter v. Dudley, 42 Ala. 616. 3 McRea v. McMinn, 17 Fla. 886 ; Hyer v. Caro, 18 Fla. 694 ; Bernstein v. Humes, 71 Ala. 260 : Doolittle v. Cook, 75 111. 354. *Doolittle V. Cook, 75 111. 354 ; Trustees v. Wheeler, 61 N. Y. 88. 5 Moore v. Bank, 55 N. Y. 41 ; Simpson v. Del Hoyo, 94 N. Y. 189; Sey- mour V. McKinstry, 106 N. Y. 230. 6 Partridge v. Chapman, 81 111. 137 ; Stagg v. Small, 4 111. App. 192. ' New V. Wheaton, 24 Minn. 406 ; Pell v. McElroy, 36 Cal. 268. 8 Pomroy v. Stevens, 11 Met. (Mass.) 244 ; Lamb v. Pierce, 113 Mass. 73 ; CONSTRUCTION OF REGISTRATION LAWS. 775 The great weight of authority is to the effect that possession by the grantor after a full conveyance, is not constructive notice to subsequent purchasers of any right reserved in the land to the grantor.^ § 747. Possession of Part of the Premises. — The posses- sion of part of a tract of land is sufficient to put a second purchaser upon inquiry as to the prior title.^ The notice given by possession is equivalent to a constructive notice afforded by registration of the deed.^ Where, therefore, a tenant is in pos- session under a lease, or an agreement, a person purchasing part of the estate must be bound to inquire on what terms that per- son is in possession.* But if this notice is constructive, its effects cannot be extended to cover lands outside the limits of the possession.^ § 748. Actual Possession. — As a general rule, the authori- ties declare that open, notorious, and exclusive possession and occupation of land by a stranger to a vendor's title, at the time of purchase from and conveyance by such vendor out of pos- session, are sufficient to put such purchaser upon inquiry as to the legal and equitable rights of the party so in possession. The possession must be open, notorious, and exclusive, and not merely a constructive possession.® A party will not be allowed to contradict the force and effect of a full convej^ance by the mere fact of his possession after his deed has been Crassen v. Swoveland, 22 Ind. 427 ; Brophy Mining Co. v. Brophy & Dale Gold and Sil. Min. Co., 15 Nev. 101 ; Groton Sav. Bank v. Batty, 30 N. J. Eq. 126 ; Wo6ldridge v. Miss. Valley Bank, 36 Fed. Rep. 97 ; Sawyers v. Baker, 66 ALa. 292 ; Berryhill v. Kirchner, 96 Pa. St. 489 ; Atkins v. Paul, 67 Ga. 97. See, also, M'Kecknie v. Hoskins, 23 Me. 230 ; Parsell v. Thayer, 39 Mich. 467. 'Eylar v. Eylar, 60 Tex. 315; Van Keuren v. Railroad' Co., 38 N. J. L. 165. ^ Watkins v. Edwards, 23 Tex. 443. ' McCaskle v. Amarine, 12 Ala. 17 ; Dixon v. Lacoste, 1 Sm. & Mar. (Miss.) 70, 107. * Daniels v. Davison, 16 Ves. 249 ; Anthe v. Heide, 85 Ala. 236. °Daggs V. Ewell, 3 Woods, C. C. 344. « Brophy Mm. Co. v. Brophy & Dale Gold and Sil. Min. Co., 15 Nev. 101 ; Trezise v. Lacy, 22 Kan. 742 ; Noyes v. Hall, 97 U. S. 34. 776 REGISTRATION OF THE INSTRUMENT. recorded.^ When the occupant places the title in another, an innocent mortgagee from the nominal owner will be protected against the real owner.^ A vendee under a contract of purchase, in possession, will be protected against a mortgage given by his vendor,^ but the mortgage lien will cover the property to the extent of the unpaid purchase-money/ A devisee of land subject to a mortgage duly recorded is chargeable with notice thereof, and after a reasonable time, with notice of the open, exclusive possession of a purchaser under a foreclosure to which he was not a party .^ One may be in possession, but not sufficient to give notice. Thus, a mother-in-law lived with her son-in-law, who worked the farm, and resided thereon ; she claimed title by an unrecorded deed from him. It was held her possession was not notice.^ Open and exclusive possession is sufficient to put a purchaser upon inquiry.^ § 749. Character op the Possession Required. — Though possession of land is notice to all the world of the possessor's interest, the definition of the word is restricted to an actual, open, and visible occupancy, accompanied by improvements of the premises, and not a mere constructive possession.^ Posses- sion must be, at least, of a character to amount to a disseisin ; acts of trespass will not be sufficient;^ possession must be continued 1 Eylar v. Eylar, 60 Tex. 315 ; Bloomer v. Henderson, 8 Mich. 395, 404 ; Koon V. Traaiel, 71 Iowa, 132. ^ Groton Sav. Bank v. Batty, 30 N. J. Eq. 126. * Bank v. Flagg, 3 Barb. Ch. (N. Y.) 316. * Jpeger v. Hardy (Ohio), 27 N. E. Eep. 863; Westbrook v. Gleason, 14 Hun (N. Y.), 245 ; Young v. Guy, 87 N. Y. 457. ^ Jellison v. Halloran, 44 Minn. 199. « Elliot V. Lane, 82 Iowa, 484. ' Fair v. Stevenot, 29 Cal. 486 ; Ely v. Wilcox, 20 Wis. 523. * Wood V. Rayburn, 18 Oreg. 3 ; Ray burn v. Davisson (Oreg.), 29 Pac. Rep. 738 ; Webster v. Van Steenbergh, 46 Barb. (N. Y.) 215 ; Tuttle v. Jackson, 6 Wend. (N. Y.) 226 ; Trustees v. Wheeler, 50 Barb. (N. Y.) 585 ; Troup v. Hurl- but, 10 Barb. (N. Y.) 358 ; Bogue v. Williams, 48 111. 371 ; 2 White & Tudor's Lead. Gas. in Eq. (4th Am. ed.), p. 185, pt. 1 ; Norcross v. Widgery, 2 Mass. 506. 9 M'Mechan v. Griffing, 3 Pick. (Mass.) 155, 156 ; Cook v. Travis, 22 Barb. (N. Y.) 338 ; 20 N. Y. 400. CONSTRUCTION OP REGISTRATION LAWS. 777 to a time when the title of the party sought to be charged with notice accrued/ It begins to be notice only from the time the legal title is conveyed in violation of the trust.^ Cutting trees being but an act of trespass, is not notice of possession ; ^ and making or repairing of fences is not notice.* So the entry on fifty acres of uncultivated land, clearing fifteen acres, and working them, building a house and a still- house, and living upon and using the premises for twenty years is not notice where the boundaries of the fifty acres are not settled.^ Possession being evidence of the possessor's title only, the possession of a tenant is not notice of his landlord's title.' But one purchasing or taking a mortgage of land in the possession of a tenant is bound to inquire as to the tenant's interest.^ The possession of a mortgagee, whose mortgage is recorded, is not notice of his claim under an agreement to purchase the premises.* And the joint residence of husband and wife gives no notice of any interest of the wife in the land.^ 1 Miles V. Langley, 1 Russ. & M. 40 ; 2 Russ. & M. 626 ; Hewes v. Wiswell, 8 Me. 94. 2 Scott V. Gallagher, 14 Serg. & R. (Pa.) 333. 3 M'Mechan v. Griffing, 3 Pick. (Mass.) 155. ^M'Mechan v. Griffing, 3 Pick. (Mass.) 155; Merritt v. Railroad Co., 12 Barb. (N. Y.) 608. * Billington v. Welsh, 5 Binn. (Pa.) 128. ® Barnhart v. Greenshields, 28 Eng. L. & E. 82 ; Flagg v. Mann, 2 Sumner, C. C. 557 ; Cook v. Travis, 20 N. Y. 400 ; Hanbury v. Litchfield, 2 Mylne & K. 629. ^ Cunningham v. Pattee, 99 Mass. 248, 252. 8 Plumer r. Robertson, 6 Serg. & R. (Pa.) 179. » Neal V. Perkerson, 61 Ga. 345. 778 registeation of the instrument. Article 3. Actual Notice. § 750. The General Rule. § 756. Taking Effect of the Notice. § 751. Exceptions to the Docti'ine of § 757. A Purchaser Without Notice Notice as Affecting Priority. May Convey a Good Title to § 752. Character of the Notice. One Having Notice. § 753. Degree, Manner, and Purpose § 758. Acquiring Title from One Who of Actual Notice. Has Notice of an Unrecorded § 754. Burden of Proof of Notice. Mortgage. I 755. Kind of Proof 1 759. Secret Lien or Trust. § 750. The General Rule. — In a few of the States the courts have interpreted the intention of the legislature as de- manding that the personal information of the unrecorded instrument should be proved by direct evidence, and as ex- cluding all instances of actual notice established by circum- stantial evidence. But this is not the general rule, for in most of the States, however, where a statute has been passed, the courts have defined the actual notice required by the legisla- ture as embracing all instances of that species in contradistinc- tion from constructive notice — that is, all kinds of actual notice whether proved by direct evidence or inferred as a legitimate conclusion from circumstances.^ Hence, actual notice as ap- plicable to conveyances does not necessarily mean actual knowledge ; it may be embraced or implied. If the party has knowledge of such facts as would lead a fair and prudent man, using ordinary caution, to make further inquiries, and he avoided inquiry, he is chargeable with notice of the facts which, b}^ ordinary diligence, he would have ascertained. Actual notice of facts which, to a prudent man, can only indi- cate notice is proof of notice.^ The decided preponderance of authority supports the position that the statutory actual notice is the conclusion of facts capable of being used by all grades of legitimate evidence.^ And yet, while the fact of notice may be inferred from circumstances as well as proved by direct evi- ^2 Pom. Eq. Jur. 596, note. 2 Knapp V. Bailey, 79 Me. 196. 3 Speck V. Eiggin, 40 Mo. 405 ; Mich. Mut. Ins, Co. v. Conant, 40 Mich. 530. CONSTRUCTION OF REGISTRATION LAWS. 779 dence, the proof must be such as to affect the conscience of the purchaser, and must be so strong and clear as to fix upon him the imputation of mala fides. ^ Undoubtedly the true rule is that notice must be held to be actual when the subsequent purchaser has actual knowledge of such facts as would put a prudent man upon inquiry, which, if jDrosecuted with ordinary diligence, would lead to actual notice of the right or title in conflict with that which he is about to purchase. When the subsequent purchaser has knowl- edge of such facts, it becomes his duty to make inquiry, and he is guilty of bad faith if he neglects to do so, and conse- quently he will be charged with actual notice he would have received if he had made the inquiry.^ The actual notice required by the statute is used in contra- distinction to the constructive notice given by the record. It does not mean that there must necessarily be direct and posi- tive evidence that the subsequent purchaser knew of the exist- ence of the deed. Any proper evidence tending to show it, facts and circumstances coming to his knowledge that would put a man of ordinary circumspection upon inquiry, should go to the jury as evidence of such notice.^ So actual notice embraces all degrees and grades of evidence, from the most direct and positive proof to the slightest cir- cumstances from which a jury would be warranted in inferring notice. It is a mere question of fact, and is open to every species of legitimate evidence which may tend to strengthen or impair the conclusion.* This is the general rule adopted, but the decisions are not all under statutes.^ ' Vest V. Michie, 31 Gratt. (Va.) 149 ; 2 Minor's Inst. (2d ed.) 887 ; Robinson Law of Priority, p. 27. ■^ Brinkman v. Jones, 44 "Wis. 498, 519 ; Musgrove v. Bonser, 5 Oreg. 313 ; Wilson v. Miller, 16 Iowa, 111. ^ Maupin v. Emmons, 47 Mo. 304, 306 ; Speck v. Riggin, 40 Mo. 405 ; Vaughn V. Tracy, 22 Mo. 417 ; 25 Mo. 318. * Williamson v. Brown, 15 N. Y. 359 ; Hull v. Noble, 40 Me. 480 ; Porter v. Sevey, 43 Me. 519. ^ Hankinson v. Barbour, 29 111. 80 ; Montgomery v. Keppel, 75 Cal. 128 ; Fair V. Stevenot, 29 Cal. 486 ; Smith v. Yule, 31 Cal. 184 ; Pell v. McElroy, 36 Cal. 272; Burwell v. Fauber, 21 Gratt. (Va.) 463; Brush v. AVare, 15 Pet. (U. S.) 780 REGISTRATION OF THE INSTRUMENT. However, this construction of the statute is in conflict with the established doctrine of Massachusetts * and Indiana,^ and with tlie definition given by Bouvier ^ and Story/ § 751, Exceptions to the Doctrine of Notice as Af- fecting Priority. — In a few of the States no notice, however full and formal, will supply the place of registration of a deed of trust or mortgage. Thus, in Louisiana, an unrecorded mortgage is void as against third persons, even though they have actual knowledge of such instrument.^ These were early decisions, but they have been followed by others of the same purport.'' So in North Carolina,^ actual notice of an unrecorded mort- gage avails nothing as against a subsequent mortgagee or j^ur- chaser in good faith.^ Where one who knows of a prior unrecorded mortgage or deed of trust procures a mortgage for his own benefit on the same property, which is recorded first, he gets the first lien on the property, unless he uses fraud to prevent the registration 111 ; Dugger v. Dagger, 84 Va. 130 ; Mateskey v. Feldman, 75 Wis. 103 ; Thomp- son V. Pioche, 44 Cal. 516 ; Jordan v. Pollock, 14 Ga. 157 ; Warren v. Sweet, 31 N. H. 332 ; Price v. McDonald, 1 Md. 403 ; Hastings v. Cutler, 24 N. H. 481 ; Whitbread v. Jordan, cited in 19 Eng. Ch. 255 ; Lewis v. Bradford, 10 Watts (Pa.), 67 ; Blaisdell v. Stevens, 16 Vt. 179 ; Hubbard v. Smith, 2 Mich. 207 ; Morrison v. March, 4 Minn. 422 ; Groff v. Eamsey, 19 Minn. 44 ; New v. Wheaton, 24 Minn. 406 ; Buck ^;. Halloway, 2 J. J. Marsh (Ky.), 163,180; Daniels v. Davison, 16 Ves. 249 ; Gilbert v. Jess, 31 Wis. 110. ^ Parker v. Osgood, 3 Allen (Mass.), 487; Dooley v. Wolcott, 4 Allen (Mass.), 406; Sibley v. Leffingwell, 8 Allen (Mass.), 584; White v. Foster, 102 Mass. 375 ; Lamb v. Pierce, 113 Mass. 72. Compare Curtis t».Mundy,3 Met. (Mass.) 405. =* Crassen v. Swoveland, 22 Ind. 428, 434. 3 Law Diet. 236. * Eq. Jur., sect. 399. ^ Britton v. Janney, 21 La. Ann. 204 ; Harang v. Plattsmier, 21 La. Ann. 426. ^Levy V. Mentz, 23 La. Ann. 261; Succession of Simon, 23 La. Ann. 533, 534 ; Gaiennie v. Gaiennie, 24 La. Ann. 79 ; Eochereau v. Do la Croix, 26 La, Ann. 584 ; Villevaso v. Walker, 28 La. Ann. 775 ; Adams v. Daunis, 29 La. Ann. 315 ; Watson v. Bondurant, 30 La. Ann. 1, 11. See, also. Code Napo- leon, art. 2134 ; Paul Pont, Privileges et Hypothgques, arts, 727, 728. ^ Code, sect. 1254. 8 Hinton v. Leigh, 102 N. Car, 28. CONSTRUCTION OF REGISTRATION LAWS. 781 of the mortgage which is first in date.^ No notice, however full and formal, will supply the place of registration.^ So in Ohio, a purchaser from the mortgagor of lands incum- bered by an unrecorded mortgage takes title thereto free from such incumbrance, even if he has full knowledge and notice of its existence, and that it is unpaid at the date of the pur- chase.^ As against third persons, a mortgage has no effect either at law or in equity, until delivered to the recorder of the proper county, even though such persons have full knowledge and actual notice of it.* § 752. Character of the Notice. — Actual notice is all de- grees and grades of evidence, from the most direct and positive proof to the slightest circumstance from which a jury would be warranted in inferring notice.^ It may be proved by circum- stances like any other fact.*' Actual notice of the statute may be something short of posi- tive knowledge ; '' it may be written or verbal ; ^ it may be in- tended or accidental ; ^ it affects an infant or feme covert as well as an adult man ; ^° notice to one of several partners is notice to the partnership." A cestui que trust is bound by the notice to his trustee.^^ So notice to one of several trustees is generally sufficient.^^ In law 1 Trader's Nat. Bank v. Woodlawn Manufact. Co., 96 N. Car. 298. * Robinson v. Willoughby, 70 N. Car. ,358. 3 Building Asso. v. Clark, 43 Ohio St. 427 ; Rev. Stat., sect. 4134 ; 82 Ohio L. 230 ; L. of 1885. * Bloom V. Noggle, 4 Ohio St. 45. See, also, Holliday v. Bank, 16 Ohio, 533 ; Bercaw v. Cockerill, 20 Ohio St. 163 ; Mayham v. Coombs, 14 Ohio, 428 ; Astor V. Wells, 4 Wheat. (U. S.), 466. * Williamson v. Brown, 15 N. Y. 354. " Hull V. Noble, 40 Me. 480. 'Wilson V. Miller, 16 loAva, 111 ; Maupin v. Emmons, 47 Mo. 304, 306 ; Por- ter V. Sevey, 43 Me. 519. 8 North British Ins. Co. v. Hallett, 7 Jur. (N. S.) 1263. 9 Smith V. Smith, 2Cromp. & Mees. 231. 1" Fisher on Mort. (3d ed.) p. 448. " Travis v. Milne, 9 Hare, 141. ^^ Wise V. Wise, 2 Jones & Lat. 403. ^" Meux V. Bell, 1 Hare, 73. 782 REGISTRATION OF THE INSTRUMENT. when a purchaser designedly abstains from making inquiries for the purpose of avoiding knowledge, he is charged with actual notice and positive knowledge.' Facts and circumstances coming to the knowledge of the purchaser that would put a man of ordinary circumspection upon inquiry, should go to the jury as evidence of actual notice.^ Notice is actual when the purchaser either knows of the existence of the adverse claim of title, or is conscious of having the means of knowledge, although he may not use them.^ That actual notice means direct personal knowledge, and nothing else, is no longer the rule, except in Massachusetts and in Indiana. § 753. Degree, Manner, and Purpose of Actual Notice. — The manner of the notice or the purpose of it is material. The degree, however, may range from circumstances and facts, a formal written statement of the lien, or a mere verbal declara- tion of the fact of its existence.* But a vague report of stran- gers or information of one not interested, will not affect a pur- chaser with notice ; * but information derived from parties in- terested, and from reliable sources is sufficient to charge with notice.^ But a mere rumor that some other person has an in- terest in the property is not sufficient to charge a purchaser with notice.'^ Some courts hold that such notice, to be binding, must pro- ceed from some person interested in the property ; * but it is suffi- cient if the information is derived from some reliable source.^ ^ Wilson V. Miller, 16 Iowa, 111. ^ Maupin v. Emmons, 47 Mo. 304, 306. ^ Spook V. Riggin, 40 Mo. 405 ; Michigan Mut. Ins. Co. v. Conant, 40 Mich. 530. * Smith v. Smith, 2 Comp. & Mees. 231 ; North British Ins. Co. v. Hallett, 7 Jur. (N. S.) 1263. * Kerns v. Swope, 2 Watts (Pa.), 75. « Connell v. Connell, 32 W. Va. 319 ; Mulliken v. Graham, 72 Pa. St. 484. ' Jolland V. Stainbridge, 3 Ves. Jr. 478 ; Wildgoose v. Wayland, Gouldsb. 147 ; Wilson v. McCullough, 23 Pa. St. 440. ® Rogers r. Hoskins, 14 Ga. 166 ; Barnhart v. Greenshields, 9 Moore, P. C. 18, 36 ; Lamont v. Stimson, 5 Wis. 443. ''MuUiken v. Graham, 72 Pa. St. 484; Curtis v. Mundy, 3 Met. (Mass.) 405, 407. CONSTRUCTION OF REGISTRATION LAWS. 783 Notice of the intention to give a mortgage on property does not prevent a party from taking a valid lien upon it, though he had notice of the owner's intention/ Where it is the duty for a party to remember, or the notice is of a fact affecting his interest, he is charged with notice.^ § 754. Burden op Proof of Notice. — The burden of j^roof is upon the party who claims precedence, to make out affirma- tively that the other lienor had notice of his incumbrance.^ The burden is upon him so to displace a subsequent recorded deed, and he must prove by a preponderance of evidence that the subsequent purchaser had actual notice of the existence of his mortgage when he received his.* And to affect a j^urchaser for value of land with notice of an unrecorded deed of trust, the evidence must be sufficient to prove him guilty of fraud.^ § 755. Kind of Proof. — The proof must be clear and un- doubted.*' When the facts set forth make it incumbent upon the purchaser or mortgagee to make inquiry, and enable him to prosecute it with success, he is charged with notice.'^ If the evidence may be regarded as per se evidence of fraud, he must fail and be charged with notice.^ If the "evidence shows that the purchaser avoided inquiry in order not to be informed, he then is charged with notice, and his claim of priority must fail.^ ^Gale V. Morris, 30 N. J. Eq. 285. * Goodwin v. Dean, 50 Conn. 517. 2 McCormick v. Leonard, 38 Iowa, 272 ; Center v. Bank, 22 Ala. 743 ; Ex parte Hardy, 2 Dow & C. 393 ; Van Wagenen v. Hopper, 4 Halst. (N. J. Ch.) 684, 707 ; Miles v. Blanton, 3 Dana (Ky.), 525 ; Fort v. Burch, 6 Barb. (N. Y.) 60, 78. * Marshall v. Dunham, 66 Me. 539. "Xast V. Michie. 31 Gratt. (Va.) 149. MVilson V. Miller, 16 Iowa, 111; Iline v. Dodd, 2 Atk. 275; Condit r. Wil- son, 36 N. J. Eq. 370 ; Riley v. Hoyt, 29 Hun (N. Y.), 114 ; West v. Reid, 2 Hare, 249. ' Parker v. Kane, 4 Wis. 1 ; SpoflFord v. Weston, 29 Me. 140 ; Nute v. Nute, 41 X. H. 60. « Dunham v. Dey, 15 Johns. (N. Y.) 555. 'Blaisdell v. Stevens, 16 Vt. 179, 186; 2 White & Tudor's Lead. Cas. in Eq. (4th Am. ed.) pp. 152 et seq., pt. 1. See, also, Weare v. Williams (Iowa), 52 N. W. Rep. 328. 784 REGISTRATION OF THE INSTRUMENT. § 756. Taking Effect of the Notice. — Such notice takes effect at any time before the completion of the transaction. The protection of the purchaser for a valuable consideration stands on this, that he has acquired a legal title, and paid the purchase-money before notice of the priority of the other lien. If he has acquired a legal title, but has not paid the purchase- money before notice his plea of having no notice fails. So if he has paid the purchase-money but has acquired no legal title, and then received notice of the other party's equity, he cannot defeat that prior equity by procuring the legal title.^ So a plea of purchase for a valuable consideration without notice cannot avail unless the party has both paid the purchase- money and acquired the legal title before notice of the other lien or equity.^ And if a mortgagee has notice of a jirior un- recorded mortgage before paying over the money secured by his mortgage he takes subject to the unrecorded mortgage, though his own mortgage has been recorded.^ And if he has forgotten the prior lien, he takes with notice.* § 757. A Purchaser Without Notice May Convey a Good Title to one Having Notice. — When a purchaser of real estate without notice of a prior unrecorded deed, for a valuable consideration, conveys to one who has notice thereof, the title of the latter is not impaired by the notice.^ The former, having an indefeasible title, could convey to the latter ; otherwise an innocent purchaser without notice might be forced to keep his estate, or the sale of estates would be very much hindered.® 1 Bush V. Bush, 3 Strobh. Eq. (S. Car.) 134 ; Vattier v. Hinde, 7 Pet. (U. S.) 271 ; Ellis v. Young, 31 S. Car. 322. '' Lynch v. Hancock, 14 S. Car. 66 ; Beckett v. Cordley, 1 Bro. C. C. 353 ; English V. Waples, 13 Iowa, 57 ; Syer v. Bundy, 9 La. Ann. 540 ; Jamison v. Gjemenson, 10 Wis. 411. ^Schultze V. Houfes, 96 111. 335. * Hunt r. Clark, 6 Dana (Ky.), 56. 5 Hill ('. McNichol, 76 Me. 314; Varick v. Briggs, 6 Paige (N. Y.), 323; Sweet V. Southcote, 2 Bro. C. C. 66 ; Lowther v. Carlton, 2 Atk. 242. 6 Harrison v. Forth, Prec. Ch. 51 ; Pierce v. Faunce, 47 Me. 507 ; Brackett i\ Ridlon, 54 Me. 426 ; Boynton v. Rees, 8 Pick. (Mass.) 329 ; Flynt v. Arnold, 2 Met. (Mass.) 619 ; Bell v. Twilight, 18 N. H. 159 ; Harrington v. Allen, 48 Miss. 492 ; Chance v. McWhorter, 26 Ga. 315. CONSTRUCTION OF REGISTRATION LAWS. 785 A judgment creditor who buys at a sheriff's sale the land of the judgment debtor, and receives a sheriff's deed without knowledge of a prior unrecorded mortgage given by the judg- ment debtor on the land, must show that his sheriff's deed was first recorded before he can claim to be a purchaser in good faith and for a valuable consideration.^ Hence, a judgment creditor who has notice of an unrecorded mortgage holds his lien subject to the mortgage.^ On the other hand, it is held that when a judgment creditor gains priority over the mort- gagee, a purchaser at an execution sale buys free from the incumbrance of the mortgage, notwithstanding he had notice.^ Notice of an unrecorded mortgage affects a subsequent pur- chaser, though the mortgagee agrees not to have his mortgage recorded, and receives a written guaranty to hold him harm- less by reason of not recording the deed.* § 758. Acquiring Title from One Who Has Notice of AN Unrecorded Mortgage. — A purchaser in good faith may acquire title to land from one having notice of an unrecorded mortgage, provided he records his deed before the mortgage is recorded. Should he omit to record his deed until the mort- gage is recorded, he will then stand in the same position as his vendor.^ So if any number of conveyances be made in the chain of title derived from the second grantee, each with like notice of the prior unrecorded mortgage deed, the first grantee will still hold the title, although all the deeds except his own are duly recorded, and he can protect his title by recording his deed. If, however, any one of the second grantee's successors pur- chases without notice of the first grantee's prior unrecorded 1 Thomas v. Vanlieu, 28 Cal. 616. ^ Williams v. Tatnall, 29 111. 553. 'Smith V. Jordan, 25 Ga. 687 ; Condit v. Wilson, 36 N. J. Eq. 370. *Lord V. Doyle, 1 Cliff. C. C. 453. * Harrington v. Allen, 48 Miss. 492 ; Westbrook r. Gleason, 79 N. Y. 23, re- versing 14 Hun (N. Y.), 245 ; Fort r. Burch, 5 Den. (N. Y.) 187 ; Decker v. Boice, 83 N. Y. 215 ; Doherty v. Stimmel, 40 Ohio St. 294 ; Mertins v. Joliffe, Amb. 311, 313 ; M'Queen v. Farquhar, 11 Ves. 467, 478 ; Jackson v. Van Val- kenburgh, 8 Cow. (N. Y.) 260 ; Stroud v. Lockart, 4 Dall. (Pa.) 153. 50 786 REGISTRATION OF THE INSTRUMENT. deed, and places his own on record, the title of the first grantee in the unrecorded deed is gone forever/ An attaching creditor without notice of an unrecorded deed will hold the property, though his debtor had notice.^ § 759. Secret Lien or Trust. — Where real estate is held by a title which is regular on its face, a bona fide mortgagee thereof, or one claiming under such mortgagee, is not liable to be affected by any secret trust or equity, if he be without notice of it.^ But one taking with knowledge of the trust, takes it subject to the trust.* When a husband conveys his land to his wife under the pretext of having held the title in trust, his creditors having a mortgage upon the land prior to and at the time of such con- veyance can show that no such trust existed, and that such conveyance was made for the purpose of defrauding his cred- itors.^ So where a husband receives money from his wife to invest in certain lands for her benefit, purchases other lands in his own name and mortgages the same to secure debts contracted prior to the purchase, in the absence of any notice of the wife's claim by the mortgagee, she is not entitled by any equity to have the sum advanced by her allowed to her from the pro- ceeds of the sale of the mortgaged premises.® A person who acquires a legal title with notice that the equitable title is in some other person than his grantor will be deemed to hold the legal title for the benefit of the equitable owner.^ 1 Hill V. McNichol, 76 Me. 314 ; Flynt v. Arnold, 2 Met. (Mass.) 619. 2 Coffin V. Ray, 1 Met. (Mass.) 212. 3 Bigley v. Jones, 114 Pa. St. 510. * Harwood v. Pearson, 122 Mass. 425 ; Jackson v. Blackwood, 4 McAr. (Dist. Col.) 188 ; Saunders v. Dehew, 2 Vern. 271. * Lehman v. Hawks, 121 Ind. 541. 6 Hall V. Hall, 89 Ky. 514. See, also, Meade v. Stairs, 88 Ky. 66 ; Darnaby V. Darnaby, 14 Bush (Ky.), 485. ' Gale V. Moorie, 29 N. J. Eq. 222. construction of registration laws. 787 Article 4. Implied Notice. § 760. Actual Notice in the Second I 765. Agent of Two Different Prin- Degree. cipals in Two Separate § 761. Agent and Principal — English Transactions. Rule. § 766. The Agent Being the Mort- ^ 762. Modification of the Old English gagor. Rule. I 767. Agents of Corporations. § 763. Agent's Knowledge of a Prior I 768. Ofiicers Selling Incumbered Lien. Land to their Corporation. I 764, The Knowledge of the Agent Must be Pertinent and Ma- terial to the Transaction. §760. Actual Notice in the Second Degree. — Implied notice imputes notice to a party because he is shown to be con- scious of having the means of knowledge, though he does not use them. In other words, where he chooses to remain voluntarily ignorant of the fact, or is grossly negligent in not following the inquiry which the known facts present, he has implied notice. Notice by implication differs from constructive notice with respect to the character of the inference upon which it rests. Constructive notice being the creature of positive law, but rest- ing upon strictly legal inferences, while implied notice arises from inferences of facts.^ So when an agent acquires a knowl- edge of any matter or instrument affecting land in which his principal is interested, the law imputes his knowledge to his principal.^ § 761. Agent and Principal — English Rule. — Lord Chan- cellor Hardwicke assumed it as unquestioned law that notice to the agent, in order to bind his principal by constructive no- tice, should be in the same transaction. " This rule ought to be adhered to ; otherwise it would make purchasers' and mort- gagees' titles depend altogether on the memory of their coun- ^ Wade Notices (2d ed.), sect. 5. * Donald v. Beals, 57 Cal. 399 ; Walker v. Schreiber, 47 Iowa, 529 ; AVilham- 8on V. Brown, 15 N. Y. 354, 359 ; Yerger v. Barz, 56 Iowa, 77 ; Hovey v. Blanchard, 13 N. H. 145. 788 REGISTRATION OF THE INSTRUMENT. sellers and agents, and oblige them to apply to persons of less eminence as counsel, as not being so likely to have notice of former transactions." ' Lord Chancellor Plunket adverted to the rule as to the neces- sity of notice in the same case, and stated if it were notice ac- quired in the same transaction necessarily the principal was to be charged with the knowledge of the agent ; but if it were notice received by him in another transaction, then such no- tice was not to affect the principal unless he actually had the knowledge at the time of the second transaction.^ Lord Langdale, master of the rolls, held that where one transaction is closely followed by and connected with another, or where it is clear that a previous transaction was present to the mind of the solicitor when engaged in another transaction, there is no ground for a distinction by which the rule that no- tice to the solicitor is notice to the client should be restricted to the same transaction.^ Lord Chancellor Eldon said that he would be unwilling to go so far as to say that if an attorney has notice of a trans- action in the morning he shall be held in a court of equity to have forgotten it in the evening ; that it must, in all cases, depend upon the circumstances.* § 762. Modification of the Old English Rule. — The modification of the old English rule is recognized in late cases. Justice Bradley states that the doctrine in England seems to be established that, if the agent at the time of effecting a pur- chase has knowledge of any prior lien, trust, or fraud affecting the property, no matter when he acquired such knowledge, his principal is affected thereby. If he acquires the knowledge when he effects the purchase, no question can arise as to his having it at that time. If he acquired it previous to the pur- 1 Warrick v. Warrick, 3 Atk. 291, 294. ^ Nixon V. Hamilton, 2 Dru. & Wal. Irish Ch. 364. See, also, Dresser v. Norwood, 17 C. B. (N. S.) 466. ^ Hargreaves v. Roth well, 1 Keen Ch. 154. * Mountford v. Scott, 1 TUrn. & R. Ch. 274. See, also, RoUand v. Hart, L. R., 6 Ch. App. 678 ; Boursot v. Savage, L. R., 2 Eq. 1.34, 142 ; Kennedy v. Green, 3 Myl. & K. 699, 719; Bradley w. Riches, L. R., 9 Ch. D. 189. CONSTRUCTION OF REGISTRATION LAWS. 789 chase, the presumption that he still retains it and has it present to his mind will depend upon facts and other circumstances. Clear and satisfactory proof that it was so present seems to be the only restriction required by the English rule as now under- stood, and the rule as now settled by the English court is the true one, and is deduced from the best consideration of the reasons on which it is founded.^ § 763. Agent's Knowledge of a Prior Lien. — In order to bind the principal with an agent's knowledge, the agency must be shown.^ The rule that notice of an agent is notice of his principal applies only to knowledge by the agent in the particular trans- action, or which, if previously acquired, is still present in his mind at the time of his agency.^ So if an agent, before the beginning of his agency receives notice of an unrecorded lien on real estate, of which his prin- cipal afterward becomes the purchaser, such notice of the agent will not be imputed to the principal unless there be very strong evidence that, at the time of the purchase, the agent re- membered the fact that he had received such notice.* Therefore, a principal is only chargeable with notice com- municated to or knowledge acquired by his agent in another transaction at another time, and when he was acting for another principal, when clear proof is made that the knowledge or notice was present in the mind of the agent at the time of the transaction in question. Hence, the simple fact that an attor- ney who has taken a mortgage for his client and placed it on record, had previously taken for another client a mortgage on the premises which was not recorded do not charge the junior mortgagee with knowledge of the existence of the prior mort- gage ; in order to charge the principal, it must be made to appear clearly that the attorney at the time of the execution and delivery of the second mortgage had in mind the exist- ^The Distilled Spirits, 11 Wall. (U. S.) 356. * Caughman v. Smith, 28 S. Car. 605. ' Yerger v. Barz, 56 Iowa, 77. * Morrison v. Bausemer, 32 Gratt. (Va.) 225. 790 REGISTRATION OF THE INSTRUMENT. ence of the prior one, and not only this, but also that he knew it was still an existing and valid lien. If he did recollect that the prior mortgage was executed, but honestly believed that it was then or had been satisfied, although mistaken on that point, the second mortgagee would not be charged with notice of its existence.^ The knowledge of an agent can be charged to the principal only when clear proof is made that the knowledge was present in the agent's mind at the time of the transaction which is the subject of consideration.^ A purchaser knowing that the recorder has made a mistake in the description of land in recording the mortgage is charged with notice, and takes the land subject to the mortgage.^ Knowledge communicated to a purchaser by his attorney, that there is an unrecorded mortgage on the propert}'^, is a suf- ficient notice to the principal.* But a mere rumor that the owner is negotiating a loan is not a sufficient notice to charge a trustee and cestui que trust with notice.^ § 764. The Knowledge of the Agent Must be Pertinent AND Material to the Transaction. — The notice of the agent must be of that kind which is pertinent to the transaction, and of some thing which the agent is in duty bound to communi- cate to his principal.® However, if the agent acts in a minis- terial capacity, the principal is not afiected with the notice of the agent. So a mortgagor to whom a mortgage is intrusted for record is not the agent of the mortgagee, so as to affect the latter with notice of the former's knowledge of an incumbrance.^ 1 Constant v. University, 111 N. Y. 604, opinion by Peckham, J. ; 31 N. E. Rep. 26. "^ Slattery v. Schwannecke, 118 N. Y. 543. ^ Shoemake v. Smith, 80 Iowa, 655. See, also, Jones v. Bamford, 21 Iowa, 219 ; Sowler v. Day, 58 Iowa, 252. * Bunker v. Gordon, 81 Me. 66. ^Connell v. Connell, 32 AV. Va. 319. « Wyllie V. Pollen, 32 L. J. (N. S.) Ch. 782. ' Anketel v. Converse, 17 Ohio St. 11 ; Hoppock v. Johnson, 14 Wis. 303. CONSTRUCTION OF REGISTRATION LAWS. 791 The knowledge on the part of an attorney who makes out a writ of attachment does not affect his jjrincipal. But notice to the officer of the existence of an unrecorded mortgage upon the property, who levies an attachment is notice to the creditor who has the writ issued and the levy made/ § 765. Agent of Two Different Principals in Two Separate Transactions. — When an agent of two different principals, in two separate transactions, acts for both of them_, his duties are conflicting, and the question arises, can such a position bind either principal? It has been stated that in such a case where an agent owes conflicting duties, the security which is taken or the act which is performed by the agent may be repudiated by his principal when he becomes aware of the position occupied by such agent.^ But when both parties to a transaction have employed the same agent, the knowledge of the agent is to be imj)uted to both of his principals. If, with a full knowledge of the facts that his own agent is the agent of the other, each principal re- tains him in his employment, and his notice is the notice of both of his principals ; for each then notes the position which the agent has with regard to the other, and each takes the risk of having imputed to him whatever knowledge the agent may have on the subject.^ § 766. The Agent Being the Mortgagor. — Whenever the agent is '' the contriver, the actor, and the gainer of the trans- action," his principal is not charged with notice.* So, when an agent or attorney of two principals executed a mortgage to one of them which was not recorded, and then executes a mortgage to the other which was recorded, the latter 1 Tucker v. Tilton, 55 N. H. 223. * Storey's Agency, sect. 210. ^ Le Neve v. Le isTeve, 1 Amb. 436 ; Toulmin v. Steere, 3 Meriv. 210 ; Con- stant V. University, 111 N. Y. 604, 615. See, also, Nixon v. Hamilton, 2 Drury & Walsh, 364; Losey v. Simpson, 3 Stockt. (N. J. Eq.) 246; Astor r. Wells, 4 Wheat. (U. S.) 466 ; Fuller v. Benett, 2 Hare, 403 ; Hargreaves v. Roth well, 1 Keen, 154; Jamison v. Gjemenson, 10 Wis. 411. * Kennedy v. Green, 3 Myl. & K. 699. 792 REGISTRATION OF THE INSTRUMENT. mortgage took priority, because the last principal was not charged with notice/ Tlie act of the agent in order to impute notice must be in the scope of his business in order to impute notice. So, when an agent is guilty of fraud, and the fraud is concealed in order to carry out the unlawful transaction, the principal is not chargeable with notice.^ If the agent acts as a party to an independent fraud on his principal, it is not chargeable to his principal as an act done by his agent.^ § 767. Agents of Corporations. — The principal is deemed to have notice of whatever is communicated to his agent while acting as such in a transaction to which the communication relates. Notice to a bank director or knowledge obtained by him while not engaged officially in the business of the bank is inoperative as notice to the bank.^ So when a director makes a mortgage to his company as a third person, on his own behalf, acting for himself, the corpora- tion is not chargeable with constructive notice of a prior con- veyance of it by the mortgagor.^ Where an agency is in its nature continuous and made up of a long series of transactions of the same general character, the knowledge acquired by the agent in one or more of the trans- actions is to be charged as the knowledge of the principal, and will affect him in other transactions in which the agent as such ^Hope Fire Ins. Co. v. Cambrelling, 1 Hun (N. Y.), 493. See, also, Anketel v. Converse, 17 Ohio St. 11 ; Hoppock v. Johnson, 14 Wis. 303 ; McCormick v. Wheeler, 36 Til. 114 ; Eolland v. Hart, L. R. 6 Ch. App. 678, 683 ; Winchester v. Railroad Co., 4 Md. 231 ; Kennedy v. Green, 3 Myl. & K. 699. 2 Cave V. Cave, L. R. 15 Ch. D. 639 ; Kennedy v. Green, 3 Myl. & K. 699; Fulton Bank v. Canal Co., 4 Paige (N. Y.), 127 ; In re European Bank, L. R. 5 Ch. App. 358 ; Rolland v. Hart, L. R. 6 Ch. App. 678, 682 ; Atterbury v. Walhs, 8 De G., M. & G. 454, 466. 3 Cave V. Cave, L. R. 15 Ch. D. 639 ; Espin v. Pemberton, 3 De G. & J. 547 ; Thompson v. Cartwright, 33 Beav. 178; Hewett t-. Loosemore, 9 Hare, 449, 455 ; Sharpe v. Foy, L. R. 4 Ch. App. 35. * Bank v. Davis, 2 Hill (N. Y.), 451. 5 La Farge Fire Ins. Co. v. Bell, 22 Barb. (N. Y.) 54, 61. CONSTRUCTION OP REGISTRATION LAWS. 793 is engaged and in which the knowledge is material.^ And it is not necessary in all cases that the notice shall be given to the principal in the identical transaction ; so notice to an agent of a bank interested in the management of its business is notice to the corporation in transactions conducted by such agent, acting for the corporation in the scope of his authority, whether the knowledge of the agent was acquired in the course of a particular dealing or on some prior occasion.^ § 768. Officers Selling Incumbered Land to Their Cor- poration. — When the officers of a corporation are acting for themselves, and not for the corporation, and their interest is adverse to that of the corporation, the knowledge of the officers of an unrecorded mortgage on property taken by the corpora- tion from the officers is not chargeable to the corporation.^ Chief Justice Norton says that the knowledge of officers of a corporation of a prior unrecorded deed of trust, acquired while acting for themselves, in making a conveyance of the land from themselves to the corporation, will not be regarded as the knowledge of the latter.* It was decided in this case that, though the officers were the president and the secretary of the company who made the conveyance to the company, yet their knowledge of an unrecorded deed could not be chargeable to the corporation. 1 Holden v. Bank, 72 N. Y. 286. See, also, Brotherton v. Hatt, 2 Vern. 574 ; Hargreaves v. Rothwell, 1 Keen, 154 ; Winter v. Anson, 1 Sim. St. 434. 2 Cragie v. Hadley, 99 N. Y. 131. See, also, Welsh v. Bank, 73 N. Y. 424 ; Atlantic State Bank v. Savery, 82 N. Y. 291. ^Innerarity v. Bank, 139 Mass. 332; 52 Am. Rep. 710; Fairfield Savings Bank v. Chase, 72 Me. 226 ; 39 Am. Rep. 319 ; Wickersham v. Chicago Zinc Co., 18 Kan. 481 ; 26 Am. Rep. 784 ; Savings Association v. Printing Co., 25 Mo. App. 643. See, also, Drand v. Roher Manf. Co., 9 Mo. App. 249 ; Cor- net V. Bartelsmann, 61 Mo. 118 ; Vest v. Mitchie, 31 Gratt. (Va.) 149 ; 31 Am. Rep. 722. * Johnston v. Shortridge, 93 Mo. 227. PART IV. CONTKACTS m YIOLATIOK OF LAW. CHAPTER XIX. usurious mortgages. Article 1. Nature and Effect. § 769. Usury. g 775. Premiums and Exchange. § 770. Statutory Provisions. § 776. Taxes and Expenses. §771. Intent is Essential to Constitute §777. Commission and Discount. Usury. § 778. Attorney's Fees. § 772. Renewal of a Mortgage Tainted § 779. Void Agreements. with Usury. § 780. Sale of Security. § 773. Securities Having an Indepen- § 781. Absolute Sale with Agreement dent Existence. to Repurchase. § 774. Building and Loan Associations — Mortgages not Usurious. § 769. Usury. — The laws controlling the taking of illegal interest are not as stringent as formerly. At one time, in some of the States, it was a misdemeanor to take usury. Idaho, North Dakota, South Dakota, New Mexico, and Texas still have such laws ; but the other States and Territories have abolished such a law as to the misdemeanor feature, if they ever had one ; New York repealed the misdemeanor provision in the statute in 1886.^ In the early ages even interest was not allowed for the use of money.^ § 770. Statutory Provisions. — The statutory provisions as to the law of usury are frequently changed and modified. 1 Laws of 1886, ch. 593. * Bouvier's Law Diet., tit. " Usury." 794 USURIOUS MORTGAGES. 795 Some States have no usury laws, and there is no uniformity in the laws of the other States in this regard. In order that the following statements of the law of usury and the application of the same may be readily understood, it has been deemed neces- sary to give a brief synopsis of the law of the various statutes. The following States and Territories have no usury laws : California, Colorado, Connecticut, Maine, Massachusetts, Mon- tana, Nevada, Rhode Island,^ Washington, Wyoming, Arizona Territory, and Utah Territory. In the following States, there is a forfeiture of the usury above the statutory rate : Georgia,^ Indiana, Kansas, Kentucky, Maryland, Ohio, Penn- sylvania, Tennessee,^ Vermont, and West Virginia. In the following States and Territories usury forfeits all interest : Alabama, Florida, Illinois, Louisiana, Michigan, Mississippi, Missouri,* Nebraska, New Jersey, North Dakota, South Caro- lina, Virginia, Wisconsin,^ District of Columbia, and Okla- homa Territory. In the following States, all usurious contracts are void : Arkansas, Delaware, Indian Territory, Minnesota, New York, Oregon,^ and Alaska Territory. In Idaho the penalty for taking usury is three times the ' In Rhode Island there is no law as to usury, but the rate stipulated for may be so unconscionable that a court of equity might avoid the agreement. Thus, five per cent, a month, payable monthly in advance, each instalhnent to bear interest at the same rate, is unconscionable and void : Brown v. Hall, 14 R. I. 249. * In Georgia, a waiver of usury by one executing a mortgage, of the right of homestead and exemption laws, becomes of no eflfect, if usury enters into the transaction : Small v. Hicks, 81 Ga. 691. See, also, Martin v. John- son, 84 Ga. 481 ; Lewis v. Brown, 14 S. E. Rep. 881 ; Dotterer v. Freeman, 88 Ga. 479. ' A stipulation for usury does not forfeit the actual debt, but no paper showing a contract for usury upon its face, can be sued on, but the action must be brought as if no such paper was in existence. * Penalty for usury is the forfe iture of all interest to the common school fond. * If the usurious interest is paid, the person taking it is liable to an action for treble the amount of the unlawful interest or excess, if action is brought within one year. ®The entire debt is forfeited to the school fund. 796 CONTRACTS IN VIOLATION OF LAW. amount so paid, and a fine of three hundred dollars or six months' imprisonment, or both. In Iowa the payee shall receive only the principal, without interest and without costs, and a judgment rendered against the maker of the contract for ten per cent, of the debt, which shall be forfeited to the school fund. The New Hampshire laws provide that the receiver of usury shall forfeit three times the sum so received in excess of the legal rate to the person aggrieved, who shall sue therefor. In New Mexico usury is a misdemeanor punishable by a fine of not less than twenty-five dollars nor more than one hundred dollars, with a forfeiture of double the amount of illegal inter- est collected. The North Carolina statute provides for the forfeiture of the entire interest, and the one paying the usury may recover double the amount of interest paid. In Texas the party taking usurious interest is subject to a fine of not less than one-third, nor more than the whole amount, of the money loaned. In South Dakota the whole interest is forfeited, and the party receiving usury is guilty of a misdemeanor ; and a similar law is in force in North Dakota. § 771. Intent is Essential to Constitute Usury. — ^While intent is essential to constitute usury, yet the intent must be deduced from, and determined by, the fact. The voluntary taking or reserving a greater interest or compensation for a loan than that allowed by law is per se usurious. So the offense is not ordered dismissed by a want of intent to violate the statute or by giving the transaction another name than of a loan.^ Because interest has been calculated and included in the mortgage debt in excess of the strict legal right, does not make a usurious contract ; ^ and an agreement for the highest rate of 1 Kelley v. Lewis, 4 W. Va. 456; Culver v. Pullman, 59 Hun (N. Y.),615; Cooper V. Nock, 27 III. 301 ; Fiedler v. Darrin, 50 N. Y. 437 ; Duvall v. Bank, 7 Gill & Johns. (Md.) 44 ; Scruggs v. Scottish Mort. Co., 54 Ark. 566 ; Childers v. Deane, 4 Rand. (Va.) 406 ; Stelle v. Andrews, 19 N. J. Eq. 409 ; Bardwell v. Howe, Clarke (N. Y.), 281. 2 Spencer v. Ayrault, 10 N. Y. 202. USURIOUS MORTGAGES. 797 interest, payable semi-annually or quarterly, is not usurious,^ nor is taking tlie highest rate in advance for a whole year.^ An agreement by a borrower upon mortgage to allow the lender to retain part of the land mortgaged after being repaid principal and interest of the loan, if it is jjart of the mortgage transaction, is usurious, and will not be enforced.^ But the mortgagor may agree to pay the taxes, which may be included with the interest, and the agreement will not be usurious/ § 772. Renewal of a Mortgage Tainted with Usury. — A mortgage free from usury in its inception is not affected by a subsequent agreement to forbear suit in consideration of the payment of illegal interest. When such interest is paid it will be credited on the amount due on the mortgage.^ But a mort- gage given to secure a pre-existing debt, which is tainted with usury, will be vitiated by the original indebtedness.^ So a renewal mortgage is vitiated by the taint of usury in the original.^ This rule is otherwise if an innocent third person receives the renewal mortgage from the mortgagor.^ A mortgage is vitiated by usury when a former usurious mortgage constitutes the greater part of the consideration of it.' 1 Goodrich v. Reynolds, 31 111. 490, 498 ; Meyer v. Muscatine, 1 Wall. (U. S.) 384 ; Mowry v. Bishop, 5 Paige (N. Y.), 98. ^ Tholen v. Duffy, 7 Kan. 405 ; Fowler v. Trust Co., 141 U. S. 384, 408, 411 ; Mitchell V. Lyman, 77 111. 525 ; Goodrich v. Reynolds, 31 111. 490 ; McGill v. Ware, 4 Scam. (111.) 21 ; Telford v. Gan-els, 132 111. 550, 554 ; Brown v. Mort- gage Co., 110 111. 235, 239; Hoyt v. Pawtucket Inst., 110 111. 390, 394. ^Gleason v. Burke, 20 N. J. Eq. 300. See, also, Terwilliger r. Beecher, 58 Hun (N. Y.), 605 ; Lombard v. Gregory, 81 Iowa, 569 ; Telford v. Garrels, 132 111. 550 ; Succession of Latchford, 42 La. Ann. 529 ; Southall v. Parish, 85 Va. 403 ; Keagy v. Trout, 85 Va. 390. *Dutton V. Aurora, 114 111. 138. See Hodgdon v. Davis, 6 Dak. 21. ^Terhune v. Taylor, 27 N. J. Eq. 80 ; Abrahams v. Claussen, 52 How. Pr. (N Y.) 241. «Bell V. Lent, 24 Wend. (N. Y.) 230 ; Berry v. Thompson, 17 Johns. (X. Y.) 436 ; Vickery v. Dickson, 35 Barb. (N. Y.) 96. ^ McCraney v. Alden, 46 Barb. (N. Y.) 272 ; Cope v. AVheeler, 41 N. Y. 303 ; Exley V. Berryhill, 37 Minn. 182. «Kilner v. O'Brien, 14 Hun (N. Y.), 414 ; Shemood v. Archer, 10 Hun (N. Y.), 73 ; Jenkins v. Levis, 25 Kan. 479. 9 McCraney v. Alden, 46 Barb. (N. Y.) 272. 798 CONTRACTS IN VIOLATION OF LAW. But a mortgage given to secure the payment of a note tainted with usury is valid, as between the maker of the note and one who purchased it for value, and without notice that the consider- ation was usurious.^ It is not unlawful or usurious for a party to loan money to one who uses it in paying a usurious debt.^ § 773. Securities Having an Independent Existence, — Obligations and securities having an independent existence, and free from usury, are not affected by the statute, although the subject of a contract tainted with usury. A valid and sub- sisting debt is not destroyed because included in a security or made the subject of a prohibited contract. Although formally satisfied and discharged, and the security surrendered, it may be revived and enforced in case the new security is avoided.* A valid mortgage is not affected by a subsequent usurious agreement.* If a usurious agreement is independent of the loan and mortgage, and not a condition of the loan, and capable of being sustained without reference to them, either as a sale on consideration or as a gift, it may be enforced.* A usurious mortgage may, by the acts of the parties to it, be so purged of the illegal taint that it will stand as a legal se- curity against the mortgagor and all persons claiming through him." However, an agreement between the holder of the mortgage and the mortgagor for a consideration of a reduction allowed in the settlement of certain debts due him from the mortgagor, that the mortgage should be regarded as purged of usury, will not remove the taint so long as the mortgage re- mains in the same hands.^ 1 Coor V. Spicer, 65 N. Car. 401. ''Wilson V. Harvey, 4 Lans. (N. Y.) 507. See, also, Hann v. Dekater (N. J.), 20 At. Rep. 657 ; Hendrickson v. Godsey, 54 Ark. 155 ; Trible v. Nichols, 53 Ark. 271. » Patterson r. Birdsall, 64 N. Y. 294 ; 21 Am. Rep. 609; Smith v. HoUiflter, 14 N. J. Eq. 153. * Allison V. Schmitz, 31 Hun (N. Y.), 106. ^Gleason v. Burke, 20 N. J. Eq. 300. 6 Warwick v. Dawes, 26 N. J. Eq. 548. T Warwick v. Marlatt, 25 N.J. Eq. 188. USURIOUS MORTGAGES. 799 Where one of the two separate and independent loans is usurious, the taint does not adhere to tlie other, though both were between the same parties, closed at the same time, and secured by the same mortgage/ § 774. Building axd Loan Associations — Mortgages Not Usurious. — A mortgage given to a building and loan associa- tion by a holder of its stock is not usurious because it requires monthly payments of interest, besides fines and impositions, in accordance with provisions of the constitution of the asso- ciation.^ In Pennsylvania a building association can recover on its mortgage only the money actually advanced to its stockholder, with legal interest.^ • All loans must conform strictly with the terms of the statute.* But if a party is not a member, or claims he is not, he is not estopped to deny such membership, and such ques- tion must be determined by a jury as any other question of fact.' The installments which a mortgagor has contracted to pay cease at the dissolution of the association, or at the time of appointment of a receiver.® When there is actual usury in the transaction between a ^ Jackson v. May, 28 111. App. 305 ; Crippen v. Heermance, 9 Paige (N. Y.), 211. 2 Red Bank Mut. Build. & Loan Asso. v. Patterson, 27 N. J. Eq. 223. See, also, City Build. & Loan Co. v. Fatty, 1 Abb. App. Dec. (N. Y.) 347 ; Silver v. Barnes, 6 Bing. (N. C.) 180 ; McComb v. Apartment Asso. (N. Y.) 31 N. E. Rep. 719 ; Building, Loan & Sav. Asso. v. Vandevere, 3 Stockt. (N. J. Eq.) 382 ; Hekelnkgemper v. German Build. Asso., 22 Kan. 549 ; Citizens' Mut. Loan Asso. v. Webster, 25 Barb. (N. Y.) 263 ; Shannon v. Dunn, 43 N. H. 194, Compare Citizens' Security & Land Co. v. Uhler, 48 Md. 455. ^ Link V. Grermantown Build. Asso., 89 Pa. St. 15. * Birmingham v. Association, 45 Md. 541 ; Williar v. Association, 45 Md. 546, See, also, Peter's Build. Asso. v. Jaecksch, 51 Md. 198 ; McCahan v. Co- lumbian Build. Asso., 40 Md. 226 ; Johnston v. Association, 104 Pa. St. .394. ^Building Asso. I'. Thompson, 19 Kan. 321. See, also, Juniata Build. & Loan Asso. v. ^lixell, 84 Pa. St. 313 ; Lincoln Build. & Sav. Asso. v. Graham, 7 Nebr. 173 ; Wolbach v. Build. Asso., 84 Pa. St. 211. * Peter's Building Asso. v. Jaecksch, 51 Md. 198 ; Low Street Build. Asso. v. Zucker, 48 Md. 449. 800 CONTRACTS IN VIOLATION OF LAW. building association and a subscriber, the association cannot protect itself by a provision in its charter that " no dues, pre- miums, interest, or fines that may accrue to the association in accordance with its charter shall be deemed usurious." ^ § 775. Premiums and Exchange. — The sale of mortgage securities at a premium cannot subject the party to an action to recover back the premium on the ground of usury ; whether the premium was computed in the contract of sale at a certain percentage in excess of the legal rate for the time past, or stated at a gross sum, or as compound interest, is immaterial.^ The payment of exchange is not usury, unless it appears that this allowance was a mere device on the part of the mort- gagee to evade the usury laws.^ And paying a premium on gold in buying an exchange to pay a mortgage held in a foreign country^ where gold is the basis of currency, is not usurious.* The premium paid upon three distinct loans will not render wholly ursurious a mortgage given to secure such loans. Only the excess of the interest thereto must be deducted, in New Jersey.^ And where distinct the forfeiture will be confined to the one which is usurious." § 776. Taxes and Expenses. — An agreement to pay the insurance premiums on the mortgaged property in addition to the highest legal interest is not usurious ; ^ or to pay taxes on the mortgaged debt.^ So the payment by the borrower, in addition to full legal ^ Henderson Build & Loan Asso. v. Johnson, 88 Ky. 191 ; Burlington Mut. L. Asso. V. Holder, 55 Iowa, 424 ; Association v. Wilcox, 24 Conn. 147 ; Forest City Loan Asso. v. Gallagher, 25 Ohio St. 208 ; Gordon v. Association, 12 Bush (Ky.), 110. 2 Culver V. Bigelow, 43 Vt. 249. MVilliams v. Hance, 7 Paige (N. Y.), 581. * Oliver v. Shoemaker, 35 Mich. 464. ^Mahn v. Hussey, 28 N. J. Eq. 546. « Crippen v. Heermance, 9 Paige (N. Y.), 211 ; Jackson v. May, 28 111. App. 305. ■'New England Mort. Sec. Co. v. Gay, 33 Fed. Rep. 636. 8 Banks v. McClellan, 24 Md. 62 ; Kidder v. Vandersloot, 114 111. 133. USURIOUS MORTGAGES. 801 interest, of the costs of drawing the mortgage and examining the title to the security does not constitute usury/ Because the note and mortgage are made out and the note draws inter- est several days before the transaction is completed does not constitute usury.^ But if the money had been withheld on purpose to evade the usury law, it would have been usury .^ § 777. Commission and Discount. — An agent for loaning money may take a reasonable commission from the borrower, even with the knowledge of the lender, and such transaction will not be usurious, though the amount of interest reserved to the lender be full lawful interest. But an executor cannot be such an agent.* Where an agent sells a note and mortgage of his principal for a greater rate of discount than allowed by law, and the vendee takes in good faith, the transaction is not usurious.^ An agent can take a commission for securing the loan, but it must be on his own account, and not connected with the principal. It is not usurious when the principal derives no benefit from the commission.*^ When, however, the agent has the general oversight of his principal's money, and loans it without any special authority, and in such sums and at such times as he pleases, and is only restricted as to the least amount of interest to be taken, if the agent exacts usury upon his loans, the principal is affected and the transaction is usurious.^ ^Ammondson v. Ryan, 111 111. 506; Ellenbogen v. Griflfey, 55 Ark. 268; Daley v. Association, 43 Minn. 517 ; Dayton v. Moore, 30 N. J. Eq. 543. ^ Daley v. Association, 43 Minn. 517. 5 Barr v. Church (N. J.), 10 At. Rep. 287. * Landis v. Saxton, 89 Mo. 375. ^Jackson v. Travis, 42 Minn. 438. 8 Gray v. Van Blarcom, 29 N. J. Eq. 454 ; Spring v. Reed, 28 N. J. Eq. 345 ; Van AVyck v. Watters, 81 N. Y. 352 ; Guggenheimer v. Griszler, 81 N. Y. 293 • Rogers v. Buckingham, 33 Conn. 81 ; Eslava v. Crampton, 61 Ala. 507 ; Jennings V. Hunt, 6 111. App. 523; Phillips r. Roberts, 90 111. 952; New England Mort. Security Co. v. Gay, 33 Fed. Rep. 636 ; Estevez v. Purdy, 66 N. Y. 446 ; Jordan V. Humphrey, 31 Minn. 495. 'Payne v. Newcomb, 100 HI. 611 ; Stevens r. Mcers. 11 111. App. 138; Fow- ler V. Trust Co., 141 U. S. 384, 408, 411 ; Banks v. Flint, 54 Ark. 40. 61 802 CONTRACTS IN VIOLATION OF LAW. But an agent of an insurance company to procure insur- ance does not become the general agent of the company by sending to it for loans of money, so as to render the insurance company liable for usury by reason of commissions taken by such agent from the borrower. He is not the general loan agent of the company, and, his exaction of usury by taking commissions, does not affect the company.^ An agent generally may loan money and take commission where there is no arrangement to this effect between the agent and the lender.^ But when the principal ratifies the agent's usurious contract, then the principal becomes affected with the usury and must abide the consequences.^ Because the accept- ance of the mortgage with the knowledge of such unlawful origin, or with such notice as would cause a prudent person to make inquiry, is a ratification of the usurious contract, and equivalent to prior authority to make it.* But when the principal accepts an absolute deed as security for the amount of his money actually loaned by his agent, with legal interest, he does not thereby ratify the act of the agent in exacting usury, without the knowledge or authority of his principal.* A loan of money at legal interest, secured by note and mort- gage, is not rendered usurious because a commission was paid to the agent negotiating the loan, where it is not shown that the lender had knowledge of the fact, or participated in the commission paid ; ^ nor would it be usurious even if the agent acted for the lender, and deducted his commissions from the amount lent, unless this was done with the knowledge or 1 Cox V. Ins. Co., 11.3 111. 382 ; Masgachusetts Mut. L. Ins. Co. v. Boggs, 121 111. 119. 2 Callender v. Roberts, 17 111. App. 539 ; Hoyt v. Pawtucket Inst., 110 111. 390, 394 ; Telford v. Garrels, 132 111. 550, 554 ; Sanford v. Kane, 133 111. 199, 205 ; Ginn v. New England Sec. Co., 92 Ala. 135 ; May v. Flint, 54 Ark. 573 ; Weems v. American Mort. Co., 86 Ga. 760. See, also, Bliven v. Ly- decker, 130 N. Y. 102. 3 Bliven v. Lydecker, 130 N. Y. 102. * Hyatt V. Clark, 118 N. Y. 563 ; Uoytv. Thompson, 19 N. Y. 207. 5 Nye V. Swan (Minn.), 52 N. W. Rep. 39. «Am. Freehold L. Mort. Co. v. Sewell, 92 Ala. 163; Call v. Palmer, 116 IT. S. 98. USURIOUS MORTGAGES. 803 consent of the lender, or he derived some benefit from it in addition to legal interest ; nor is it usurious because separate notes are taken for the accruing interest, each bearing interest from maturity ; nor because the mortgage contained a stipula- tion for the payment of an attorney's fee on foreclosure/ § 778. Attorney's Fees. — Generally a stipulation in a mortgage for the payment of attorney's fees in addition to legal interest, in case the holder is compelled to sue, does not render the mortgage usurious,^ provided the fee is reasonable.^ But a provision in a mortgage for the " expenses of the sale " does not include attorney's fees.* But attorney's fees are not allowed in all the States. Kentucky, Ohio, and Michigan hold that the stipulation in a mortgage for attorney's fees is void as against public policy.^ It is generally held reasonable attorney's fees may be provided for in case the mortgagee has to foreclose the mortgage. Such a contract of itself does not make the contract usurious.^ But the statute cannot be avoided by any shift or device which may be resorted to by the parties.'' § 779. Void Agreements. — Where a claim to subrogation grows out of an agreement which is void by reason of usury, it furnishes no basis for the equitable doctrine of subrogation.* So in Arkansas where to secure a loan a party conveys land iGinn v. New Eng. Mortg. Sec. Co., 92 Ak. 135. ^Matzenbaugh v. Troup, 36 111. App. 261; Williams v. Flowers, 90 Ala. 136; Fowler v. Trust Co., 141 U. S. 384, 408, 411 ; Siegel v. Drumm, 21 La. Ann. 8 ; Weatherby v. Smith, 30 Iowa, 131 ; 6 Am. Rep. 663 ; Gambril v. Doe, 8 Blackf. (Ind.) 140 ; Hunter v. Linn, 61 Ala. 492 ; Billingsley v. Dean, 11 Ind. 331 ; Huling v. Drexell, 7 Watts (Pa.); 126. =* Hunter v. Linn, 61 Ala. 492 ; Clawson v. Munson, 55 111. 394. * Thomas v. Jones, 84 Ala. 302. ^Thomasson v. Townsend, 10 Bush (Ky.), 114; Rilling v. Thompson, 12 Bush (Ky.), 310; State v. Taylor, 10 Ohio, 378; Van Marter v. McMillan, 39 Mich. .305. But in Michigan a statute makes provision for paying the attor- ney in case of foreclosure : Session Laws, 1885, art. 133. « Barton v. Nat. Bank, 122 111. 352, 355 ; Clawson v. Munson, 55 111. 394, 397; Haldeman v. Mut. Life Ins. Co., 120 111. 390, 393 ; Telford v. Garrels, 132 111. 550, 555 ; Mclntyre v. Yates, 104 111. 491, 503. ' Leonard v. Patton, 106 111. 99, 104. » Perkins v. Hall, 105 N. Y. 539. 804 CONTRACTS IN VIOLATION OF LAW. by absolute deed, and subsequently, in order to pay the loan, borrows money from another party at a usurious rate of interest and procures the vendee to convey the land to the lender by absolute deed, the last conveyance is void and the vendee will not be subrogated to the rights of the first vendee.* If a note secured be void for usury, the deed of trust is void also.^ And in Georgia a waiver by one executing a mortgage, of the right of homestead and exemptions laws, becomes of no effect if usury enters into the transaction ; ^ and so a deed of land given to secure a usurious note, being tainted by usury, is void as a conveyance.* But where land is conveyed by absolute deed intended as a mortgage, such deed will not be rendered void by usury in the last of several renewal notes, there being no usury in the loan nor in the contract between the parties to the deed itself.^ It is well settled that the parties to a usurious contract can do nothing which will have the effect to validate it, so as to deprive the debtor of his right to defend on the ground of usury, except by expunging its usurious elements.^ If the immedi- ate parties to the transaction, by mutual consent, surrender the usurious contract, and substitute a new promise to pay the sum loaned, with legal interest, this may then be enforced on the principle that the parties have purged the transaction of the usury. But as between the parties to the usurious mort- gage, or as against a subsequent holder with knowledge of the defect, the original taint attaches to all substituted obligations or securities, however remote, unless the original vice be re- moved by expunging the usurious element.^ The doctrine is well settled that the purchaser of the equity 1 Trible v. Nichols, 53 Ark. 27L ^ Central Trust Co. v. Burton, 74 Wis. 329. 3 Small V. Hicks, 81 Ga. 691. * Martin v. Johnson, 84 Ga. 481- See, also, Lewis v. Brown (Ga.), 14 S. E. Rep. 881. ^ Dotterer v. Freeman, 88 Ga. 479. ^Ti-usdell V. Dowden, 47 N. J. Eq. 396. 'Taylor v. Morris, 22 N. J. Eq. 606, 609. USURIOUS MORTGAGES. 805 of redemption in mortgaged premises, who takes title subject to such mortgage, cannot set up the defense of usury/ The reason of tliis is ably stated by A^ice-Chancellor Van Fleet, who saj^s that this doctrine does not at all rest on the theory that the taint of the conveyance has, as between the original parties, been purged from the mortgage, but the doc- trine rests on the ground that the purchaser by taking title sub- ject to the mortgage and retaining out of the price he agreed to pay sufficient money to pay the mortgage, places himself in a position where he cannot allege usury without attempting to keep back part of the money which he agreed to pay for the mortgaged lands. Having retained enough of the purchase- money to pay the mortgage, under a promise that he would apply the money to the payment of the mortgage, it is plain that if he were allowed to make the defense of usury, and should make it successfully, he would defraud both his grantor and the mortgagee. He would be permitted to speculate on a violation of law that had done him no harm, and to keep back money to which he has no right whatever, and to do so in direct violation of his promise. To prevent this, equity says that he shall not make the defense of usury, but it says so, not because the mortgage has been purged of its taint, but because he kept back enough of the purchase-money to pay the mort- gage under a promise that if the money was left in his hands he would pay the mortgage debt. " This is the foundation on which the doctrine just mentioned rests, and it has no other." ^ § 780. Sale of Security. — ^Where a trust deed gives power to sell the property for any amount that may be due on the secured note, a trustee sale is not rendered invalid by the exist- ence of usury in the loan, when the sum for which the land is sold is less than the amount due after deducting the usurious interest.^ As a general rule a mortgage once issued may be sold without affecting an innocent purchaser in any of the con- 1 Pinnell v. Boyd, 3.3 N. J. Eq. 600, 602 ; Conover v. Hobart, 24 N. J. Eq. 120, 123 ; Lee v. Stiger, 30 N. J. Eq. 610, 611. 'Trasdell v. Dowden, 47 N. J. Eq. 396. ^Ammondson v. Ryan, 111 111. 506. 806 CONTRACTS IN VIOLATION OF LAW. sequences of taking usurious interest.^ The mortgagee may sell the mortgage at a discount before taken, if it be not a plan to cover up usury .^ And a corporation may sell its bonds at a discount and not violate the law as to usury .^ A purchaser under a junior mortgage has the right to remove the lien of the prior usurious mortgage by discharging only so much of the debt secured thereby as the law recognizes as valid ; and this right is not defeated by a conveyance subse- quently made by the mortgagor to the prior mortgagee.* § 781. Absolute Sale with Agreement to Repurchase. — In Georgia,^ all titles to property made as a part of a usurious contract are void. So when a deed is infected with usury it is void as title. And if void as title, it cannot have effect as an equitable mortgage, because unless title passes an equitable mortgage is not created by the conveyance of the land." When land is sold and the transaction is apparently a con- ditional sale, it will not be sustained as such unless it clearly appears that it is not a scheme to cover usury .'^ If the mortgagee knowingly and voluntarily takes or re- serves a greater interest than is allowed by law, his securit}'' is aifected with usury.^ Neither can usury be covered up by pretended sale of land with a lease back to the vendor.® ^ Jackson v. Travis, 42 Minn. 438 ; Sickles v. Flanagan, 79 N. Y. 224 ; Smith V. Cross, 90 N. Y. 549 ; Dunham v. Cudhpp, 94 N. Y. 129 ; Mix v. IVIadison Ins. Co., 11 Ind. 117. ''Armstrong v. Freeman, 9 Nebr. 11. 3 Traders' Nat. Bank v. Woodlawn Manuf. Co., 96 N. Car. 298. *Maloney v. Eaheart, 81 Tex. 281. See, also, Hann v. Dekater (N. J.), 20 At. Rep. 657 ; Trible v. Nichols, 53 Ark. 271. 5 Code, sect. 2057 (f.) « McLaren v. Clark, 80 Ga. 423 ; Broach v. Smith, 75 Ga. 159; Morrison v. Markham, 78 Ga. 161 ; Baggett v. Trulock, 77 Ga. 369; Pope v. Marshall, 78 Ga. 635. ■' Gleason v. Burke, 20 N. J. Eq. 300. 8 Fiedler v. Darrin, 50 N. Y. 437 ; Fitzsimmons v. Baum, 44 Pa. St. 32 ; An- drews V. Poe, 30 Md. 486 ; Birdsall v. Patterson, 51 N. Y. 43. 9 Gaither v. Clark, 67 Md. 18 ; Grand United Order v. Merklin, 65 Md. 579 ; Morrison v. Markham, 78 Gra. 161. usurious mortgages. 807 Article 2. Defense. I 782. Parties that Can Set Up the De- § 785. Seeking Rehef in Equity. fense of Usury. g 786. After Judgment, g 783. "Waiver of Usury by Mortgagor. I 787. Bonus for Extension of Time \ 784. Burden of Proof. After Maturity. § 782. Parties that Can Set Up the Defense of Usury. — One class of decisions holds that the plea of usury as a defense is personal to the mortgagor, his privies in blood, estate, or contract,^ and that a subsequent purchaser cannot set it up.^ Another line of decisions holds that not only the mortgagor, but any person who is seized of his estate and vested with his rights, where he has not assumed the payment of the mortgage, may interpose this defense, although a mere stranger cannot.^ But a purchaser at a sale by an assignee in bankruptcy cannot set up usury in the mortgage.* Under this class of cases a judg- ment creditor of the mortgagor may plead usury .^ So any one in legal privity under this doctrine, with the mortgagor, may set up this defense.^ The defense of usury in the notes secured by a trust deed may be interposed in an action by the trustee to foreclose the trust deed, although the holders of the notes are not parties,^ under the Wisconsin statute.^ 'Holladay v. Holladay, 13 Oreg. 523. "^ Ready v. Huebner, 46 Wis. 692 ; Darst v. Bates, 95 111. 493 ; Sellers v. Bots- ford, 11 Mich. 59 ; Butts v. Broughton, 72 Ala. 294 ; Mason v. Pierce (111.), 31 N. E. Rep. 503 ; Union Nat. Bank v. Bank, 123 111. 510 ; Lamoille County Nat. Bank v. Bingham, 50 Vt. 105 ; Cheney v. Dunlap, 27 Nebr. 401. » Westerfield v. Bried, 26 N. J. Eq. 357 ; Mason v. Lord, 40 N. Y. 476 ; Pear- sail V. Kingsland, 3 Edw. (N. Y.) 195. * Nance v. Gregory, 6 Lea (Tenn.), 343. ^Steinr. Swensen, 44 Minn. 218; Carow v. Kelly, 59 Barb. (N. Y.)239; Thompson v. Van Vechten, 27 N. Y. 568 ; Gunnison v. Gregg, 20 N. H. 100; Spengler v. Snapp, 5 Leigh (Va.), 478 ; Chaffe v. Wilson, 59 Miss. 42 ; Greene V. Tyler, 39 Pa. St. 361. Compare Powell v. Hunt, 11 Iowa, 430; Gaither v. Clarke, 67 Md. 18. « Shufelt V. Shufelt, 9 Paige (N. Y.), 137, 145 ; Stein v. Swensen, 44 Minn. 218. 'Central Trust Co. r. Burton, 74 Wis. 329. 8Rev. Stat., sect. 2607. 808 CONTRACTS IN VIOLATION OF LAW. In Illinois it is well settled that one who has voluntarily- paid usurious interest cannot recover it back in an action at law.' But this rule does not apply where the transaction has been settled, and the lender sues to recover a balance due on the principal sum. In such case the borrower, being sued, may have all payments made by him on account of interest applied in diminution of such part of the principal as remains unpaid.^ A purchaser of the equity of redemption who takes a usurious mortgage cannot defend on account of usury, when he keeps back enough of the purchase price of the mortgage to pay the mortgage ; for such a defense would be an attempt to defraud the grantor and the mortgagee.^ An answer setting up the defense of usury is not sufficient if it merely alleges that the bond sued on " was given in pay- ment of usurious interest by a contract for the payment of the same," but should state the particular facts of the alleged agreement, so that the court may see whether it was in viola- tion of the statute.^ The mere presence of the mortgagor when the mortgage was assigned, without informing the assignee of the usurious transaction on which the debt is based, does not estop him from setting up the usury against the assignee when it is not shown that the mortgagor was informed of the character of the transaction, and where it does not appear that the assignee relied exclusively on the mortgagee's assurance as to the val- idity and sufficiency of the mortgage.^ Where a usurious note, secured by a mortgage, is, at the re- quest of the principal, paid by the surety by giving of his own 1 Riddle v. Rosenfield, 103 111. fiOO, 603; Hadden v. Innes, 24 111. 381, 384; Town V. Wood, 37 111. 512, 516 ; Carter v. Moses, 39 111. 539, 542 ; Tompkins v. Hill, 28 111. 519. 2 Harris v. Bressler, 119 111. 467, 472 ; Payne v. Newcomb, 100 111. 611, 623 ; Hamill v. Mason, 51 111. 489; Hefner v. Vandolah, 62 111. 483, 486; Saylor i-. Daniels, 37 111. 331. 3 Trusdell v. Dowden, 47 N. J. Eq. 396. * Anglo- Am. Land, Mortg. & Agency Co. v. Brohman (Nebr.), 50 N. W. Rep. 271. 6 Morris v. Alston, 92 Ala. 502. USURIOUS MORTGAGES. 809 note which he afterward pays, the surety cannot, in an action to foreclose the mortgage, be made responsible by junior mortgagees for the amount of the usury.^ The law in force at the time of bringing the suit will con- tinue in force as to the relief afforded by it.^ A statement in a second mortgage that the mortgaged prem- ises were, when it was given, subject to a prior mortgage, will not prevent the second mortgagee, in a suit founded on the first, from showing either that the first is usurious or has been paid.^ One who voluntarily pays unlawful interest upon a usurious contract cannot recover it back by suit.* It is no reason for enjoining a sale under a deed of trust that the notes secured reserve usurious interest or include it except in those States where usury renders the contract void. Where usury does not invalidate the mortgage, a sale under the power will not be enjoined by reason of it unless the debtor brings into court the principal and the legal interest due.^ § 783. Waiver of Usury by Mortgagor. — A mortgagor may waive usury, and then those in privity with him cannot avail themselves of this defense. Thus, when he sells the land subject to the mortgage, the purchaser cannot set up usury in the mortgage note as a defense.^ Judge Robinson says that, where one purchases property subject to an incumbrance which was usurious, and the nomi- nal amount of such incumbrance enters into and forms part of the price or consideration to be paid for the property, he will not be allowed to set up usury in reduction of the amount ap- pearing due on the face of the mortgage.^ 'Foard v. Grinter (Ky.), 18 S. W. Rep. 1034. 2 Edmunds v. Bruce (Va.), 14 S. E. Rep. 840. 3 Trusdell v. Dowden, 47 N. J. Eq. 396. *Kirkpatrick v. Smith, 55 Mo. 389 ; Ransom v. Hays, 39 Mo. 445. ^Tooke V. Newman, 75 111. 215; Powell v. Hopkins, 38 Md. 1; Walker v. McConkey, 38 Md. 75 ; Eslava v. Crampton, 61 Ala. 507 ; Ferguson v. Soden (Mo.), 19 8. W. Rep. 727. ^Stigerr.Bent, 111 111. 328; Log-Cabin Permanent Build. Asso. v. Gross, 71 Md. 456; Fulford v. Keerl, 71 Md.397. 'Log-Cabin Permanent Build. Asso. v. Gross, 71 Md. 456, 457. See, also, 810 CONTRACTS IN VIOLATION OF LAW. The mortgagor is estopped to set up usury when he sells his equity of redemption subject to the mortgage, which grantee assumes as part payment, and such estoppel binds grantee.' The rule is different as to the grantee when he takes, without deduction, on account of the incumbrance.^ And sureties signing with their principal a promissory note, containing a waiver of homestead and exemption, are not bound by the instrument, where this waiver on the part of the principal is void, by reason of usury in the note of which they had no notice. The secret taint in the note rendered the risk of the sureties greater than it would have been if the note had been pure.^ A mortgagor who has conveyed the mortgaged land to the mortgagee, in consideration of a release from personal liability on the mortgage debt cannot afterward attack the mortgage on the ground of usury, since the conveyance constitutes a voluntary payment of the entire debt.^ § 784. Burden of Proof. — The burden of proof that the mortgage is usurious is upon the mortgagor. He must estab- lish the fact of usury beyond a reasonable doubt by a clear preponderance of the testimony.^ In a mortgage for purchase-money, the fact that the sum secured is greater than that named in the consideration of the conveyance to the mortgagor, with interest, is no evidence of u'sury.^ A mortgagor in defending may avail himself of the defense of usury under the statute before tender of the amount legally due.'' Hough V. Horsey, 36 Md. 181, 184 ; Bridge v. Hubbard, 15 Mass. 103; Morris V. Floyd, 5 Barb. (N. Y.) 135 ; Mason v. Lord, 40 N. Y. 485 ; Hardin v. Hyde, 40 Barb. (N. Y.) 435 ; Freeman v. Auld, 44 N. Y. 51 ; Warwick v. DaAves, 26 N. J. Eq. 548 ; Barnett v. Zacharias, 24 Hun (N. Y.), 304. lEssley v. Sloan, 116 111. 391 ; 16 111. App. 63. ^ Flanders v. Doyle, 16 111. App. 508. "Lewis V. Brown (Ga.), 14 S. E. Rep. 881. * Mason v. Pierce (111.), 31 N. E. Rep. 503. 5 Hotel Co. V. Wade, 97 U. S. 13 ; Conover r. Van Mater, 18 N. J. Eq. 481 ; New England Mort. Security Co. v. Gay, 33 Fed. Rep. 636. fi Vesey v. Ockington, 16 N. H. 479. ' Clark V. Finlon, 90 111. 245 ; Tooke v. Newman, 75 111. 215. USURIOUS MORTGAGES. 811 Burden of proof is on the party alleging usury .^ § 785. Seeking Relief in Equity. — When a mortgagor seeks relief in equity, he must first do equity and must therefore pay the debt with legal interest.^ And in somfe of the States the mortgagor must tender the amount legally due in availing himself of the plea of usury .^ But where the amount really due is unknown, and offering to redeem by tendering an amount so due is impracticable, the only equitable requirement is to express a willingness to allow whatever is due.* Usury must be specially pleaded.^ The plea of usury at the common law, and the answer set- ting up that defense under the codes, must set forth the usuri- ous agreement, the names of the parties between whom it was made, the amount loaned, the amount of usury agreed to be paid, the length of time for which the loan was agreed to be made, and that agreement was in violation of the statute,^ and the facts should be shown in an answer in equity.^ An averment that the mortgagee loaned the mortgagor $2,000, and " exacted and extorted " a bond and mortgage for $2,195, cannot avail as a defense. It precludes the idea of consent, and there can be no usury without a contract.^ However, usury may be set up by allegations showing that an unlawful rate of interest was agreed upon.^ iPuterbaugh v. Farrell, 73 111. 213 ; Kihlholz v. Wolflf, 103 111. 362. ''Sanner v. Smith, 89 111. 123, 125 ; Carter v. Moses, 39 111. 539, 542 ; Hender- son V. Bellew, 45 111. 322, 324 ; Clark v. Finlon, 90 111. 245, 248 ; Tooke v. Newman, 75 111. 215, 217. 3 Carver v. Brady, 104 N. Car. 219 ; Powell v. Hopkins, 38 Md. 1 ; Walker v. Cockey, 38 Md. 75. *Gaitlierv. Clarke, 67 Md. 18. ^Paddock v. Fish, 10 Fed. Rep. 125; Kilpatrick v. Henson, 81 Ala, 464; Whatly V. Barker, 79 Ga. 790 ; Frank v. Morris, 57 111. 138 ; 11 Am. Rep. 4 ; Pilsbury v. McNally, 22 Ark. 409 ; Morford v. Davis, 28 N. Y. 481 ; Newell v. Nixon, 4 Wall. (U.S.) 572. 8 Nat. Bank v. Lewis, 10 Hun (N. Y.), 468 ; Siesel v. Harris, 48 Ga. 652. ' Crane v. Ins. Co., 27 N. J. Eq. 484 ; Stark v. Sperry, 2 Tenn. Ch. 304 ; Han- nas V. Hawk, 24 N. J. Eq. 124. nVesterfield v. Bried, 26 N. J. Eq. 357. » Kurz V. Holbrook, 13 Iowa, 562. 812 CONTRACTS IN VIOLATION OF LAW. A plea to an action of ejectment which attacks a conveyance from the defendant to the plaintiff, as being part of a usurious contract, is not an equitable, but a strictly legal defense, and, to make it available, no tender or offer to pay the debt which the conveyance was intended to secure is necessary, even though the deed may be, in equity, a mortgage/ Where a certain sum of money is due, and the creditor agrees to take a lesser sum, provided that sum is secured in a certain way and paid at a certain day, but if any of the stipu- lations of the arrangement are not performed as agreed upon, the creditor is to be entitled to recover the whole of the origi- nal debt, such refnitter to his original rights does not consti- tute a penalty, and equity will not interfere to prevent its observance.^ The equitable rule that a mortgagor seeking re- lief should pay the sum owed with legal interest does not apply.^ § 786. After Judgment. — In any litigation after judgment of foreclosure of a mortgage the mortgagor cannot plead usury in the mortgage debt, unless it is averred that the judgment was procured by accident, fraud, or mistake, or the usury appears on the face of the judgment.* After foreclosure a mortgage contract is regarded as exe- cuted, and usury cannot then be set up in defense ; ^ but if the mortgagee himself buys the property, his title may still be im- peached for usury in the mortgage.^ And the same rule applies to a purchaser with notice.^ ^ Suijart V. Mays, 5-4 Ga. 554. ^ 2 White & Tudor's Lead. Cas. in Eq., p. 2025 ; Pomeroy's Eq. Jur., sect. 438 ; Thompson v. Hudson, L. R. 4 H. L. 1 ; Coote on Mort. (4th ed.) 883 ; Powell on ISIort. {6th ed.) 900 ; Adams on Eq. (7th ed.) 109 ; Reeves v. Stipp, 91 111. 609 ; United States Mortg. Co. v. Sparry, 138 U. S. 313, 348. » Gore V. Lewis, 109 N. Car. 539. * McLaws V. Moore, 83 Ga. 177. s Cuthbert v. Haley, 8 Term R. 390 ; Jackson v. Henry, 10 Johns. (N. Y.) 196, 197 ; Tyler v. Mass. Mat. Ins. Co., 108 111. 58 ; Carter v. Moses, 39 111. 539 ; Perkins v. Conant, 29 111. 184. « Jackson v. Dominick, 14 Johns. (N. Y.) 435; Welsh v. Coley, 82 Ala. 363; McLaughlin v. Cosgrove, 99 Mass. 4. 'Bissell V. Kellogg, 65 N. Y. 432. USURIOUS MORTGAGES. 813 In New Jersey a subsequent mortgagee may set up usury under his petition for the surpKis money remaining after the satisfac- tion of the prior mortgage.^ In Minnesota only a bona fide purchaser for value without notice is protected.^ Generally where the debt is merged in a judgment or decree, the contract ceases to exist, and the rate of interest is thereafter controlled by the statute.^ The act of Arkansas,* providing that every lien created or arising by mortgage, deed of trust, or othermse " to secure the payment of a contract " for usur}^ and every conveyance made " in furtherance of any such lien," shall be void, and may be annulled at the suit of the maker of the usurious contract, does not apply to a judgment by confession in an action to foreclose a usurious mortgage.^ § 787. Bonus for Extension of Time After Maturity. — By paying a bonus for the extension of time for the payment of the debt, though usurious, does not make the original trans- action usurious. Thus, the payment of usurious interest on renewal note for the extension of time on the first notes is no defense to a foreclosure of a vendor's lien.^ Subsequently pay- ing usurious interest for an extension of time does not affect the original mortgage debt.'^ However, if the usurious contract goes back to the original contract it is affected by usury .^ Such agreement, if usurious, is affected by the usury laws.® And it is held that no one but the borrower and his represen- tatives can take advantage of the defense of usury in such 1 Plutchinson v. Abbott, 33 N. J. Eq. 379. = Jordan v. Humphrey, 31 Minn. 495; Exley v. Berryhill, 37 Minn. 182. ^Palmer r. Harris, 100 111.276, 280; Conn. Mut. L. Ins. Co. v. Cushman, 108 U. S. 51, 54 ; Mason v. Eakle, Breese (111.), 52; Tindall v. Meeker, 1 Scam. (111.) 137 ; White v. Haffaker, 27 111. 349 ; AVayman v. Cochrane, 35 HI. 152. * Act March 3, 1887. 5 Bell V. Ferjrus, 55 Ark. 536. «Woodall r. Kelly, 85 Ala. 368. ' Terhime v. Taylor, 27 N. J. Eq. 80 ; Mahoney v. :Mackubin, 54 Md. 268 ; Lindsay v. Hill, 66 Me. 212 ; Hawhe v. Snydaker, 86 111. 197. * Smith V. Hathom, 88 N. Y. 211, reversing 25 Hun, 159. 'Church V. Maloy, 70 N. Y. 63, 814 CONTRACTS IN VIOLATION OF LAW. contracts for extension of time ; that the lender is bound.* But it is held that in such cases the court will not help either party to enforce the contract while it remains executory.^ It is also held that while the contract is binding upon the mortgagee when the contract is actually executed, it is not binding when the contract is executory.^ Taking bonus by creditor for accepting new security with additional risk is not usury/ Article 3. Interest Upon Interest. § 788. Compound Interest. § 791. Executory Agreements. § 789. When Can the Payment of ^ 792. Taking Interest in Advance. Usurious Interest be Recov- ^ 793. Interest Coupons. ered Back. | 794. Computation of Interest. § 790. Statutory Provisions. § 788. Compound Interest. — An agreement to pay interest on accrued interest is not invalid.^ So when a mortgagor, with full knowledge, and not under oppression, agrees to pay compound interest, it is a valid agreement.^ A contract to pay money at a subsequent period, with interest to be paid annu- ally, and if the interest be not paid annually, then the interest to become principal, is neither usurious, unconscionable, nor contrary to public policy 'J but some courts have held that such is usury ,^ and when the interest is to be compounded annually, it is usurious.^ 1 BiUington v. Wagoner, 33 N. Y. 31. Compare Church v. Maloy, 70 N. Y. 63. ^ Jones V. Trusdell, 23 N. J. Eq. 121, 554. 3 BiUington v. Wagoner, 33 N. Y. 31 ; Jones v. TrusdeU, 23 N. J. Eq. 121, 554. * Hall V. Edwards, 15 111. App. 369. * Quimby v. Cook, 10 Allen (Mass.), 32 ; Hale v. Hale, 1 Coldw. (Tenn.) 233 ; Stewart v. Petree, 55 N. Y. 621 ; 14 Am. Rep. 352. 6 Culver V. Bigelow, 43 Vt. 249. ■^ Scott V. Saffold, 37 Ga. 384 ; Columbia County v. King, 13 Fla. 451 ; Stew- art V. Petree, 55 N. Y. 621 ; Hill v. Meeker, 23 Conn. 592. « Waring v. Cunliffe, 1 Ves. Jr. 99 ; Chambers v. Goldwin, 9 Ves. 254, 271 ; Barnard v. Young, 17 Ves. 44, 47 ; Thornhill v. Evans, 2 Atk. 330 ; Leith v. Irvine, 1 Myl. & K. 277. » Cox V. Brookshire, 76 N. Car. 314. See, also, Leonard v. Villars, 23 111. 377 ; I usueious mortgages. 815 § 789. When Can the Payment of Usurious Interest be Recovered Back. — In many States, money paid as usurious interest is allowed to be recovered back on the theory that the law regards the payment as made under duress.^ But the general rule is that money voluntarily paid, with full knowl- edge of all the material facts, cannot be recovered back, even though made upon illegal consideration, which the laW would not enforce.^ An agreement made after interest is due to make it a prin- cipal sum does not render the transaction usurious.^ In Illi- nois in case of usury the debtor is entitled to have all pay- ments on account of interest applied in diminution of such part of the principal as remains unpaid.* § 790. Statutory Provisions. — Some of the States have enacted laws as to the taking of compound interest. In Arkansas, when a payment falls short of paying the interest due at the time of making such payment, the bal- ance of interest must not be added to the principal.^ In California the interest, by written agreement, if not paid when due, may be added to the principal.^ But otherwise in Louisiana.^ In Idaho compound interest is not allowed to be contracted for in the original agreement.^ Interest cannot be compounded Barker r. Bank, 80 111. 96 ; Cromwell v. Sac County, 96 U. S. 51 ; Broughton V. Mitchell, 64 Ala. 210 ; Wilson v. Davis, 1 Mont. 183 ; Denver Brick Manuf. Co. V. McAllister, 6 Colo. 261 ; Force v. Elizabeth, 28 N. J. Eq. 403 ; Ferry v. Ferry, 2 Cush. (Mass.) 92 ; Stokely v. Thompson, 34 Pa. St. 210 ; Union Bank r. Williams, 3 Coldw. (Tenn.) 579 ; Mason v. CoUander, 2 Minn. 350 ; 72 Am. Dec. 102; Connecticut v. Jackson, 1 Johns. Ch. (N. Y.) 13; 7 Am. Dec. 471 ; Doe v. Warren, 7 Me. 48 ; Drury v. Wolfe, 134 111. 294. ^ Albany v. Abbott, 61 N. H. 158. ^Caldwell V. Wentworth, 14 N. H. 431. ' Hawnrth r. Hulinpr, 87 111. 23 ; Gilmore v. Bissell, 124 111. 488 ; Drury v. Wolfe, 134 111.294; Thayer v. Star Mining Co., 105 111. 540, 553; McGovern V. Ins. Co., 109111. 151. * Fowler r. Trust Co., 141 U. S. 384, 408, 411. ^Dig. of Stat., 1884, sect. 4738. « Civil Code, 1885, sect. 1919, ^Rev. Code, 1870, art. 1939. 8 Rev. Stat., 1887, sect. 1265. 816 CONTRACTS IN VIOLATION OF LAW. in Minnesota.^ In Missouri parties may contract to pay inter- est upon interest, computed annually.^ In Wisconsin, by written agreement, parties may compound interest.^ § 791. Executory Agreements to Pay Compound In- TEREST^ — It is generally held that so long as the contract is executory to pay compound interest, the courts will not enforce it. But after the interest has accrued an agreement to pay interest upon it is not usurious.* Thus, adding overdue inter- est into the principal of a new note is not usurious.^ Courts of equity refuse to allow compound interest when their aid is invoked to collect a debt.^ In some of the States when the interest is payable at stated periods, it becomes principal from the time it is due, with in- terest.'' The rate of interest will control which is stipulated for in the mortgage,^ and when no rate is stated, the legal rate will control.^ § 792. Taking Interest in Advance. — Taking the legal rate of interest in advance is not usury.^'^ But if the mortgagor gives the mortgagee a new note for the amount of the debt, adding in the interest for a year, and also interest on such in- terest for that period, the transaction may be regarded as usurious." But the adding in to the principal the overdue in- 1 Laws of 1879, ch. 66. 2 Rev. Stat., 1879, ch. 41, sect. 2728. 3 Rev. Stat., 1878, sect. 1689. * Force v. Elizabeth, 28 N. J. Eq. 403. ^McGovern v. Union, etc., Ins. Co., 109 111. 151. *Cox V. Smith, 1 Nev. 161. Compare Clarkson v. Henderson, L. R. 14 Ch. D. 348. ^Cramer v. Lepper, 26 Ohio St. 59; 20 Am. Rep. 756; Mann v. Cross, 9 Iowa, 327; Preston v. Walker, 26 Iowa, 205 ; Borrows v. Stryker, 47 Iowa, 477; Watkinson v. Root, 4 Ohio, 373. ^Diinlap V. Wiseman, 2 Disney (Ohio), 398. ^Cramer v. Lepper, 26 Ohio St. 59. iOHoyt r. Pawtucket, 110 111. 390 ; Bloomer v. Mclneraey, 30 Hun (N. Y.), 201 ; Mitchell v. Lyman, 77 111. 525. " First Nat. Bank v. Davis, 108 111. 633. USURIOUS MORTGAGES. 817 terest, and giving a note for the whole amount, without taking interest in advance upon the whole, is no usury.' § 793. Interest Coupons. — Many money loaners now take notes with coupons attached for the payment of a specified sum at certain periods, and if not paid at the time stated, the amount stated in the coupon draws interest from the date of its maturity.^ Such coupons are in effect promissory notes and draw inter- est after maturity, and although they are detached from the note, the lien of the mortgage still covers them.^ There is no difference between coupons payable to bearer for a sum certain and a bank bill ; they pass alike by delivery,* and are admissible under the money counts.* Overdue coupons, so drawn as to be negotiable securities ac- cording to the general commercial law, bear interest after maturity at the lawful rate of interest, and taking such interest is not usury .^ However, interest upon interest, as represented by coupons, must be allowed or refused, as may be required by the statute of the State.^ In general, in case of interest cou- pons annexed to commercial paper, such coupons bear interest after maturity.^ Interest, in such case, is not compounded indefinitely. It is simply payable upon the amount of the face of the coupon ; and that the coupon bears interest is solely because of the character given it by commercial usage.^ 'McGovern v. Union, etc., In?. Co., 109 111. 151. 2 Columbia County v. King, 1.3 Fla. 451 ; Gelpcke v. Dubuque, 1 Wall. (U. S.) 175, 206 ; Harper v. Ely, 70 111. 581 ; Hollingsworth v. Detroit, 3 McLean, C. C. 472. ' Miller v. Railroad Co., 40 Yt. 399. * Mercer County r. Hubbard, 45 111. 139. * Johnson v. Stark County, 24 111. 75; Mercer County r. Hubbard, 45 111. 139. * United States Mortg. Co. r. SpeiTv, 138 U. S. 313. 'Ohio V. Frank, 103 U. S. 697 ; Phinncy v. Baldwin, 16 111. 108 ; Chicago v. Allcock, 86 111. 384 ; United States Mortg. Co. v. Sperry, 138 U. S. 313. ^Benneson r. Savage. 1.30 HI. 352. 'Aurora v. West, 7 Wall. (U. S.) 82, 105; Mercer Co. r. Hacket, 1 Wall. (U. S.) 83 ; Meyer v. Muscatine, 1 Wall. (U. S.) 384. ^ 52 818 CONTRACTS IN VIOLATION OF LAW. Coupons signed by the guardian according to law are addi- tional evidence of the interest agreed to be paid, but are not in- dependent obligations, nor strictly commercial securities, upon which he can be held liable, when, by the express contract be- tween the parties, recited in the bond and mortgage, he and his estate are exempt from all liability for the money borrowed. And as the ward is not personally liable for the money,' the bonds as well as the cou[)ons are, in effect, payable out of par- ticular funds, under the order of the court, and not absolutely and at all events as in the case of commercial paper. The guardian cannot, without leave of court, make an allowance of interest upon past-due coupons that are not negotiable securi- ties.^ But generally the execution of a coupon is the execut- ing of an instrument which, ex vi termini, bears interest after maturity — if no rate is expressed, at the legal rate ; and, at the date of the executing the coupons, any rate not exceeding the lawful rate may be fixed by agreement of the parties.^ These coupons are, in effect, promissory notes, and no reason exists why interest should not be compounded upon them after they become due.^ § 794. Computation of Interest. — When the payments are in installments with interest at certain times, the interest begins from the making of the contract, and the interest falls due on the specified intervals.^ If the mortgage provides that the whole debt shall fall due if the interest is not paid when due, the mortgagee can enforce the payment of the interest alone or the whole debt at his election.^ When no payments have 1 Story on Bills, sects. 74, 75 ; Forster v. Fuller, 6 Mass. 58 ; 1 Daniel on Nego. Instr., sect. 271 ; 1 Parsons on Notes and Bills, 89, 90. ^United States Mortg. Co. v. Sperry, 138 U. S. 31.3, 343, 349. ^Benneson v. Savage, 130 111. 352, 367; Harper v. Ely, 70 111. 581,586; Humi)hreys v. Morton, 100 111. 592. * Gelpcke v. Dubuque, 1 Wall. (U. S.) 175, 206 ; Hollingsworth v. Detroit, 3 McLean, C. C. 472 ; Dunlap ?'. Wiseman, 2 Disney (Ohio), 398. See, also, Clark V. Iowa City, 20 Wall. (U. S.) 583; Genoa t;. AVoodruff, 92 U. S. 502 ; Amy V. Dubuque, 98 U. S. 470, 473. ^Conners v. Holland, 113 Mass. 50 ; Hastings v. Wiswall, 8 Mass. 455. « Waples V. Jones, 02 Mo. 440. 1 USURIOUS MORTGAGES. 819 been made on the mortgage, the interest must be computed from the date of the note until the rendition of the decree. It must not then be compounded.^ And intermediate pay- ments made on the interest, but not yet due, should be deducted at the end of the year, without allowing interest upon them.^ Interest on note with interest coupons at a greater rate than the legal rate should be computed at agreed rate to time of decree.^ A settlement and payment of a debt, with compound interest, where there has been contract to pay interest at stated periods, or to pay interest in that manner, is a usurious trans- action.* In Illinois, under the statute, a guardian having obtained leave of the county court to borrow the sum of $95,000 and mortgage the ward's estate to secure its payment, allowed the mortgagee, in the settlement of the loan, but without the assent of that court, the sum of $7,219.27 in payment of interest on overdue coupons upon previous loans, and received from the mortgagee only $87,780.73. It was held : 1. That this was not a contract within the meaning of the statute, that the mort- gagee should receive usurious interest, for no such contract had been attempted to be authorized by the county court ; 2. That as the allowance by the guardian of interest upon interest was under a mistaken view of the obligations of the coupons in that regard, the remedy was to treat the loan as one for only $87,780.73, making the calculation of interest at the contract rate upon that basis, and not to forfeit the interest upon the sum actually received by the guardian from the mortgagee, as would be required under a usurious contract.^ Where the mortgagee has in fact paid the notes which he gives to the mortgagor to negotiate for him, interest may be computed from their date.® ^ Barker v. Bank, 80 111. 96. ^ Townsend v. Riley, 46 N. H. 300. 'Starne v. Farr, 17 111. App. 491. *Ward V. Brandon, 1 Heit^k. (Tenn.) 490. 5 United States Mort,. Ck). v. Sperry, 138 U. S. 313, 349, 351. \Baxter v. Blodgett, 63 Vt. 629. 820 contracts in violation of law. Article 4. Conflict of Laws. I 795. Law of Place — Lex Loci Con- § 798. Lex Loci Rei Sitae Determines tractus. the Validity of the Mortgage. § 796. Payment May be Controlled I 799. The Law of Another State Must by Contract. be Pleaded. § 797. The Mortgage is affected with the Usury of the Note. § 795. Law of Place — Lex Loci Contractus. — The rights of parties to a contract are to be judged" of by that law which they intended, or, rather, by which they may justly be pre- sumed to have bound themselves.^ The general rule established, ex comitate et jure gentium, is that the place where the contract is made, and not where the action is brought, is to be considered in expounding and enforcing the contract ; but this rule admits of exceptions when the parties, at the time of making the contract, had a view to a different jurisdiction.^ The law of the country where the contract is made governs as to the nature, the obligation, and the interpretation of it,^ unless the contracting parties clearly appear to have had some other law in view.* The place where the loan is to be paid will govern the con- tract, though the land mortgaged be in another State.^ So a corporation of New York, being authorized by its charter to loan money on bond and mortgage on real estate within the United States, or upon any hypothecation of such real estate for any period of credit, can contract in Illinois to lend money there upon bond and mortgage of real estate at the lawful rate 1 Lloyd V. Guibert, 6 Best & S. 100 ; Central Trust Co. v. Burton, 74 Wis. 329. ^ Robinson v. Bland, 1 W. Bl. 234, 256, 258 ; 2 Burr, 1077, 1078. 3 Peninsular, etc., Co. v. Shand, 3 Moore, P. C. (N. S.) 272, 290. *Cox -y. United States, 6 Pet. (U.S.) 172; Scudder i-. Bank, 91 U.S. 406; Pritchard v. Norton, 106 U. S. 124; Lamar v. Micou, 114 U. S. 218; Watts r. Camors, 115 U. S. 353, 362 ; Liverpool Steam Co. v. Ins. Co., 129 U. S. 397, 453. * Newman v. Kershaw, 10 Wis. 333 ; Kennedy v. Knight, 21 Wis. 340 ; Mills V.Wilson, 88 Pa. St. 118; Cope v. Wheeler, 41 N. Y. 303; Dobbin v. Hewett, 19 La. Ann. 513 ; Cubbedge v. Napier, 62 Ala. 518. USURIOUS MORTGAGES. 821 of interest, although the highest rate of interest permitted by the law of Xew York was less than that rate, and although the charter of the company provided that no loan or advance of money should be made by it " at a rate of interest exceeding the legal rate." ^ Loans made in other States may be at the rate of interest allowed by the State where the contract or loan is made, although such rate is in excess of that fixed by the law of the loaner's residence.^ § 796. Payment May be Controlled by Contract. — The parties may contract where the payment of the note secured shall be made. Thus, the parties may agree that the notes shall be paid in a State other than that where the land lies, and in such case the place where the contract is to be fulfilled will govern, as to the legal effect of the contract.^ If the mortgagee resides in the State where the land lies, and the mortgagor in another State, if no place of payment is named, then the law of the mortgagee's State will govern.* The parties may stipulate for interest in either State, so long as it be not a plan to cover up a usurious transaction.^ But if made payable in another State to cover up usury, the note will be declared usurious.® Michigan has a law providing that the interest taken shall not be affected by the laws of the place w^here payment is to be made.^ When the contract does not control, in determining what law governs, the true inquiry is as to the intention of the parties. The fact that the contract would not be held invalid 1 United States Mortga^re Co. v. Sperry, 138 U. S. 313. 2 Sheldon v. Haxtun, 91 N. Y. 124; Tilden v. Blair, 21 Wall. (U. S.) 241 ; Scudder v. Union Nat. Bank, 91 U. S. 406, 412 ; Pratt v. Adams, 7 Paige (N. Y.),615; Wayne County Savings Bank v.Low, 81 N. Y. 566. ^Slacum V. Pomery, 6 Cranch (U. S.) 221 ; Duncan v. Helm, 22 La. Ann. 418 ; Fitch v. Remer, 1 Flippin, C. C. 15. * Mills V. Wilson, 88 Pa. St. 118 ; 6 Week. N. Cas. 23. ^Townsend v. Riley, 46 N. H. 300; Peck v. Mayo, 14 Vt. 33, 38. « Cope V. Wheeler, 41 N. Y. 303 ; Williams v. Fitzhugh, 37 N. Y. 444 ; Lock- wood V. Mitchell, 7 Ohio St. 387. See, also, Andrews v. Pond, 13 Pet. (U. S.) 65, 78 ; Mix v. Ins. Co., 11 Ind. 117. \Com. Laws, 1871, pp. 541, 542. 822 CONTRACTS IN VIOLATION OF LAW. by the laws of the State where the land lies where the mort- gagor resides, and where the money is intended to be used, furnishes ground for the presumption that the law there will govern as intended by the parties.^ So a loan made in New Hampshire, upon land in the State, may be m.ade payable in New York, and at a higher rate than allowed by the New Hampshire law.^ The law of the place of contract, or of the place of perform- ance, determines the question of usury, irrespective of the place where the land is situated.^ The general principles in relation to contracts made in one place, to be performed in another, are well settled. They are to be governed by the law of the place of performance, and, if the interest allowed by the place of performance is higher than that permitted at the place of contract, the parties may stipulate for the higher interest without incurring the penalties of usury. The converse of this proposition is also well settled. If the rate of interest be higher at the place of contract than at the place of perform- ance, the parties may lawfully contract in that case also for the higher rate. These rules, however, are subject to the qualifi- cation that the parties act in good faith, and that the form of the transaction is not adopted to disguise its real character. So when the parties, in good faith, agree upon a rate of interest which is lawful at the place where the agreement is to be per- formed, the contract is valid.* § 797. The Mortgage is Affected with the Usury of THE Note. — Usury invalidating notes is a defense to the fore- closure of the mortgage given to secure such notes. Thus, 1 Newman v. Kershaw, 10 Wis. 333 ; Richards v. Globe Bank, 12 Wis. 697 ; Vliet V. Camp, 13 Wis. 208 ; Fisher v. Otis, 3 Pin. (Wis.) 78 ; Chapman v. Robertson, 6 Paige (N. Y.), 627. 2 Townpend v. Riley, 46 N. H. 300. 3 Campion v. Kille, U N. J. Eq. 229; DeWolf v. Johnson, 10 Wheat. (U. S.) 367 ; Cotheal v. Blydenburgh, 1 Halst. (N. J. Eq.) 17, 631 ; Dolman v. Cook, 14 N. J. Eq. 56. * Brown v. Finance Co., 31 Fed. Rep. 516 ; Kilgore v. Dempsey, 25 Ohio St. 413; Townsend v. Riley, 46 N. H. 300; Miller v. Tiffany, 1 Wall.(U. S.) 298; Coad V. Home Cattle Co., 32 Nebr. 761. USURIOUS MORTGAGES. 823 where notes are negotiated in New York, and the trust deed was delivered to the trustee there, and that was the j^lace of performance of the contract, the laws of New York must con- trol. The fact that the trust deed included lands in Wisconsin and in Illinois, and that the borrower was a resident of Wis- consin, and used the money at the place of his residence, does not make it a contract of the latter State ; such notes being controlled by the law of New York and being usurious, are void, and the debt is thus extinguished and also the trust deed given to secure it. Because if there be no debt, or if it is paid or extinguished in any way, the mortgage cannot exist ; it is fundus officio. And when the notes are thus invalidated the trust deed or mortgage has no effective existence as a contract or obligation, save in so far as it represents an actual indebtedness.^ The place of contract determines the validity of the notes.^ § 798. Lex Loci Rei Sit^ Determines the Validity op THE Mortgage. — The lex loci rei sitas determines the validity of a mortgage of land, though the mortgage was executed in an- other State, by a citizen of the latter State. Thus, a note, being a Massachusetts contract, is governed by the laws of this State. But the mortgage, although executed in Massachusetts, by a citizen of this State, being a conveyance of land in New Hampshire, is controlled by the laws of New Hampshire.'^ But the lex loci rei sitx does not control the question of usury.* The remedy to enforce a lien must be sought where the land is situated. The validity of the mortgage is determined by the law of lex loci rei sitse.^ § 799. The Law of Another State Must be Pleaded. — In setting up the usury law of another State as a defense, it ^ Central Trust Co. v. Burton, 74 Wis. 329. ^ Fessenden v. Taft, 65 N. H. 39. ''Fessenden v. Taft, 65 N. H. 39; Griffin v. Griffin, 18 N. J. Eq. 104; God- dard v. Sawyer, 9 Allen (Mass.), 78. * Connor v. Bellamont, 2 Atk. 382; Stapleton v. Conway, 3 Atk. 727. *Hosford V. Nichols, 1 Paige (N. Y.), 220; Sedgwick v. Laflin, 10 Allen (Mass.), 430, 432; Lyon v. :McIlvaine, 24 Iowa, 9 ; Oregon, etc., Co. v. Rath- bun, 5 Saw. C. C. 32 ; Chapman v. Robertson, 6 Paige (N. Y.), 627. 824 CONTRACTS IN VIOLATION OF LAW. must be averred and proved as a matter of fact.* The defense of usury not having been made, the court should not declare a contract made in another State usurious, although upon its face it bears a rate of interest in excess of that allowed by the law of the State where the suit is brought.^ By the statute ^ of Wisconsin a statute of another State may be "pleaded by stating the substance thereof.* No proof to the contrary, the laws of another State in regard to usury will be presumed to be the same as those of the lexfori.^ The law in force at the time of making the contract and delivery of the mortgage controls its validity or construction.® The manner of enforcing the remedy is not binding upon the courts of other States.'^ And when the court can use his discretion, he may refuse to allow the statute of another State, as to the contract, to be set up, where he is of the opinion that such statute is unconscionable.* If an answer in a suit in one State, pleading usury under the laws of another State, does not aver what are the laws of such State, but merely alleges that the security in the suit is usuri- ous and contrary to the law of such State, the courts will pre- sume that such foreign laws are the same as the laws of their own State.^ The defendant should file such a plea as the law of the foreign State prescribes.'" * Camp V. Randle, 81 Ala. 240 ; Klinck v. Price, 4 "W. Va. 4 ; Campion v. Kille, 14 N. J. Eq. 229 ; Hosford v. Nichols, 1 Paige (N. Y.),220; Dolman v. Cook, 14 N. J. Eq. 56 ; Andrews v. Torrey, 14 N. J. Eq. 355. ^Reiff ?'. Bakken, 36 Minn. 333. 3 Rev. Stat., sect. 2676. * Central Trust Co. v. Burton, 74 Wis. 329. ^ Van Auken v. Dunning, 81 Pa. St. 464. « Newton v. Wilson, 31 Ark. 484 ; Jacoway v. Denton, 25 Ark. 625 ; Har- rison V. Styres, 74 N. Car. 290 ; Scheible ?'. Bacho, 41 Ala. 423 ; Olson v. Nel- son, 3 Minn. 53 ; Latrobe v. Hulbert, 6 Fed. Rep. 209. Compare Stillman v. Looney, 3 Cold. (Tenn.) 20. ' INIatthews v. Warner, 6 Fed. Rep. 461. See, also, Wheelock v. Lee, 64 N. Y. 242 ; Bissell v. Kellogg, 65 N. Y. 432. « Corning v. Ludlum, 28 N. J. Eq. 398. 3 Leake v. Bergen, 27 N. J. Eq. 360. 1" Bowman v. Miller, 25 Gratt. (Va.) 331 ; 18 Am. Rep. 686. CHAPTER XX. fkaudulent mortgages. Article 1. Fraud Generally. § 800. Application to Mortgages. ? 803. Rights of Parties. \ 801. Secret Trusts— Confidential Re- ^ 804. The Mortgagor Must Use Due lations. Diligence. I 802. Fraudulent Intent as to Cred- § 805. Pre-existing Debt. itors. § 800. Application to Mortgages. — At common law all conveyances made in fraud of creditors are voidable at the in- stance of such creditors.^ The statute 13 Elizabeth, ch. 5, avoiding fraudulent con- veyances, was merely declaratory of the common law.^ The statute of 13 Elizabeth, ch. 5, perpetuated by 29 Eliza- beth, has been re-enacted or copied in nearly every State in the Union, and has been adopted as the basis of jurisprudence upon the subject of fraudulent conveyances. This statute constitutes the basis of American jurisprudence on this subject, and is, when not specially enacted, a part of the unwritten law.^ By the provisions of this statute all conveyances and dispo- sitions of property, real and personal, made with intent to de- fraud creditors, are null and void as against creditors.* Mort- gages come under the same rule as other conveyances, and when obtained by fraud they are null and void and may be discharged.* And a mortgagee cannot be a purchaser for value where the ' Cadogan r. Kennet, 1 Cowp. 432, 434 ; Curtis v. Leavitt, 15 N. Y. 124 ; Blackman v. Wheaton, 13 Minn. 326 ; Baker v. Humphrey, 101 U. S. 499. * Clements v. Moore, 6 Wall. (U. S.) 312 ; Davis v. Turner, 4 Gratt. (Va.) 429. * Story's Eq. Jur., sect. 553 ; Gardner v. Cole, 21 Iowa, 209. *Drake v. Rice, 130 Mass. 410. *^Wartemberg v. Spiegel, 31 Mich. 400 ; Mason v. Daly, 117 Mass. 403. 825 826 CONTRACTS IN VIOLATION OF LAW. mortgage was obtained by fraud or forgery of his agent.^ If obtained by trickery witliout negligence, it cannot become good in the hands of any party ,^ and if forged, the question of good faitli cannot arise.^ And where tlie mortgagor after the execution of tlie mort- gage obtains judgment, fraudulently quieting his title to the mortgaged land against the owner thereof, and such judgment is subsequently vacated with the consent of all the parties thereto on account of fraud, neither the mortgagor nor the mortgagee acquires any benefit or title under the fraudulent judgment.* The principles and rules of the common law are so strong against fraud in every shape that the common law would have attained every end proposed by the statutes of 13 Eliz., c. 5, and 27 Eliz., c. 4. The former of these statutes relates to creditors only ; the latter, to purchasers. These statutes cannot receive too liberal construction, or be too much extended in suppression of fraud.^ It is a general rule that, where one of two innocent persons must suffer from the fraudulent act of a third, he by whose act the third person was enabled to perpetrate the fraud must bear the loss.^ The English courts hold that a voluntary settlement, though made in good faith and without any intention to defraud any person, is fraudulent against subsequent purchasers, however remote in time. The result is to give the settler power to revoke his settlement at his option. This doctrine has often been criticised and regretted in England/ and has been repu- diated in this country.^ ^Laprad v. Sherwood, 79 Mich. 520. ''Burson v. Huntington, 21 Mich. 415 ; Bank v. Deal, 55 Mich. 592. 3 McGinn v. Tobey, 62 Mich. 252; Mersman v. Werges, 3 Fed. Rep. 378. * Watkins v. Houck, 44 Kan. 502. * Cadogan v. Kennct, 1 Cowp. 432, 434. See, also, Perry-Herrick v. Attwood, 2 De G. & J. 40 ; 27 Law J. Ch. 121, 128 ; Hamilton v. Russel, 1 Cranch (U.S.), 310, 316 ; May on Fraud, Conv. 3, 4. « Burgess v. Bragaw (Minn.), 52 N. ^Y. Rep. 45. ' Doe f. Manning, 9 East, 59 ; Rob. Fraud. Con. ,39, 41 ; May Fraud. Con. 195. «Sterry v. Arden, 1 Johns. Ch. (N. Y.) 261 : 12 Johns. (N. Y.), 536; Cath- cart V. Robinson, 5 Pet. (U. S.) 264 ; Beal v. Warren, 2 Gray (Mass.), 447. FRAUDULENT MORTGAGES. 827 So where the obhgee and mortgagee named in a bond and mortgage produces them with no marks upon them iiidicating that he had parted with the property in them, but with an indorsement showing a recent payment of interest to him as owner, and he proposes to assign them for full value, a pur- chaser will be protected without examining the records for prior assignments.^ § 801. Secret Trusts — Confidential Relations. — Secret trusts cannot be upheld to defraud creditors. Thus, where a husband invests his wife's money in land, and takes the title in his own name, and gives a mortgage back, his wife cannot set up her equity to have the money she advanced paid back to her from the proceeds of the foreclosure sale.^ So if a hus- band conveys land to his wife under the pretext of having held the title in trust for her, his grantor having a mortgage upon the land prior to the date of such conveyance, or a judg- ment creditor, may show that no such trust existed, and that such conveyance was made for the purpose of defrauding his creditors.^ If a mortgage is given with no intent to defraud, and the mortgagee takes possession, but permits the mortgagor to re- main upon the premises and manage them, and receives a portion of the proceeds, there is no fraud.* Where one in good faith and without fraud takes a mortgage from a husband and wife to secure a just debt, the court will hesitate long before setting it aside, even on proof that the husband procured her execution thereof by fraudulent repre- sentations, and that she used due diligence to ascertain its contents.' And where the wife has sold several parcels of her land, and allowed her husband to receive the money, and afterward, at his request, joined him in conveying another part upon condi- iMellick V. Mellick, 47 N. J. Eq. 86. '^Hallv. Hall,89Ky. 514. ' Lehman v. Hawks, 121 Ind. 541. * Decker v. Wilson, 45 N. J. Eq. 772. f Spurgin v. Traub, 65 111. 170. 828 CONTRACTS IN VIOLATION OF LAW. tion of his making provisions for their daughter, to whom a note and mortgage were then given for a larger amount than re- ceived for the part last sold, in the absence of fraud, it is a valid transaction, and the mortgage legal/ Constructive notice to the subsequent purchaser of a fraudu- lent assignment, arising from its record, will not affect the rights of such subsequent purchaser. Thus, a father, being the mortgagee and owner of two bonds and mortgages of $5,000 and $2,000, respectively, contracted with a single woman to marry her and to settle upon her by as- signment, before marriage, the $5,000 bond and mortgage. Nine- teen days before the wedding, for the purpose of defrauding her, he assigned both bonds and mortgages to his son for the express consideration of one dollar and love and affection, but actually received a consideration in money less than the amount of the smaller bond and mortgage. He afterward regained posses- sion of the $5,000 bond and mortgage, and assigned the same to the woman just before his marriage with her. The woman was entitled to the benefit of the securities notwithstanding that the prior assignment was recorded on the day it was exe- cuted, and that the son was innocent and ignorant of the fraud- ulent scheme of his father.^ § 802. Fraudulent Intent as to Creditors. — Where it is the intention of a debtor in giving a mortgage to put his property in such a position as to defraud, hinder, or delay his creditors, and this intention is known to the mortgagee, some courts hold that the mortgagee is, in law, charged with a par- ticipation in the fraud, although he may pay a full consid- eration, and take immediate and open possession ; where the mortgagee takes the mortgage with such knowledge of fraud on the part of the mortgagor, the transaction cannot be said to be bona fide, however full and valuable the consideration may be.^ 1 Brooks V. Dalrymple, 12 Allen (Mass.), 102. ^Mellick V. Mellick, 47 N. J. Eq. 86 ; Sect. 805. 3 Robinson v. Holt, 39 N. H. 557 ; Blodgett v. Webster, 24 N. H. 91 ; Kimball V. Thompson, 4 Cush. (Mass.) 441 ; Bridge v. Eggleston, 14 Mass. 245. FKAUDULENT MORTGAGES. 829 On the contrary, it is held that fraud on the part of the mortgagor does not affect the mortgagee unless he is a party to the fraud, and receives the mortgage with the intent to hinder, delay, or defraud the creditors of the mortgagor/ One line of authorities holds that conveyances made by a grantor in fraud of his creditors are valid unless it be shown that the purchaser is not a purchaser for value, and in good faith. Another line of authorities states that the effect of the statute to be that conveyances, fraudulent on the part of the grantor, are invalid at the suit of his creditors, unless it be shown that the purchaser is a purchaser for value, and in good faith. The authorities are uniform in declaring that one who attacks a conveyance as fraudulently made must establish the fraud ; he has the burden of proof. But there is a conflict when the question arises whether the creditor, by proof of the fraud of the grantor, has made a prima facie case against the grantee, entitling the creditor to recover, in the absence of any evidence by his adversary. The rule adopted in Connecticut,^ lowa,^ Maryland,* Massachusetts,^ New Jersey,^ and Wisconsin^ is that the creditor must not only show fraud on the part of the grantor, but participation in or notice of it by the grantee. But other authorities hold that where the fraud of the grantor is established a prima facie case is made by the creditor, which must be met by the purchaser by evidence that he is a j^ur- chaser in good faith and for value.^ ^ Cornish v. Dews, 18 Ark. 172 ; Miner >:. Phillips, 42 111. 123 ; Price v. Mas- terson, 35 Ala. 483 ; Fifield v. Gaston, 12 Iowa, 218 ; Prior v. White, 12 111. 261 ; Rust V. Mansfield, 25 111. 336. 2 Portelo V. Harris, 26 Conn. 480. ^ Adams v. Foley, 4 Iowa, 44 ; Fifield >:. Gaston, 12 Iowa, 218. * Cooke V. Cooke, 43 Md. 524. ^ Bridge v. Eggleston, 14 ]\Iass. 245 ; Foster v. Hall, 12 Pick. (INIass.) 89. « Ins. Co. V. Tooker, 35 N. J. Eq. 408 ; Tantum v. Green, 21 N. J. Eq. 364 ; Bank v. Northrup, 22 N. J. Eq. 58. ^ Mehlhop V. Pettibone, 54 Wis. 652. « Rogers v. Hall, 4 Watts (Pa.), 359 ; Lloyd r. Lynch, 28 Pa. St. 419 ; Starin V. Kelly, 88 N. Y. 418 ; Hamilton v. Blackwell, 60 Ala. 545 ; Gordon r. Tweedy, 71 Ala. 202 ; Brown v. Hedge Co., 64 Tex. 396 ; Miller v. Fraley, 21 Ark. 22 ; Worthy v. Caddell, 76 N. Car. 82, 830 CONTRACTS IN VIOLATION OF LAW. Judge Cooper says : " We concur in the views announced by those courts which hold the proof of fraud on the part of the grantor is sufficient to entitle his creditors to subject the prop- erty fraudulently assigned, in the absence of evidence showing the claimant to be a purchaser for value and in good faith. We fail to perceive why, in cases of this character, the party assailing the conveyance shall be required to assume the bur- den of showing participation in the fraud by the purchaser, and the non-payment of value for the property fraudulently conveyed." ^ The rule is settled in many States that the debtor in failing circumstances may mortgage the whole of his property for the security of a portion of his creditors, even though the effect of the transaction is to defeat the collection of his unsecured debt.^ If the mortgage sets out a pretended indebtedness, it may be set aside for fraud.^ After the death of the mort- gagee, when the mortgagor has absconded, it will not be pre- sumed from the mere fact of non-record of the mortgage that the intention of the mortgagee was to enable the mortgagor to obtain commercial credit on the strength of being owner of the property.* A mortgage for full value, executed by both the fraudulent mortgagor and fraudulent grantee, is good as against a creditor without judgment, intended to be defrauded, though the mortgagee had notice that the conveyance was made for the purpose of defrauding that particular creditor, provided the purpose of the mortgage is not to defraud creditors.^ And so it is generally held that a mortgage, in good faith, by an insolvent debtor to a part only of his creditors will be upheld.'^ ^ Richards v. Vaccaro, 67 Miss. 516. * Perry v. Vezina, 63 Iowa, 25 ; Southern White Lead Co. t'. Haas, 73 loAva, 399 ; Giddings v. Sears, 115 Mass. 505. 3 Tully V. Harloe, 35 Cal. 302 ; Farguson v. Johnston, 36 Fed. Rep. 134. *Lanahan v. Lawton (N. J.), 23 Atl. Rep. 476. ^Sipley V. Wass (N. J.), 24 At. Rep. 233. See, also, Muchmore v. Budd, 53 N. J. L. 369. « Warren v. Dwyer (Mich.), 51 N. W. Rep. 1062, following Sheldon v. Mann, 85 Mich. 265. See, also, Warner v. Littlefield, 89 Mich. 329 ; Fitz- gerald V. McCandlish, 89 Mich. 400. FRAUDULENT MORTGAGES. 831 § 803. Rights op the Parties. — It is an established doctrine that when the legal estate is acquired by fraud, the taker is r^ garded in equity as the trustee to the party defrauded, and such party may recover the estate or its value. ^ And where several mortgagors have given their individual notes for each one's sliare of the purchase-money, secured by their joint mortgage, each one may, without the consent of the other, by bill in equity, set aside the mortgage as to himself, if the purchase of which land was procured by fraudulent rep- resentation of the grantor.^ All the mortgagors might have joined in setting aside the mortgage, if the note secured was only executed by one of them.^ A conveyance executed by an insolvent or embarrassed debtor, absolute in terms, but intended only as a mortgage or security for a debt, operates as a secret reservation of benefit to him, and is fraudulent in law as against his existing cred- itors.* Fraudulent intent on the part of one of two mortgagees will not invalidate the mortgage, though the mortgage secures two separate debts,^ The representation of the mortgagee that he will not enforce the mortgage is a nullity." And when the mortgagee has released his mortgage on state- ments made by the mortgagor, whereby a subsequent lien takes priority, in order to have his mortgage reinstated, he must show that he relied upon the fraudulent representations of the mortgagor.^ Where the directors of a corporation never sold or authorized the sale of land, a mortgage made by the president of the cor- poration, in blank and without seal, which is filled in with the ' Small V. Attwood, Younge, 507 ; Cheney v. Gleason, 117 Mass. 557. ^Moulton V. Lowe, 32 Me. 466. ^ Bowman v. Germy, 23 Kan. 306. * Campbell v. Davis, 85 Ala. 56. ^ Smith V. Post, 1 Hun (N. Y.), 516; Troustine v. Lask, 4 Baxt. (Tenn.) 162. Compare Adams v. Niemann, 46 Mich. 1.35. «Catlin r. Fletcher, 9 :Minn. 85. \McKeen v. Haseltine, 46 Minn. 426. 832 CONTRACTS IN VIOLATION OF LAW. description of the wrong land, by the grantee, is void, and a mortgage of the grantee cannot be protected/ And though one may give a mortgage to prefer some of his creditors, the unsecured creditors are entitled to the equity of redemption, and if the mortgage by its terms attempts to pre- vent access to sucli equity of redemption, it will vitiate the mortgage.^ Where a purchase of land is made by a syndicate of several persons, on the false representations of one of them as to the purchase price, so that the others pay for their interests the amount of the actual purchase price of the entire tract, while he, claiming to be paying for his interest and amount propor- tional to that paid by them, gets it for nothing, they will be entitled to his interest in the land.^ And where the title is taken in the name of one of the syndicate as trustee for the benefit of all, a person or mortgagee to whom the member who made the false representations, gives a mortgage of his undi- vided proportion of the land does not stand in the position of a bona fide incumbrancer without notice, as the most that the mortgage could incumber was an equitable estate, to which the doctrine of bona fide purchaser does not apply ; * because a purchaser of an equitable interest purchases at his peril.^ § 804. The Mortgagor Must Use Due Diligence. — The mortgagor must not sleep on his rights. Thus, when a mort- gagor purchases land and goes into possession of it and gives a mortgage back, if he has been defrauded he must take the first opportunity to seek redress, especially when the deception must have been known to him before he gave the mortgage.® Though the mortgagor is unable to read, in the absence of fraud, he cannot set up fraud. It is his business to have 1 Vaca Val, etc., Railroad Co. v. Mansfield, 84 Cal. 560. 2 Chaffee v. Blatchford, 6 Mackey (Dist. Col.), 459. ^ Crater v. Binninger, 33 N. J. L. 513. ^Shoufe V. Griffiths (Wash.), 30 Pac. Rep. 93. "Shirras v. Caig, 7 Cranch (U. S.), 34 ; Vattier r. Hinde, 7 Pet. (U. S.) 252; Boone v. Chiles, 10 Pet. (U. S.) 177. 6 Whiting V. Hill, 23 Mich. 399 ; Wright v. Peet, 36 Mich. 213. FRAUDULENT MORTGAGES. 833 the instrument read over to him before signing ; his failure can be imputed only to his neghgence/ § 805. Pre-existixg Debt. — Where a mortgage is fraudu- lently obtained to secure a pre-existing debt, the mortgagee or beneficiary cannot claim that such mortgage is damnum absque injuria. The mere existence of such a mortgage outstanding is of itself an injury, and any action to enforce it a greater in- jury. Thus, it is a fraud in a creditor to induce his debtor to secure a pre-existing debt by a mortgage upon condition of advancing a further sum, and when he has obtained the se- curit}'" to refuse to make the advance, and a court of ecpity will annul the conveyance.^ And this is the better rule, though it has been held that such fraud does not furnish any ground for annulling the mortgage in equity, for an action at law for breach of the agreement would be a sufficient remedy.^ An assignee of a bond and mortgage, holding under an assignment made by the assignor for the purpose of defraud- ing a subsequent purchaser of the securities, can, as against a subsequent purchaser for full value, derive no benefit from his assignment unless he is both innocent and ignorant of the fraud, and then only to the extent that he has parted with value on the strength of the assignment, and before notice of the fraud.* And then he cannot be allowed for past indebtedness against the assignor, unless he has given up some security, or other- wise changed his position, on the strength of the assignment.^ ^ Stewart v. Whitlock, 58 Cal. 2 ; Wilson r. Winter, 6 Fed. Rep. 16 ; Leslie V. Merrick, 99 Ind. 180 ; Montgomery r. Scott, 9 S. Car. 20. ^ Gross V. McKee, 53 Miss. 536. 'Johnson v. Murphy, 60 Ala. 288. *I\Iellick V. Melliek,"47 N. J. Eq. 86. ^Mellick V. Mvllick, 47 N. J. Eq. 86. See, also, De Witt v. Van Sickle, 29 N. J. Eq. 209 ; AUiaire v. Hartshorne, 21 N. J. L. 665, 668 ; Holcomb v. Wyckoflf, 35 N. J. L. 35 ; 2 Lead. Cas. Eq. (4th Am. ed.) 77, 82 et seq. 63 834 contracts in violation of law. Article 2. Duress as an Element of Fraud. § 806. Kind of Duress. ^ 808. To Prevent Criminal Prosecu- i 807. Husband and Wife. tion. § 806. Kind of Duress. — Undue influence is not sufficient to render a mortgage void.^ Thus, a mere command of a hus- band to his wife for her to sign a mortgage, unaccompanied by threats or violent action, is not sufficient of itself to be duress.^ As between parties occupying no relation of confidence in or toward each other, or of control by reason of position, employ- ment, or otherwise, undue influence to amount to duress can rarely be imputed without showing some degree of fear, or threats, or advantage taken of position, or unfair practices, or persuasion, involving in some degree a species of fraud. But when any of these elements enters into and constitutes part of the circumstances attending a transaction, and controlling the will of a party making a deed or other contract, courts of equity have long been accustomed to give relief.^ Vice-Chancellor Bird says : " Therefore, it is plain, that pres- sure which does not amount to duress at common law may be considered, in equity, as sufficient to set aside, or to resist, a contract. Whenever a contract is procured by such influence as overcomes the free agency of the contracting party, whether parent or child, husband or wife, such influence aftbrds an equitable defense. To this end all the cases unerringly and unwaveringly tend."* § 807. Husband and Wife. — A mere command of the hus- band to the wife to go and sign a mortgage is not duress.'' 1 Moog V. Strang, 69 Ala. 98. ^ Gabbey v. Forgeus, 38 Kan. 62. 3 Eadie v. Slimmon, 26 N.Y. 9. See, also, Lyon v. Tallmadge, 14 Johns. (N.Y.) 501, 513 ; Davies v. Ins. Co., L. R. 8 Ch. Div. 469 ; Sharon v. Gager, 46 Conn. 189 ; Reed v. Exum, 84 N. Car. 430 ; Thurman v. Burt, 53 111. 129 ; Harris v. Carmody, 131 Mass. 51 ; Smitli v. Allis, 52 Wis. 337. * Lomerson v. Johnston, 44 N. J. Eq. 93, 107. * Gabbey v. Forgeus, 38 Kan. 62. FRAUDULENT MORTGAGES. 835 However, less than actual duress will avoid an acknowledg- ment of a deed of conveyance or mortgage by a wife, provided it be known to the party claiming through it. It is enough that it be shown that the wife did it under moral constraint — that is, by threats, persecutions, and harshness of her husband to force her to set aside her own free will.^ Whenever the execution of a mortgage by the wife is in- duced by harshness and threats, and the exercise of unwar- rantable authority by the husband, so excessive as to subjugate and control the freedom of her will, the aid of a court to sup- port and enforce its provisions against her, will be refused and the mortgage annulled.^ So where an aunt is induced to give a mortgage by threats, to secure the payment of the defalcation of her nephew, she can avoid it.^ The threats of the husband to abandon his wife if she did not sign a mortgage is sufficient duress to annul the mortgage, when the mortgagee had notice of these threats at the time of executing the mortgage.* But a married woman's own negligence cannot be pleaded to set aside a mortgage. Thus, not being able to read, she re- lied on the representations of her husband, which were false ; such conduct was gross negligence ; she should have required the instrument to be read to her before signing.^ But such duress of the husband over the wife must be par- ticipated in, or known to, the mortgagee.^ But a married woman may be estopped by her deliberate conduct in executing a mort- gage in accordance with the law. She is responsible for her de- liberate and free action, and cannot claim to act under duress.^ ^Michener v. Cavender, 38 Pa. St. 334; Louden v. Blythe, 16 Pa. St. 532; Harris v. Carmody, 131 Mass. 51 ; McCandless v. Eagle, 51 Pa. St. 309. * Central Bank v. Copeland, 18 Md. 305. ^Sharon v. Gager, 46 Conn. 189. *Line v. Blizzard, 70 Ind. 23. *^tna Life Ins. Co. ?>. Franks, 53 Iowa, 618 ; Roach v. Karr, 18 Kan. 529; Frickee v. Donner, 35 Mich. 151. «Edgell V. Hagens, 53 Iowa, 223 ; Moog v. Strang, 69 Ala. 98 ; ^tna Life Ins. Co. V. Franks, 53 Iowa, 618. See, also, WiUiams v. Baker, 71 Pa. St. 476. ^Van Sickles v. Town, 53 Iowa, 259; Norton v. Nichols, 35 Mich. 148; Ed- gell t. Hagens, 53 Iowa, 223 ; Lefebvre v. Dutruit, 51 Wis. 326. 836 CONTRACTS IN VIOLATION OP LAW. A "mortgage given by a wife upon her property to prevent a criminal prosecution of her husband upon fraudulent charges of embezzlement can be annulled/ But the mortgage will not be avoided when the evidence does not show intimidation or duress. Thus, where the husband testified that a criminal prosecution was threatened, which was denied, and the wife and husband were persons of great intelligence, and the hus- band a man of great business experience, and who did not complain of duress after the execution of the mortgage, it will be enforced.^ § 808. To Prevent Criminal Prosecution. — When threats are made to a father or to the wife, that his son or her husband will be prosecuted criminally with a certainty of conviction, unless the amount of the debt is secured by mortgage on his or her property, such mortgage can be annulled by the mort- gagor when executed under such circumstances. Thus, when a father is appealed to under such circumstances to take upon himself an amount of civil liability, with the knowledge that unless he does so his son will be exposed to a criminal prose- cution, with the certainty of conviction, he cannot be regarded as a free and voluntary agent, and the mortgage can be avoided.^ So when a creditor uses undue pressure and induces the wife to mortgage her real estate to prevent a criminal prosecution of her husband, impressing her with fear or unjust apprehen- sion, her free agency is overcome, and such mortgage cannot be enforced against her real estate.* And a mortgage executed by a mother in the belief that her son had been guilty of for- gery, and would be prosecuted unless she secured the debt, is given under duress and is not valid.^ But where the threat is made to the debtor himself the rule 1 Singer Manf. Co. v. Rawson, 50 Iowa, 634. ^ Post «. Bank, 138 111. 559, affirming 38 111. App. 259. nVilliams v. Bayley, L. R. 1 H. L. 200; 35 L. J. Ch. 717. *Lomerson v. Johnston, 44 N. J. Eq. 93. 5 Strang v. Peterson, 56 Hun (N. Y.), 418. See, also, Dykes v. Wyman, G7 Mich. 236 ; Edwards v. Bowden, 103 N. Car. 50. FRAUDULENT MORTGAGES. 837 is different. Thus, when a creditor threatens to begin criminal prosecution if the felon does not secure the debt which is actu- ally due, no duress can be shown.^ If there had been no consideration, the mortgage would have been set aside. ^ A mortgage given by a defaulting county officer to secure the amount of his defalcation, is valid ; ^ or a mortgage given to secure a pardon.* Threats to begin legal proceedings to collect a valid debt, if a mortgage is not given to secure it, is not duress.^ A mortgage given to the creditor to release the mortgagor from imprisonment lawfully imposed is valid.'' Mortgages given by a wife under duress to prevent criminal prosecution of her husband, or by a father to protect his son, cannot be ratified and made valid.'^ And in general a note and mortgage given in whole or in part upon an agreement, express or implied, to settle or prevent a criminal prosecution, are void, unless the case falls within some express statute authorizing settlement.^ Article 3. Preferences. § 809. At Common Law. § 812. Stating the Consideration I 810. Statutory Provisions. More than the Debt. I 811. Fraudulent Intent. § 809. At Common Law. — At common law, if a debtor is unable to pay all his debts, he commits no fraud by appropri- ating his property to the satisfaction of one or more of his creditors, to the exclusion of all the others. Nor does it make any difference that both creditor and debtor know that the fact 1 Plant V. Gunn, 2 Woods, C. C. 372.' ''James v. Eoberts, 18 Ohio, 548. 'Oconto County v. Hall, 42 Wis. 59 ; State Bank v. Chapelle, 40 Mich. 447. * Rood V. Winslow, 2 Doug. (Mich.) 68. 5 Snyder v. Braden, 58 Ind. 143 ; Dolman v. Cook, 14 N. J. Eq. 56. ^Watkins v. Baird, 6 Mass. 506; Smillie v. Titus, 32 N. J. Eq. 51, and note. ' See Lyon v. Waldo, 36 Mich. 345. « Small V. Williams, 87 Ga. 681. 838 CONTRACTS IN VIOLATION OF LAW. of such appropriation will be to deprive other creditors of the power to reach the debtor's property by legal process in satis- faction of their claims. If there is no secret trust agreed upon or understood between debtor and creditor in favor of the former, but the sole object of the transaction of the parties is to pay or secure the payment of a debt, the transaction is valid.^ So, where there is no statute controlling such preferences, a debtor may mortgage his entire property for the sole purpose of securing the debt of one of his creditors.^ And this is the general rule, that an insolvent debtor may prefer creditors, if the same is done in good faith, and this not only in the form of actual payment of money to particular creditors preferred, but also by giving of mortgages to such creditors.^ § 810. Statutory Provisions. — Statutory provisions often control as to giving preferences, in cases of bankruptcy and insolvency. Thus, in Kentucky it is provided b}^ statutory provisions that every mortgage made b}"" a debtor in contem- plation of insolvency, and with the design to jDrefer one creditor over another, shall oj^erate as a transfer of the property for the benefit of creditors generally. But it further provides that such preference shall not affect any made in good faith to secure any debt made simultaneously with such mortgage.* Hence a mortgage given by an insolvent to secure a debt, a portion of which is created at the same time, is a valid security for such portion, though the residue of the debt is a pre-existing one. But a mortgage given to secure a pre-existing debt in pursuance of a verbal agreement, made at the time of the cre- iBanfield v. Whipi^le, 14 Allen (Mass.), 13. "^ Giddings v. Sears, 115 Mass. 505 ; Bump's Fraud. Con. 213, 226. 3 Tootle V. Coldwell, 30 Kan. 125 ; Meinhard v. Strickland, 29 S. Car. 491 ; Eureka I. & S. Works v. Bresnahan, 66 Mich. 489 ; Martin v. Hausinan, 14 Fed. Rep. 160 ; Leitch v. Hollister, 4 N. Y. 211 ; Knapp v. McGowan, 96 N. Y. 86; Beyer Wheel Co. v. Fielding, 101 N. Y.504; Brown v. Guthrie, 110 N. Y. 437 ; Hine v. Bowe, 114 N. Y. 350 ; Greene v. Remington, 72 Wis. 648 ; People V. Bristol, 35 Mich. .34 ; Smith v. Ferine, 121 N. Y. 376 ; Cleveland, etc., Co. v. Wilson, 80 Iowa, 697 ; Andrews v. Fillmore, 46 Mich. 316 ; Adams v. Nie- mann, 46 Mich. 136. * Gen. Stat., oh, 44, art. 2, sect. 1. FRAUDULENT MORTGAGES. 839 ation of the debt, months before, is not within the exception of the statute.^ Although the mortgage may be withdrawn ^ as to such part of the debt as previously existed, yet it is a security for so much as may be created simultaneously.^ . The voluntary assignment act * of Illinois does not affect the right of a failing debtor to prefer creditors by giving mortgages, in good faith, since such mortgages not being voluntary assign- ments, are not within the purview of the act.^ So in Wisconsin ^ a mortgage free from fraud, given by an insolvent debtor to a creditor in preference to other unsecured creditors, is valid, unless such insolvent within sixty days from the time of making the mortgage makes an assignment for the benefit of creditors/ In Michigan, preferences are void only in common-law assignments, because forbidden by statute.^ The statute inhib- its the debtor from preferring a creditor in the instrument.^ In Vermont no special remedy is prescribed for the recov- ery of property conveyed in fraud by the insolvent law, but the assignee may resort to any appropriate proceedings at law or in equity.^" In Ohio,^^ an insolvent debtor may make an assignment and prefer one creditor to another.'^ Under the Arkansas law,'^ a mortgage in form may consti- tute an assignment by reason of the intention of the parties and the operation of the instrument.^* ' McCutchen v. Caldwell (Ky.), 13 S. W. Rep. 1072. *Gen. Stat., ch. 44, art. 2. ^ Farmer v. Hawkins, 79 Ky. 182. * Rev. Stat., ch. 72, sect. 49. 6 Weber v. Mick, 131 111. 520. «Rev. Stat., 1883, sect. 1693 a. ^ Menzesheimer v. Kennedy, 75 Wis. 411. 8 How. Stat., sect. 8739. ^Whipple V. Stebbins, 67 Mich. 507 ; Burnham v. Haskins, 79 Mich. 35. w Ball V. Sawyer, 62 Yt. 367. " Rev. Stat., isSO, sect. 6343. ^^ Rouse r. Bank, 46 Ohio St. 493 ; Smith, etc., Co. v. McGroarty, 136 U. S. 237. 1* Mansf. Dig., sects. 30.5-309. ^ " Richmond v. Mississippi Valley, 52 Ark. 30. 840 CONTRACTS IN VIOLATION OF LAW. Generally where an insolvent debtor conveys his property to one or more preferred creditors under such circumstances, that it is evidently there is no intention of giving security merely, and of going on with the business, but an absolute parting with the jus dispgnendi, then such transfer is an assignment, and is void.' In Indiana a mortgage made in good faith by an insolvent debtor, covering all of his property to secure a bona fide debt, although executed in contemplation of an assignment which follows the succeeding day, is not carried into and made a part of the assignment ; but it will stand as a valid and enforceable lien even where the mortgagee has knowledge of the contem- plated assignment.^ And generally under the statute, after an assignment becomes voluntary, no creditor not having a prior lien, can gain a preference ; nor has any creditor the right to object that preferences have been gained by others who, by superior vigilance, in good faith, have acquired liens prior to the assignment.^ Where an insolvent corporation has a right to prefer one creditor over another, in order to impart legal efficacy to its acts, in attempting to create preferences, it must exercise its rights in this regard in a lawful manner.* Thus, where a mortgage is made, by an insolvent corporation, pending a suit by a creditor to wind it up as an insolvent cor- poration, and also in violation of an injunction issued by the Court of Chancery, the mortgage is a nullity, and a subsequent dismissal of the creditor's suit will not render the mortgage a valid instrument.^ § 811. Fraudulent Intent. — A secret arrangement by a debtor who compounds with his creditors to pay one creditor iMeinhard v. Strickland, 29 S. Car. 491 ; Colliers. Wood, 85 Ala. 91 ; Logan V. Logan, 22 Fla. 561. 2 Gilbert v. McCorkle, 110 Ind. 215. 3 Dias V. Bouchaud, 10 Paige (N. Y.), 445, 461 ; Gage v. Perry, 69 Iowa, 605 ; Johnson's Appeal, 103 Pa. St. 373 ; Dunham v. Whitehead, 2i N. Y. 131 ; Atkinson v. Tomlison, 1 Ohio St. 237 ; United States v. McLellan, 3 Sum. C. C. 345 ; Henshaw v. Sumner, 23 Pick. (Mass.) 446. * Bissell V. Besson, 47 N. J. Eq. 580. ^Bissell V. Besson, 47 N. J. Eq. 580. FRAUDULENT MORTGAGES. 841 more than he does the others is a fraud upon the others ; and a mortgage given to carry out such an arrangement is void. Such a consideration will invalidate the mortgage in toto} When the consideration is made up of several distinct trans- actions, some of which are entirely fair and honest, not tainted with fraud, and the valid consideration can be separated with certainty and ease from the vicious, then it may be held good for so much as is free from the taint of illegality.^ If the fraudulent intent is not carried out, ihe mortgage is not invalid ; ^ and a mortgage may be fraudulent with ref- erence to a particular creditor and valid as to others/ A defrauded party applying to a court of equity for relief must be compelled to exonerate himself from all imputations of ratifying, in any degree, the fraud of wliicli he complains. He cannot be permitted to affirm as to a part of the transac- tion, and repudiate as to the residue, except in very special cases, where it is evident no injustice will be done. In an action of this character, the defrauded party cannot be allowed to retain the benefits of the transaction, and at the same time to cancel and annul the mortgage security. Such a proceed- ing would be at once a ratification and a repudiation, and these cannot concur in the same action ; where such a case is presented, it is within the power, and it is the duty of the trial court, to impose equitable terms upon the plaintiff as a condi- tion to the granting of the relief demanded.^ § 812. Stating THE Consideration More THAN THE Debt. — If the consideration is placed at a sum slightly in excess of the real debt, it is not sufficient to stamp it with fraud, in the absence of a fraudulent intent on the part of the mortgagee.® » I^awrence r. Clark, 36 N. Y. 128 ; Sharp v. Teese, 4 Halst. (N. J. Eq.) 352, 440. ^Carleton r. Woods, 28 N. H. 290; Robinson i\ Green, 3 Met. (Mass.) 159; Feldman v. Gamble, 26 N. J. Eq. 494. ^Corbett r. Woodward, 5 Saw. C. C. 403. Hulsman v. Whitman, 109 Mass. 411. * Carlton v. Hulett (Minn.), 51 N. W. Rep. 1053; Knappen v. Freeman, 47 Minn. 491 ; Bradley v. Bosley, 1 Barb. Ch. (N. Y.) 125. See, also, Grymea V. Sanders, 93 U. S. 55 ; Savery v. King, 5 H. L. Cas. 627. , «Van Patten v. Thompson, 73 Iowa, 103; Frost v. Warren, 42 N. Y. 204 ; 842 CONTRACTS IN VIOLATION OF LAW. But when the value of the property is more than double the amount of the debt secured, or greatly in excess of it, it is, to say the least, a badge of fraud/ A mortgage is not void because no amount is specified as secured ; ^ or because it includes debts due other persons which the mortgagee verbally assumes to pay.^ Article 4. Who May Set Up Fraud. § 813. Rights of Mortgagor and Mort- § 816. Subsequent Purchaser. gagee. § 817. Proof. § 814. When the Mortgagor is an In- § 818. Burden of Proof. nocent Party. | 819. Defense — Want of Consider- § 815. Who May Attack. ation. § 813. Rights of Mortgagor and Mortgagee. — Courts of equity will not lend aid to relieve a mortgagor from the con- sequences of his own fraudulent act. Nor will it aid the mort- gagee in securing him in the enjoyment o^ the property fraudulently mortgaged where its interposition is necessary for that purpose.'* A fraudulent mortgage, duly executed and delivered, is binding between the parties, and the mortgagor cannot set it aside on account of his own fraud.^ So executory contracts are likewise valid between the origi- nal parties, although they were entered into for the purpose of Weeden v. Hawes, 10 Conn. 50 ; Wilhson v. Desenberg, 41 Mich. 156 ; Tully V. Harloe, 35 Cal. 302 ; Butts v. Peacock, 23 Wis. 359 ; Blakeslee v. Rossman, 43 Wis. 116 ; GoflF v. Rogers, 71 Ind. 459 ; Hughes v. Shull, 33 Kan. 127 : Hoey V. Pierron, 67 Wis. 262. 1 Wright ('. Hencock, 3 Munf. (Va.) 521 ; Mitchell v. Beal, 8 Yerg. (Tenn.) 134; Anderson v. Hunn, 5 Hun (N. Y.), 79; Bennett v. Bank, 5 Humph. (Tenn.) 612 ; Bailey v. Burton, 8 Wend. (N. Y.) 339 ; Hawkins v. Alston, 4 Ired. Eq. (N. Car.) 137 ; Hubbard v. Turner, 2 McLean, C. C. 519. 2 Youngs V. Wilson, 27 N. Y. 351, reversing 24 Barb. (N. Y.) 510. * Carpenter v. Muren, 42 Barb. (N. Y.) 300. * Brookover v. Hurst, 1 Met. (Ky.) 665 ; Wearse v. Peirce, 24 Pick. (Mass.) 141. 5 Parkhurst v. McGraw, 24 Miss. 134 ; Harvey v. Varney, 98 Mass. 118 ; Upton V. Craig, 57 111. 257. FKAUDULEXT MORTGAGES. 843 preventing the creditors of the vendor from attaching the property.^ Such fraudulent mortgages as to creditors cannot be avoided by the mortgagor.^ If the creditors of the mortgagor do not intervene, the mort- gage stands as valid.^ The fact that a person executes a mortgage while he is in the last stages of a certain disease, does not show that the exe- cution was procured through mistake or fraud, especially when the instrument was executed in his own house and in the ab- sence of the mortgagee/ In New York ^ mortgages on land, executed in consideration of money won at betting or gambling shall be void as to the mortgagees, and shall inure to the sole benefit of such persons as would have been entitled to the mortgaged property if the mortgagor had died immediately upon the execution of the mortgage. Under this statute, in an action by the assignee of a deceased mortgagee to foreclose a mortgage, as the mort- gagor would be released from personal liability on the bond to secure which the mortgage was given, he has such an interest in the result as to preclude him, under the statute,^ from testi- fying that the mortgage and bond were given to secure the payment of money won at gaming, and hence the mortgage may be enforced.^ § 814. When the Mortgagor is an Innocent Party. — But where there is no fraud, misrepresentation, or concealment on the part of the mortgagor, neither he nor his heirs are estopped from setting up the invalidity of the mortgage in an action of foreclosure brought by the mortgagee.^ ^ Knapp ?■. Lee, 3 Pick. (Mass.) 452. ^ Bonesteel v. Sullivan, 104 Pa. St. 9 ; Gill v. Henry, 95 Pa. St. 388 ; Stores v. Snow, 1 Root (Conn.), 181 ; Dyer v. Homer, 22 Pick. (Mass.) 253. ^ Upton V. Craig, 57 111. 257. * Johnston v. Derr, 110 N. Car. 1. 5 1 Rev. St., p. 663, sects. 16, 17. «Code Civil Proc, sect. 829. 'Luetchford v. Lord, 132 N. Y. 465. ^ Brewster v. Madden, 15 Kan. 249. 844 CONTRACTS IN VIOLATION OF LAW. But if the mortgagor made fraudulent representations in inducing the mortgagee to make the loan, he cannot set up a defense inconsistent with such statements/ The wrong which constitutes a legal fraud, that forms the basis of an estoppel in such case, is the repudiation of what has been affirmed, in words or conduct, to be true ; and it is not necessary that there should be prior positive fraud to create an equitable estoppel.^ And a suit instituted by a creditor, though on behalf of him- self and other creditors who may come in, is subject to the complete and absolute dominion of the parties until decree is made ; and they are entitled to settle and have the suit dis- missed, without the consent of the other creditors, at any time before decree, and until decree the other creditors have no in- terest in the suit.^ Where the mortgagee is not misled by the mortgagor, he cannot make him responsible for the fraud of a third party. Thus, a party executed a deed of conveyance with a nominal consideration, and delivered it to a solicitor, with authority to deliver it to the grantee or mortgagee as security for the loan to her son of $600. The grantee, in the grantor's ab- sence, accepted the deed, which he supposed came from the son's possession as security as well for $600 then loaned as for $250 previously advanced. He was notified by the solicitor that the grantor had executed it as security for $600 only, but relied upon an untrue statement by the son that his mother had agreed that it should stand as security for both sums. Under these circumstances, the grantor could redeem by paying the $600.* § 815. Who May Attack. — A general creditor cannot sue to set aside a mortgage on the ground that it is in fraud of 1 Kelley v. Fipk, 110 Ind. 552. '^ Gregg V. Wells, 10 Ad. & El. 90 ; Richardson v. Chickpring, 41 N. H. 380 ; Catherwood v. Watson, 65 Ind. 576; Rogers v. Union Cfert L. Ins. Co., Ill Ind. 343. ^Handford v. Storie, 2 Sim. & S. 196; Pemberton v. Topham, 1 Beav. 316; Innes v. Lansing, 7 Paige (N. Y.), 583 ; Thompson v. Fisler, 33 N. J. Eq.480. *McKee v. Jordan (N. J.), 24 At. Rep. 398. FRAUDULENT MORTGAGES. 845 creditors.* A third party not being a subsequent purchaser from the mortgagee of the mortgagor, nor a creditor of the mortgagor who has laid hold of the mortgaged property by legal process, is not in position to object to the validity of the mortgage.^ When a conveyance is said to be void against creditors, the reference is to such parties when clothed with either judgments and executions, or such other process as the law provides for the collection of debts.^ It is commonly said that a fraudulent conveyance is void against creditors ; but this must be taken in a limited sense. Creditors cannot seize the property of their debtor without any legal process, and appropriate it of their own accord to the satisfaction of their debts. They must follow the process pro- vided by law.* The mortgage cannot be questioned by a creditor at large, except by some process known to the law.^ An assignee for the benefit of creditors may not only defend actions to foreclose mortgages which he deems fraudulent, but, ordinarily, is the only one who can institute actions to set aside mortgages or conveyances executed by the assignor prior to the assignment for fraud .^ § 816. Subsequent Purchaser. — A subsequent purchaser of the equity of redemption upon an execution sale, may set aside the mortgage on account of fraud.'^ And so may a cred- itor of the mortgagor, after having levied an execution on the equity of redemption and purchasing it at sheriff's sale.^ So a subsequent judgment creditor may show that a prior 1 Wol(7ott V. Ashenfelter (N. Mex.), 23 Pac. Rep. 780. "^ Ellingboe v. Brakken, 36 Minn. 156 ; Tolbert v. Horton, 31 Minn. 518. 3 Van Heusen v. Radcliff, 17 N. Y. 580. * Bump's Fraud. Con. (3d. ed.) p. 460. * Fearey v. Cummings, 41 Mich. 370 ; People's Sav. Bank v. Bates, 120 U. S. 556 ; Thompson v. Van Vechten, 27 N. Y. 568. ® Voorhees v. Carpenter, 127 Ind. 300 ; Cooper r. Perdue, 114 Ind. 207 ; Bar- ker V. Barker, 2 Woods, C. C. 87 ; In re Leiand, 10 Blatchf. C. C. 503 ; Hilde- burn V. Brown, 17 B. Mon. (Ky.) 779 ; Hratchinson v. Bank (Ind.), 30 N. E. Rep. 952. ^ Matson v. Capelle, 62 Mo. 235. * Van Deusen v. Frink, 15 Pick. (Mass.) 449. 846 CONTRACTS IN VIOLATION OF LAW. mortgage was fraudulently executed and without consideration in an action by the mortgagee to foreclose the mortgage.^ A subsequent incumbrancer cannot set up fraud in a prior mortgage.^ The English courts hold that a voluntary settlement, though made in good faith, and without any present intention to defraud any person, is fraudulent against the subsequent purchaser, however remote in time. This doctrine has often been criticized and regretted in England,' and has been repu- diated in this country/ It is a sound and settled principle that notice to a purchaser of a prior fraudulent deed will not affect the subsequent pur- chaser, and that such subsequent purchaser may avail himself of the fraud in the first deed.^ The same principle is acted upon in the case of conveyances of land made for the purpose of defrauding future creditors. It is well settled, as Vice-Chancellor Pitney says, in order to avoid such conveyances as to subsequent creditors, they must have been conceived in fraud, as distinguished from mere con- structive fraud ; and it is equally well settled that when such fraud clearly appears the registry of the fraudulent deed will not help it, when attacked by a subsequent creditor.® Thus, a father, being the mortgagee and owner of two bonds and mort- gages, of $5,000 and $2,000, respectively, contracted with a single woman to marry her, and to settle upon her by assign- ment, before marriage, the $5,000 bond and mortgage. Nine- teen days before the wedding, for the purpose of defrauding the contractee, he assigned both bonds and mortgages to his son for the express consideration of one dollar, and love and > Kelly V. Lenihan, 56 Ind. 448. = Nichols V. Weed Sewing-Machine Co., 27 Hun (N. Y.),200; 97 N. Y. 650. ' Doe V. Manning, 9 East, 59 ; Roberts on Fraud. Conv. 39-41 ; May on Fraud. Conv. 204. *Sterry v. Arden, 1 Johns. Ch. (N. Y.) 261; Verplank v. Sterry, 12 Johns. (N. Y.) 536 ; Cathcart v. Robinson, 5 Pet. (U. S.) 280 ; Seal v. Warren, 2 Gray (Mass.), 447. * Verplank v. Sterry, 12 Johns. (N. Y.) 536, 557. See, also, Roberts on Fraud. Conv. 30-41. sMellick v. Mellick, 47 N.J. Eq. 86. FRAUDULENT MORTGAGES. 847 afFection, but actually received a consideration in money less than the amount of the smaller bond and mortgage. He after- ward gained possession of the $5,000 bond and mortgage and assigned the same to the contractee just before marriage with her. It was held that the contractee was entitled to the bene- fit of the securities notwithstanding that the prior assignment to his son was recorded on the day it was executed, and that the son was innocent and ignorant of the fraudulent scheme of his father.^ § 817. Proof. — In order to render a mortgage of real estate made by an insolvent debtor void under the bankrupt law,^ it must be affirmatively shown by his assignee in bankruptcy, that the grantee had reasonable cause to believe that the mort- gagor was insolvent at the time he executed the mortgage, and that it was made with the intention to defeat the bankruptcy law.^ This act requires that the insolvent's creditor should have some reasonable cause to believe him insolvent. He must have knowledge of some fact or facts calculated to pro- duce such belief in the mind of an ordinary intelligent man.** And a mortgage made with the intent to prefer contrary to the bankrupt law is void against the assignee of the mortgage, although the property be a homestead and exempted from exe- cution.^ When a mortgage is executed in the absence of the mort- gagee, the declarations of the person thus executing the mort- gage made by him at that time are not competent to show that the execution of the instrument was procured through mistake or fraud." In some States it is provided by statute that when deeds and mortgages are claimed to have been executed in fravid of cred- itors, the question of fraudulent intent shall be deemed a ques- tion of fact; in such States there can be no constructive 1 Mellick r. Mellick, 47 N. J. Eq. 86. "Act of March 2, 1867, ch. 176, sect. 35 ; 14 Stat 534. 'Barbour v. Priest, 103 U. S. 293. * Grant v. Bank, 97 U. S. 80, 82. •^Beals V. Clark, 13 Gray (Mass.), 18. * Johnston v. Derr, 110 k. Car. 1. 848 CONTRACTS IN VIOLATION OP LAW. fraud.' So the question of fraud is one of fact and cannot be inferred as a matter of law.^ Hence, whatever is necessary to be found to sustain a conclusion of law must be alleged ; con- sequently, under such statutes, to raise an issue of fraud, fraud, as a fact, must be alleged.^ The fraudulent intent, which is a question of fact, will not be inferred from the facts stated in the complaint, either for that or any other purpose, for the reason that a voluntary con- veyance by an insolvent debtor, is not necessarily fraudulent and void as to creditors.* The mere fact that a mortgagee withholds the mortgage from record under an agreement with the mortgagor, though a badge of fraud, does not make such mortgage fraudulent as to exist- ing or subsequent creditors.^ Pertinent declarations made by the person while on his way to procure the execution of a mortgage to secure an antecedent debt or liability, the expedition having resulted in its procure- ment, are admissible in evidence against the mortgagee on the question whether the mortgage was procured by fraud or du- ress. They are a part of the res gestae of the transaction and, consequently, are admissible in evidence irrespective of the relation of agency between the mortgagee and the person who procures for him the execution of the mortgage.® § 818. Burden of Proof. — The burden of proof rests on the one claiming a conveyance to be fraudulent to show that it is in plain violation of law.^ So where in an attachment proceeding, a third person 1 Cicero v. Picken, 122 Ind. 260. 2 Farmers' L. & Trust Co. v. Railroad Co., 127 Ind. 250 ; Smith v. Long, 9 Daly (N. Y.), 429, 436. 3 Smith V. Long, 9 Daly (N. Y.), 429, 436 ; Hutchinson v. Bank (Ind.), 30 X. E. Rep. 952. * Threlkel v. Scott, 89 Cal. 351 ; Bull v. Bray, 89 Cal. 286 ; Jamison v. King, 50 Cal. 130 ; McFadden v. Mitchell, 54 Cal. 628 ; Scythe Co. v. Foster, 36 N. Y. 561 ; Bank v. Reed, 27 Abb. N. C. (N. Y.) 5; Martin v. Fox, 40 Mo. App. 661. 5 Hutchinson v. Bank (Ind.), 30 N. E. Rep. 952. « Small V. Williams, 87 Ga. 681. ^Pettingill v. Jones, 30 Mo. App. 280 ; Rochester v. Sullivan (Ariz.), H Pac. Rep. 58. FRAUDULENT MORTGAGES. 849 claims the attached property under a deed of trust which the plaintiff attacks as fraudulent, the burden is uj^on the plaintiff to show fraud.^ Where the natural inference from the proofs made does not necessarily lead to the presumption of a fraudulent intent, but the evidence relied on is equally consistent with innocence as with a wrong-doing, that construction must be placed upon it which will exonerate the party implicated from a dishonest intent.^ §819. Defense — Want of Consideration. — The intention to defraud creditors is common to both parties, and neither can be permitted to show that the notes and mortgage were made to delay or defraud creditors. The mortgagor cannot show fraud as a substantive ground of defense, but he may show want of consideration, and when this is shown the mortgagee cannot rebut this defense by showing that the notes and mort- gage were also given to defeat creditors of the mortgagor.^ Between the original parties, want of consideration is a good defense in a foreclosure suit.* And a purchaser of the right of redemption of the assignee of the mortgagor may avoid the mortgage as to creditors for want of consideration in the notes secured by the mortgage.^ The English rule is that purely voluntary settlements of land- are void under 27 Eliz., c. 4, as against subsequent pur- chasers, no matter how free they were of any actual fraud. Of late years the English judges have caught at very small matters of consideration for such voluntary settlements, in order to relieve against the hardship of this rule. Lord Hatherly says : '' With regard to the observation which was made by counsel, that purchasers would hardly know how they are to deal with property where there has been a volun- * Deering r. Collins, 80 Mo. App. 73. " Morris v. Talcott, 96 N. Y. 100 ; Shultz v. Hoagland, 85 N. Y. 464. 3 Clark V. Clark, 62 N. H. 267 ; Wearse v. Peirce, 24 Pick. (Mass.) 141 ; Han- nan V. Hannan, 12.3 Mass. 441. * Northy v. Northy, 45 N. H. 141. ' Brewer v. Hyndman, 18 N. H. 9. 64 850 CONTRACTS IN VIOLATION OF LAW. tary settlement, I do not think anything could be more un- satisfactory than what we find to be the state of the law under which a person, with full and distinct knowledge of a volun- tary settlement, is able at any time to overthrow it. It is quite established that, although a settler cannot get rid of such a settlement directly, he can do so indirectly, by making a mortgage of the property to somebody else for the purpose of being able to destroy the settlement. Now, it is not for me to say whether the mode by which the court has at- tempted to remedy some of the evil of this state of the law, namely, by holding that a small and inadequate consideration is sufficient to support such a settlement under the statute of Elizabeth has diminished the extent of the mischief. But so it is, that a very small consideration is admitted to be suffi- cient." ^ When the defense set up to an action to foreclose is that the plaintiff fraudulently misrepresented the quality and value of the mortgaged land, but fails to state the value of the land had it been as represented, and the amount of damages result- ing from the fraud, the answer presents only a defense of a total failure of consideration, and not a counter claim for damages.^ Article 5. Sunday Laws. 2 820. Mortgages and Notes Executed § 822. Doctrine that Sunday Con- on Sunday. tracts are Voidable, but § 821. Doctrine that Sunday Contracts may be Katified. are Absolutely Void. § 820. Mortgages and Notes Executed on Sunday. — As a general rule contracts executed on Sunda}'' are void ; this is affirmed by statutory provisions. But there are exceptions to this rule, or the statutes are not interpreted the same. Thus, in Illinois, a note executed and delivered on Sunday is valid ' Bayspoole v. Collins, L. R. 6 Ch. 228, 232. See, also, Price v. Jenkins, 5 Ch. Div. 619. ^ Kobiter v. Albrecht (Wis.), 61 N. W. Rep. 1124. See, also, Herman v. Gray, 79 Wis. 182. FEAUDULENT MORTGAGES. 851 provided the parties thereto do not disturb the peace in per- fecting the transaction.^ But many courts interpret such statutes as making all con- tracts executed on Sunday as invalid and incapable of ratifi- cation on a secular day.^ § 821. Doctrine that Sunday Contracts are Absolutely Void. — Some courts treat Sunday contracts as absolutely void, and incapable of ratification on a secular day. Thus, Chief Justice Beasley says that the parties cannot legalize that which the law has declared illegal. " It is competent to them to im- part new efficacy to a voidable act, but they have no power to give life to an act which, from reasons of public policy, has been ordained by the legislative authority to be absolutely void." ^ So a parol agreement to extend the time of the pay- ment of a mortgage debt, entered into on Sunday, is absolutely void.* And a loan made on Sunday is void.^ But when Sunday's sacredness is limited to sunset of that day, a mortgage executed and delivered after sunset on Sunday is valid, and can be enforced.^ § 822. Doctrine that Sunday Contracts are Voidable, BUT may be Ratified. — Some of the courts in construing Sunday contracts hold that they are voidable, but may be rati- fied and validated on a secular day. Thus, in Iowa, though notes and a mortgage to secure the same are voidable if exe- cuted on Sunday, a payment on a secular day on such notes is a ratification thereof, and both notes and mortgage are thence- forth valid obligations. The payment of a part of a debt, whether the payment is made to apply upon the notes or mortgage, is a ratification of both instruments. Both are but incidents of the debt, and the satisfaction of the debt will dis- ^ Richmond v. Moore, 107 111. 429. " Reeves v. Butcher, 31 N. J. L. 224 ; Header v. White, 66 Me. 90 ; Finn v. Donahue, 35 Conn. 216. 3 Reeves r. Butcher, 31 N. J. L. 224. *Ruph V. Rush (N. J.), 18 At. Rep. 221. * Header r. White, 66 Me. 90; Finn v. Donahue, 35 Conn. 216. * Tracy v. Jenks, 15 Pick. (Mass.) 465. 852 CONTRACTS IN VIOLATION OP LAW. charge both. So payment upon the debt will discharge, pro tanto, both instruments and thereby operate as a ratification of both.^ But if the agreement is noi ratified on a secular day there- after, the mortgage and notes are void.^ And in Tennessee, because a mortgage is acknowledged on Sunday does not, for that reason, make it void.^ So a mort- gage given to secure the payment of money and dated on a secular day, may be enforced, though the note was made and executed, and the money borrowed, on Sunday.* So, in Wisconsin, if a note and mortgage are executed on Sunday, but not delivered until the next day, they are valid.'^ The rule held in Vermont is that such contracts may be affirmed on a subsequent secular day and thus made valid." In Massachusetts a deed was executed and delivered on Sun- day to secure the mortgagee. An oral agreement was also entered into that the mortgagee should hold the land in trust for the mortgagor after his debt was discharged ; a declaration of trust was afterward executed, and it was held that because the deed was executed and delivered on Sunday, it did not entitle the grantee to hold the land discharged of the trust. The apparent title conveyed was qualified by the trust imposed upon it, as effectually as if the terms of the trust were contained in the deed itself. The title, such as it was, passed to the grantee and was held in trust. Neither party could assert rights incon- sistent with the conveyance.^ ^Russell V. Murdock, 79 Iowa, 101. Compare Harrison v. Colton, 31 Iowa, 16. "^ Hanchett v. Jordan, 43 Minn. 149 ; Schwab v. Bigby, 38 Minn. 395. ' Lucas V. Larkin, 85 Tenn. 355. * Gwinn v. Simes, 61 Mo. 335. See, also. Heller v. Crawford, 37 Ind. 279. HVilson r. Winter, 6 Fed. Rep. 16. 6 Adams v. Gay, 19 Yt. 358. 'Faxon v. Folvey, 110 Mass. 392. See Myers v. Meinrath, 101 Mass. 366 ; Hall V. Corcoran, 107 Mass. 251. PART V. EIGHTS OF PARTIES BEFORE DEFAULT. CHAPTER XXI. the rights of the mortgagor. Article 1. Construction of Mortgagor's Covenants. I 823. Personal Liability. § 825. As Evidence against the Mort- l 824. Statutory Provisions. gagor. § 823. Personal Liability. — The mortgage, unless it con- tains some express contract to that effect, is not of itself an instrument which imports personal liability of the mortgagor to the mortgagee. Justice Clark ably says that the remedy of such mortgage is confined to the land in pledge, unless accom- panied by some cause of action which, of itself, creates a per- sonal liability, in which case the mortgage is merely a collateral security, and does not merge such claim. Unless the mortgage contains an express covenant to that effect, it does not of itself import any personal liability for the money it secures.' A personal liability will not be implied.^ And the mere recital of a consideration is not sufficient to .create such a liability,^ even though the condition stipulates that the grant is intended as security for the payment of a certain amount with interest.* ^ Baum V. Tonkin, 110 Pa. St. 569. ^Sliafer v. Bear River, etc., Co., 4 Cal. 294 ; Smith v. Rice, 12 Daly (N. Y.), 307 ; Howel v. Price, 1 P. Wm. 291, 292 ; Coleman v. Van Rensselaer, 44 How. Pr. (N. Y.) 368. 3 Henry v. Bell, 5 Vt. 393. * Severance v. Griffith, 2 Lans. (N. Y.) 38 ; Coleman v. Van Rensselaer. 44 How. Pr. (N. Y.) 368. 853 854 RIGHTS OF PARTIES BEFORE DEFAULT. The mortgagor in possession is liable upon covenants which run with the land.* And when he covenants to insure he will be bound by them, even if the agent of the mortgagee tells him that the mortgagee will see to the insurance,^ but his covenants to insure do not import any admissions as to the other recitals and covenants.^ A mortgage that recites that a general execution shall not issue thereon, does not create a personal liability.* But a re- cital that the mortgagor is indebted in a certain sum which should have been previously paid, is a covenant to pay money, and the mortgagor is personally liable.^ An unqualified ad- mission of indebtedness by the mortgagor is equivalent to an express covenant ; ^ but a recital that the mortgagor " is justly bound " does not make a personal liability on the part of the mortgagor.'' § 824. Statutory Provisions. — It is provided by statutory provisions in some of the States that no mortgage shall imply a covenant for payment of the debt secured. So if the mortgage contains no covenant to pay the amount, no personal liability attaches to the mortgagor, and the mort- gagee's remedy must be confined to the land.* A verbal agreement will not change this rule, and the remedy is still upon the land.* Of course the mortgage must secure the payment of some debt or the performance of some duty, but it is not essential that there should be any covenant to that efiect,**^ and it is not ^Trustees v. Streeter, 64 K H. 106. 2 Brant v. Gallup, 111 111. 487. 3 Coleman v. Van Renssalaer, 44 How. Pr. (N. Y.) 368. * Kennion v. Kelsey, 10 Iowa, 443. ^ Couger V. Lancaster, 6 Yerg. (Tenn.) 477. See, also, Philadelphia & B. R. R. Co. r. Johnson, 54 Pa. St. 127. « Elder v. Rouse, 15 Wend. (N. Y.) 218. ^ Smith V. Rice, 12 Daly (N. Y.), 307. ^ California : Civil Code, sect. 2928 ; Michigan : Comp. Laws, 1871, sect. 4208 ; Minnesota : Gen. Laws, 1866, ch. 40, sect. 6 ; New York : 2 Rev. Stat., p. 1119; Wyoming: Comp. Laws, 1876, ch. 3, sects. 5, 6. 8 Van Brunt v. Mismer, 8 Minn. 232; Weed v. Covill, 14 Barb. (N. Y.) 242. lOHickox V. Lowe, 10 Cal. 197 ; Dougherty v. McColgan, 6 Gill & J. (Md.) 275. I THE EIGHTS OF THE MORTGAGOR. 855 necessary that there shall be any personal security/ But an express covenant to pay the debt makes the mortgagor per- sonally liable.^ § 825. As Evidence against the Mortgagor. — The recit- als in a mortgage are competent evidence against the mort- gagor ; ^ but when a negotiable note is given, it must be pro- duced before judgment, unless its absence is accounted for by being lost or accidentally destroyed.* The note is not merged in the mortgage or extinguished by it.^ The recitals may refer to a present indebtedness or to one contemplated by the parties, and may be explained.^ Article 2. Relative Rights as to the Mortgagee. I 826. Possession. I 833. Appointment of Receiver. \ 827. Recitals may Imply that the ^ 834. Royalties. Mortgagor may Retain Pos- I 835. Use and Occupation by Mort- session. gagor. I 828. Statutory Provisions. I 836. Adverse Possession. I 829. The Property Must be Ap- I 837. Sale Subject to the Mortgage. plied to the Mortgage Debt. § 838. Dedication and Easements. I 830. Rents and Profits. I 839. Taxes. § 831. Mortgage of Leasehold. § 840. Abandonment. \ 832. After Forfeiture. § 841. Surrender of Property. § 826. Possession. — In those States where it is held that the mortgage conveys the legal estate, defeasible on performance of the condition, the right of immediate possession is given to the mortgagee, unless by the terms of the mortgage possession is reserved in the mortgagor.^ 1 Brookings v. ^Vhite, 49 Me. 479 ; Mitchell r. Burnham, 44 Me. 286. ^ Brown v. Cascaden, 43 Iowa, 103 ; Newbury v. Rutter, 38 Iowa, 179. ^Warner v. Brooks, 14 Gray (Mass.), 107. *Chewning v. Proctor, 2 McCord (S. Car.), Ch. 11. ^ Ligget V. Bank, .7 Serg. & R. (Pa.) 218 ; Williamson v. Andrew, 4 Har. & M. (Md.), 482; Shaw v. Burton, 5 Mo. 478. *Keeler v. Keeler, 3 Stockt. (X. J. Eq.) 458; Ellis v. Messervie, 11 Paige (N. Y.), 467 ; Hone v. Fisher, 2 Barb. Ch. (N. Y.) 559. ' Morse r. Whitcher, 64 N. H. 591 ; Brastow v. Barrett, 82 Me. 456 ; Watford V. Gates, 57 Ala. 290 ; Youngman v. Elmira, etc., R. R. Co., 65 Pa. St. 278 856 RIGHTS OF PARTIES BEFORE DEFAULT. If the mortgagor is left in possession he is regarded, fo. most purposes, as the owner and takes the rents and profits/ If tlie mortgagor and mortgagee be Hving together in posses- sion of the premises after condition broken, it is a question of fact for the jury to determine as to who has the possession.^ In tliose mortgages where possession is reserved to the mort- gagor, his possession may be terminated after default by the mortgagee,^ and if the grantor in a trust deed wrongfully re- fuses to give possession after demand, he is liable to the trustee in damages. The grantor's interest is not an estate upon con- (Jition, but an estate upon a conditional limitation, which terminates with the happening of the contingency, and the right of possession would cease without entry or demand.* And where the mortgagor has possession under the statute until condition broken, he has, as against the mortgagee, the legal right to the possession, and whatever he severs from the real estate before condition broken, becomes his property.^ Though the mortgagee is entitled to the possession of the land until he takes it legally, the possession of the mortgagor is not illegal, and a contract of the sale of timber thereon by the latter is not in contravention of the Arkansas statute.*^ And in Missouri real property destroyed by the neglect of a stranger makes him liable to the mortgagor, who may sue for damages ; and this rule applies to personalty, even when the condition was broken.'^ § 827. Recitals may Imply that the Mortgagor may Retain Possession. — Though the mortgage does not state in express terms that the mortgagor shall remain in possession, ^ Anderson v. Strauss, 98 111. 485. => Hall V. Tunnell, 1 Houst. (Del.) 320. 2 Hill V. Robertson, 24 Miss. 368; Pratt v. Skolfield, 4.5 Me. 38G; Pierce v. Brown, 24 Vt. 165 ; Rev. Stat, of Vt. 1880, sect. 1258. nValker r. Teal, 7 Saw. C. C. 39. ^ Brunswick-Balke-Callender Co. v. Herrick, 63 Vt. 286 ; Rev. Stat. Vt., sect. 1258. « Stewart v. Scott, 54 Ark. 187; Mansf. Dig., sects. 1658, 1659, 1663, Supp. ' Logan V. Wabash, etc., Co., 43 Mo. App. 71. THE RIGHTS OF THE MORTGAGOR. 857 yet recitals in the instrument may imply that such is the con- tract. Thus, a stipulation that the mortgagee may enter after default, implies that the mortgagor shall remain in possession/ So if the mortgagee takes a lease of the premises, covenanting to pay the mortgagor rent.^ The condition of the parties will often determine this point. Thus, when the agreement is to support ; ^ or the mortgagor is to work the farm on shares/ A stipulation that the mortgagee may take possession upon default, and receive the rents and profits until the mortgage debt is paid may be enforced. If the mortgagor pays the debt after the mortgagee has taken possession, he has a right to the property.^ To fullv understand this branch of the sub- ject as to the right of possession, the law as laid down in Chapter I must be consulted.® § 828. Statutory Provisions. — ^By referring to Chapter I, it will be seen that several of the States have enacted that the mortgagee shall not take possession of the mortgaged premises except by buying +^/em at the foreclosure sale.'' The mort- gagor's possessioiu it a matter of right under such a statute.^ And a stip'cTlation that the mortgagee may take possession after default and receive the rents and profits, is a nullity ; ^ but the CQ^cirt may appoint a •receiver to collect the rents and profits, when the property is inadequate to pay the debt, pending foreclosure.^" § 829. The Property Must be Applied to the Mort- gage Debt. — If the mortgagor sells his equity of redemption, ' McMillan v. Otis, 74 Ala. 560. ^ Newall V. Wright, 3 Mass. 138. 'Soper V. Guernsey, 71 Pa. St. 219. *Lamb v. Foss, 21 Me. 240 ; Rhoades v. Parker, 10 N. H. 83 ; Flagg v. Flagg, 11 Pick. (IMass.) 475 ; Norton v. Webb, 35 Me. 218 ; Bryant v. Erskine, 55 Me. 153, 15G ; Wales >\ Mellen, 1 Gray (Mass.), 512. ^ Mclntyre v. Whitfield, 13 Sm. & M. (Miss.) 88 ; Hyman v. Kelly, 1 Nev. 179. « Sects. 11-27. ' Sects. 29-54. * Kidd V. Teefle, 22 Cal. 255 ; Crippen v. Morrison, 13 Mich. 23. ^Sickler v. Delfs, 25 Kan. 159. /"Post V. Dorr, 4 Edw. (N. Y.) 412; Hunter v. Hays, 7 Biss. C. C. 362. 858 EIGHTS OF PARTIES BEFORE DEFAULT. and the mortgage is assumed by the purchaser, the mortgagor becomes in effect a surety of the debt, and can compel the mortgagee to apply first the property to the debt, or to transfer to him if he pays the debt. Therefore, if the mortgagee releases a portion of the property to such purchaser, he must account for it in an action against tlie mortgagor to collect the debt.^ § 830. Rents and Profits. — Substantially the legal title to the mortgage premises, both at law and in equity, is in the mortgagor during the life of the mortgage. His right to use and occupy the mortgage premises carries with it the right to the proceeds of such use, until he is divested of the title.^ Judge Hines says that it ought not to alter the case that the mortgagee before sale, undertook, without right, to control and rent the property ; that the rent goes with the legal title, and the right to possession begins and ceases with it. The location of the legal title and the right of possession at any time, de- termine the right to the rents, and not the unauthorized assumption of control of the property by the mortgagee, and this is the true rule.^ Before entry, and so long as the mortga'jg:or is allowed to remain in possession, he is entitled to receive aiT.d apply to his own use the income and profits of the mortgaged es.tate. He can recover and receive to his own use, damages for any iiTjl'iry done to the possession or estate. He is not liable to the mort- gagee for rent nor for damages recovered. Although the mortgagee has the right to take possession, if he does not ^ Worcester Mech. Sav. Bank v. Thayer, 136 Mass. 459. See, also, Townsend Sav. Bank v. Munson, 47 Conn. 390, 2 Hardin v. Hardin, 34 S. Car. 77 ; Taliaferro v. Gay, 78 Ky. 496. 3 Argall V. Pitts, 78 N. Y. 239 ; Teal v. Walker, 111 U. S. 242 ; Central Trust Co. V. Wabash, etc., R. R. Co., 30 Fed. Rep. 332 ; Mississippi, etc., R. R. Co. *'. U. S. Express Co., 81 111. 534 ; Reeder v. Dargan, 15 S. Car. 175 ; Kountze v. Hotel Co., 107 U. S. 378, 392; Woolley v. Holt, 14 Bush (Ky.), 788 ; Leeds v. Gifford, 41 N. J. Eq. 464 ; Wooten v. Bellinger, 17 Fla. 289 ; Frierson v. Blan- ton, 1 Baxt. (Tenn.) 272 ; Chelton v. Green, 65 Md. 272 ; Coflfey v. Hunt, 75 Ala. 236 ; Falkner v. Campbell Printing Press, etc., Co., 74 Ala. 359 ; Young v. Northern, etc., Co., 9 Biss. C. C. 300 ; Boston Bank v. Reed, 8 Pick. (Mass.) 459 ; Noyes v. Rich, 52 Me. 115 ; Wathen v. Glass, 54 Miss. 382 ; Mayo v. Fletcher, 14 Pick. (Mass.) 525 ; M'Kim v. Mason, 3 Md. Ch. 186. il THE RIGHTS OF THE MORTGAGOR. 859 exercise it, he cannot claim the profits. If he sees fit to exer- cise tlie riglit, lie thereupon becomes entitled to the earnings and to all the damages that may be done to the possession.^ And upon the death of the mortgagor in possession, his widow is entitled to retain the possession and receive the rents and profits until her dower is assigned, or until the entry of the mortgagee to foreclose for breach of condition." § 831. Mortgage of Leasehold. — The same rule applies as to leasehold property. Thus, upon a suit to foreclose a mort- gage of a leasehold, the mortgagor will continue to take the rents and profits, unless the court, by its order, appoint a receiver, and he takes possession of it in the same way as if the property was a fee simple estate. Rents and profits are not the corpus of a leasehold.^ The law does not imply an obligation on the mortgagor's part to pay rent previous to an entry by the mortgagee.* § 832. After Forfeiture. — Ordinarily the purchaser of real estate at decretal sale for satisfying a mortgage debt is entitled to rents from the date of the execution and delivery of the commissioner's or master's deed.^ And upon the appoint- ment of a receiver, the mortgagee cannot maintain a suit to re- cover earnings of a railroad in the hands of an agent which accrued before the receiver's appointment.'' If the mortgagee wishes to receive the rents and profits, he must take early means to gain possession.'^ The mortgagor can ordinarily receive the rents and profits until the deed under sale is delivered to the purchaser in those States where the mortgagee cannot gain possession until after foreclosure and sale to him.^ Such statutory provisions, prohibiting a mortgagee from 1 Morse v. Whitcher, 64 N. H. 591. " Cook V. Parham, 63 Ala. 456. 3 Childs V. Hurd, 32 W. Va. 66. * Mayo V. Fletcher, 14 Pick. (Mass.) 525. 5 Taliaferro v. Gay, 78 Ky. 496. ^Noyes v. Rich, 52 Me. 115. '' Wilder v. Houghton, 1 Pick. (^Nlass.) 87 ; White r. Wear, 4 Mo. App. 341. v« Hunter v. Hays, 7 Biss. C C. 362 ; Gelston v. Burr, 11 Johns. (N. Y.) 482 ; 860 RIGHTS OF PARTIES BEFORE DEFAULT. taking possession, apply to a mortgage in the form of an abso- lute deed.^ However, this is denied by other courts,^ thus presenting an irreconcilable conflict. A provision of the statute that it shall not be waste for the mortgagor to occupy the premises during the time of redemption may be waived in a stipulation in the mortgage.^ A special stipulation in a mortgage that the mortgagor shall remain in possession until forfeiture, does not imply that the mortgagee may take possession after default, under a statute giving the mortgagee possession only after foreclosure sale and buying the premises. Such a provision is surplusage, because the law implies as much.^ § 833. Appointment of Receiver. — The mortgagee can only be entitled to the rents of the mortgaged premises by commenc- ing suit for the foreclosure of his mortgage, and procuring the appointment of a receiver ; and then will be confined to the rents and profits accruing pending the suit.^ If the property is shown to be inadequate to meet the debt the court may appoint a receiver of the rents and profits pend- ing the foreclosure proceedings,^ and order the rents and prof- its paid to the receiver.^ If the rents and profits are expressly pledged for the security of the mortgage debt, the mortgagee has no right to rents and profits until he gains possession, or until possession is taken in his behalf by a receiver.* Barrett «. Blackmar, 47 Iowa, 565 ; Astor r. Turner, 11 Paige (N. Y.), 436; Sickler v. Delfs, 25 Kan. 159 ; Clason v. Corley, 5 Sandf. (N. Y.) 447 ; Argall v. Pitts, 78 N. Y. 239 ; Mitchell v. Bartlett, 52 Barb. (N. Y.) 319. 1 Jackson v. Lodge, 36 Cal. 28 ; Thompson v. Hickey, 8 Abb. (N. C.) 159. 2 Allen V. Frost, 62 Ga. 659 ; Broach v. Barfield, 57 Ga. 601 ; Richards v. Crawford, 50 Iowa, 494 ; Burdick v. Wentworth, 42 Iowa, 440 ; Jeffery v. Hursh, 42 Mich. 563 ; Brophy Mining Co. v. Brophy & Dale Gold and Silver Mining Co., 15 Nev. 101. 3 Edwards v. Woodbury, 1 McCrary, C. C. 429. * Morrow v. Morgan, 48 Tex. 304. s Argall V. Pitts, 78 N. Y. 2.39. « Post V. Dorr, 4 Edw. (N. Y.) 412 ; Lofsky v. Maujer, 3 Sandf. Ch. (N. Y.) 69. ' Hunter v. Hays, 7 Biss. C. C 362. 8 Teal r. Walker, 111 U. S. 242 ; Grant v. Ins. Co., 121 U, S. 105, 117. See, also, Sickler v. Delfe, 25 Kan. 159. THE RIGHTS OF THE MORTGAGOR. 861 § 834. Royalties. — Royalties are not profits arising from the estate, but are in the corpus of it.^ As between the owner or his assignee in bankruptcy and an assignee of the mortgage of such premises, such royalties belong to the latter. However, if the mortgagor is allowed to remain in possession, he may receive the royalties. If a receiver is appointed and the royal- ties are paid into court for distribution, the owner nor his assignee in bankruptcy can receive the royalties until the mortgage debt is first paid.^ § 835. Use and Occupation by Mortgagor. — At common law tenants at sufferance were not liable to payment, strictly so-called.^ But a tenant at sufferance, occupying by permis- sion of the landlord, was liable upon an implied contract in assumpsit for use and occupation of the premises.* But if he did not occupy the premises by contract, express or implied, with the owner, but showed that he asserted an adverse title, he was not liable to such an action.^ Whether in the absence of any agreement for payment of rent, a mortgagee, after notice to foreclose, may maintain an action against the mortgagor for use and occupation, is not decided.*' A mortgagee cannot sue the mortgagor for use and occupa- tion of the mortgaged premises subsequent to an entry to fore- close, if the foreclosure has been completed, and the premises at the time of such completion were worth more than the debt and interest secured by the mortgage.^ § 836. Adverse Possession. — Possession of the mortgagor or his privies, including his grantees with notice, will not be 1 Caldwell v. Fulton, 31 Pa. St. 475. ^ippeal of DuflF (Pa.), 14 At. Rep. 364. 3 1 Cruise Dio;., tit. 9, ch. 2, sect. 6. * Ibbs V. Richardson, 9 Ad. & El. 849 ; Christy v. Tancred, 7 Mees. & AVels. 127 ; 9 Mees. & Wels. 438 ; 12 Mees. & Wels. 316. ^Cripps V. Blank, 9 Dowl. & R. 480 ; Tew v. Jones, 13 Mees. & Wels. 12 ; Church Wardens v. Ford, 2 Hurl. & N. 446; Smith v. Stewart, 6 Johns. (X. Y.) 46. « See, Murrill v. Bullock, 105 Mass. 486. 'Morse v. Murritt, 110 Mass. 458, opinion per Wells, J. 862 RIGHTS OF PARTIES BEFORE DEFAULT. adverse, nor bar an action by the mortgagee for foreclosure or for possession of the land, unless there has been an open and explicit disavowal and disclaimer of holding under the mortgagee's title, and assertion of title in the holder brought home to the mortgagee. Judge Smith says the mere taking possession by the vendee of the mortgagor, and continued occupancy by him and his vendees for the period of the statutory bar, and their open control and improvements of the land, and payment of taxes thereon as their own absolute property, with the intention of holding it against all comers, will not bar the action by the mort- gagee.^ The grantees of a mortgagor are not protected in their title against foreclosure of the mortgage duly recorded, by seven years' possession and payment of taxes, under the Illinois law. Because from the peculiar relation of mortgagor and mortgagee, and the fact that a purchaser from the former had succeeded to his rights with notice of the incumbrance, and the consequent privity between the parties, the possession of such purchaser must be considered in subordination to such mortgage, and not adverse ; and it cannot cease to be of that character until there is an open disclaimer of holding under it, and the assertion of a distinct title with the knowledge of the mortgagee.^ The mortgagor's possession at common law is consistent with, and subordinate to, the right and title of the mortgagee.^ 1 Benton County v. Czarlinsky, 101 Mo. 275 ; Harding v. Durand, 36 111. App. 238 ; Gatford v. Strauss, 89 Ala. 283 ; Whittington v. Flint, 43 Ark. 504, approving Harris v. King, 16 Ark. 122 ; Birnie v. Maine, 29 Ark. 591 ; Cold- cleugh V. Johnson, 34 Ark. 312, overruling so far as the Arkansas cases hold that adverse possession may be set up by a mortgagor or his vendee with notice, without a distinct denial of, or acts inconsistent with, the mortgagee's title. 2 Medley r. Elliott, 62 111. 532. See, also, Martin v. Jackson, 27 Pa. St. 504 ; Hughes V. Edwards, 9 Wheat. (U. S.) 490 ; Hall v. Doe, 5 Barn. & Aid. 687 ; Jones V. Williams, 5 Adol. & Ell. 291 ; Palmer v. Eyre, 17 Adol. & Ell. (N.S.) 366 ; Chinnery v. Evans, 11 H. L. Cas. 115 ; Colddeugh v. Johnson, 34 Ark. 312 ; Butler v. Douglass, 1 McCrary, C. C. 630 ; Pike v. Goodnow, 12 Allen (Mass.), 472; Parker v. Banks, 79 N. Car. 480; Bacon v. Mclntire, 8 Met. (Mass.) 87 ; Conard v. Atlantic Ins. Co., 1 Pet. (U. S.) 441. ^ Doyle V. Mellen, 15 R. I. 523 ; Jamison v. Perry, 38 Iowa, 14 ; Seeley o. Manning, 37 Wis. 574 ; Tucker v. Keeler, 4 Vt. 161. THE RIGHTS OF THE MORTGAGOR. 863 And this is the law in all the States where a mortgage car- ries a legal title, except in Mississippi, where, it seems, the possession of the mortgagor, after condition broken, is prima facie adverse to the mortgagee.* The true rule is that where the original possession by the holder of land is in privity with the title of the rightful owner, in order to enable such holder to avail himself of the statute of limitations, nothing short of an open and explicit disavowal and disclaimer of holding under that title, and assertion of title in himself brought home to the other party, will satisfy the law.^ An overt act of hostility is required to set the stat- ute in motion in favor of a mortgagor or his vendee against a mortgagee out of possession.^ Of course the question of adverse possession cannot arise at all in favor of a mortgagor in possession against a mortgagee in those States where the mortgagee's interest is considered a mere chattel interest and not an interest in the land. For there the mortgagee is, under no circumstance, entitled to the possession; and the mortgagor's possession during the period allowed by the statute for instituting a suit for fore- closure is not adverse to the rights of the mortgagee, but is subordinate thereto. Justice Raney says the same is true as to the possession of the grantor to the grantee, although such grantee holds under a covenant of warranty of title. He fur- ther says, in speaking of those States where a mortgage at law and in equity is a mere lien, that the theory of any conveyance of legal title to the mortgagee, either actual or technical, existing by virtue of a mortgage, is entirely antagonistic to both the spirit and letter of the law. So there can be no basis for an analogy to legal actions for the recovery of real property as to adverse title between the mortgagor and mort- gagee.* A mortgagee, as well as a mortgagor, may be disseized by ' Wilkinson v. Flowers, 37 Miss. 579, and cases cited ; Nevitt v. Bacon, 32 Miss. 212. ^ Zeller v. Eckert, 4 How. (U. S.) 289. « Boyd V. Beck, 29 Ala. 703. * Jordan i'. Say re, 24 Fla. 1. 864 RIGHTS OF PARTIES BEFORE DEFAULT. a stranger, but it must be by an actual ouster and exclusive occupation.^ The policy of the common law is to restrain and prohibit the conveyance of land by one who is not in actual seisin and possession thereof; hence, under the common law, a mortgagee of land who is disseized cannot make a valid assignment of his mortgage.^ § 837. Sale Subject to the Mortgage. — The mortgagor may sell the premises subject to his mortgage, and the grantee receives the equity of redemption, which can be barred only by proceedings for foreclosure by which he is made a party or by lapse of time. Such sale of redemption is not fraudulent as to the mortgagee.^ So when a mortgagor conveys his mort- gaged land in fee, he only transfers the equity of redemption,^ and the mortgagee is not affected by such sale.^ § 838. Dedication and Easements. — It is not in the power of the grantor of land in a deed of trust to secure the payment of money, to dedicate the streets and alleys laid off by him or the land conveyed in trust to the public use, so as to de- stroy or release the trust lien of the cestui que trust thereto, or estop him from the assertion thereof without the concurrence of the cestui que trust clearly established.^ If the owner of land mortgages it, he cannot subsequently by grant, create an easement in the land to the prejudice of the rights of the mortgagee.^ The mortgagor cannot nor his grantee, by any subsequent act affect the mortgagee's lien in any respect.^ In fine, the 1 Hunt V. Hunt, 14 Pick. (Mass.) 385. ^Dadmun v. Lamson, 9 Allen (Mass.), 85. ^Hodson V. Treat, 7 Wis. 263. * Buchanan v. Monroe, 22 Tex. 537. 5 Coker v. Whitlock, 54 Ala. 180 ; Flanagan v. Westcott, 3 Stockt. (N. J. Eq.) 264. ^ Walker v. Summers, 9 W. Va. 533. ^ Murphy i'. Welch, 128 Mass. 489. « Hartley v. Harrison, 24 N. Y. 170 ; Frost v. Shaw, 10 Iowa, 491 ; Kruse v. Scripps, 11 111. 98 ; Anderson v. Strauss, 98 111. 485. THE RIGHTS OF THE MORTGAGOR. 865 mortgagee is not affected by any act of the mortgagor in pass- ing any rights of his to third persons.' The owner of a tract of land on which was a mill-dam mort- gaged forty-one acres of it without reserving the right to over- flow such land. About two acres of the forty -one were flooded by the dam, though it was not shown that said two acres were actually under w^ater when the mortgage was given, or that it was necessary to flood them in order to run the mill successfully. A purchaser at a foreclosure sale of the forty-one acres took title free from any easement.^ In this case the court says it would be unreasonable to hold that the mortgagor intended to reserve any right in the nature of an easement over the mortgaged premises, or that the mortgagee understood when he accepted the security that it was cut down in extent and reduced in value by the fiction of an implied reservation. § 839. Taxes. — It is the mortgagor's duty to pay the taxes unless otherwise stipulated. If not paid, the mortgagee has a right to pay the taxes on the mortgaged premises to protect his interest, and especially so when the mortgagor has cov- enanted to pay taxes.^ But when the mortgagee has paid the taxes, and sells the mortgage to the mortgagor and releases it of record, he cannot then sue the mortgagor for the taxes paid.* And generally the mortgagee may pay the taxes to prevent a sale of the property for taxes.^ And so when the mortgagee is not in possession of the land conveyed by a mortgage deed, nor bound by any covenant or promise to pay the taxes on the property, there being no trust relation existing between the mortgagor and mortgagee, the mortgagee may purchase the land so mortgaged, and acquire a good title thereto under 1 EUithorp v. Dewing, 1 D. Chip. (Vt.) 141 ; Coker «. Whitlock, 54 Ala. 180. ^ Wells V. Garbutt, 132 N. Y. 430. ^Gormley v. Bunyan, 138 U. S. 623; Hall v. Gould, 79 111. 16; Jackson v. Relf, 26 Fla. 465 ; Townsend v. Case Thresh. Mach. Co., 31 Nebr. 836; Boone V. Clark, 129 111. 466, 495 ; McCreery v. Schaffer, 26 Nebr. 173 ; Austin v. Bank, 30 La. Ann. 689, 691. * Kersenbrock v. Muff, 29 Nebr. 530. ^ Young V. Omohundro, 69 Md. 424 ; West v. Hayes, 117 Ind. 290. 55 866 RIGHTS or PARTIES BEFORE DEFAULT. his tax deed ; and if under such circumstances the mortgagee is dead, his executor may purchase the land at a tax sale and acquire title under the tax deed/ When the original debt is barred by the statute of limita- tions, the mortgagee cannot recover from the mortgagor money paid for taxes.^ Where the mortgagee agrees to pay a certain per cent, if the mortgagor would pay the taxes, this is not an agreement that the mortgagee will pay the taxes ; ^ but the mortgagee has a right to pay the taxes to keep the premises from being sold for taxes.* § 840. Abandonment. — The owner of a mining claim who has mortgaged it, cannot abandon the same so as to permit the land to be located as unoccupied mineral lands, and defeat the mort- gage lien thereby,^ because his rights have passed to the mort- gagee, and the mortgagor could not abandon it, and by so doing defeat the mortgage. To permit such a subterfuge to defeat a mortgage would be to give to fraud the sanction of a court of equity." § 841. — Surrender of Property. — The mortgagor may surrender his property to the mortgagee. Thus, where the transaction is fair and not tainted with oppression or fraud or undue influence, and the mortgagor has not availed himself of his position to obtain an advantage over the mortgagee, a bona fide agreement between the parties to vest the entire estate in the mortgagee will be sustained, and the execution of a formal deed will not be required ; ^ and a judgment creditor of the mortgagor, whose debt is subsequent to that of the mortgagee, cannot object that he has been deprived of any security.* ' Beckwith v. Seborn, .31 W. Va. 1 ; Summers v. Kanamha, 26 W.Va. 159. 2 Hill V. Townley, 45 Minn. 167. 3 Hewitt V. Dean, 91 Cal. 5, 617. * Robinson v. Suiter, 85 Ga. 875 ; Parsons v. Gas Light and Coke Co., 108 111. 380^ Gormley v. Bunyan, 138 U. S. 623. ^ Alexander v. Sherman (Ariz.), 16 Pac. Rep. 45. « Keller v. Berry, 62 Cal. 488 ; Stephens v. Mansfield, 11 Cal. 363 ; Moren- haut V. Wilson, 52 Cal. 263 ; Deny v. Ross, 5 Colo. 295. ' West V. Reed, 55 111. 242 ; Carpenter v. Carpenter, 70 111. 457 ; Harrison v. Phillip's Academy, 12 Mass. 456. 8 Seymour v. Mackay, 126 111. 341. the rights of the mortgagor. 867 Article 3. Remedies Against Mortgagee. I 842. Ejectment. § 844. Injunction — Damages. I 843. Trespass. I 845. In Equity. § 842, Ejectment. — The mortgagor cannot recover in eject- ment against the mortgagee in possession after breach of the condition, or against persons holding possession under the mortgagee.^ When the mortgagee is in possession, the taking of an account of what is due under the mortgage is a proceeding appertaining to a court of equity by which a multipHcity of suits will be avoided, and ejectment cannot be maintained.- So long as there is any settlement to be made between the parties, the mortgagor must go into equity.^ However, in Pennsylvania, a mortgagor may bring ejectment against a mortgagee in possession, and the action will be treated as a substitute to redeem, and equitable principles applied.* In those States where a mortgage is a mere lien, if the mortgagor puts the mortgagee into possession, he cannot be ejected so long as his possession is rightful.^ At common law the title remains in the mortgagee after the debt is paid, if not paid till after the law day,^ and the mort- gagor cannot set up payment in ejectment proceedings until a discharge is legally made.^ This title remaining in the mort- gagee after payment, cannot be taken advantage of by any party but the mortgagee. Until the mortgagor redeems he is a stranger to the legal title at common law.^ iBrobst V. Brock, 10 Wall. (U. S.) 519 ; Oldham r. Pfleger, 84 111. 102. ■•'Moulton V. Leighton, 33 Fed. Rep. 143. ^ Woods V. Woods, 66 Me. 206 ; Edwards v. Farmers' Ins. and Loan Co., 21 Wend. (N. Y.) 467. * Wells V. Van Dyke, 109 Pa. St. 330 ; Brobst v. Brock, 10 Wall. ( U.S.) 519. » Newton r. McKay, 30 Mich. 380; Preston v. Young, 46 Mich. 103, 107. * Chamberlain v. Thompson, 10 Conn. 243 ; Cross v. Robinson, 21 Conn. 379 ; Cooch V. Gerry, 3 Harr. (Del.) 280. 'Doton V. Russell, 17 Conn. 146. ? Savage v. Dooley, 28 Conn. 411. 868 RIGHTS OF PARTIES BEFORE DEFAULT, If ejectment be brought by one claiming under a mortgage of the premises against tlie mortgagee in possession or one holding under him as tenant, the mortgage will constitute a complete defense to the action, for the reason that ejectment cannot be brought against one lawfully in possession.^ And an equitable assignee of a mortgage, after condition broken, being in possession of the land mortgaged, and being the holder of the note secured by the mortgage, and the as- signee thereof, can defend his possession under the mortgage in ejectment brought by the mortgagor or those claiming under him.^ § 843. Trespass. — As the mortgagee is regarded as having all the rights of a grantee in fee, subject to a defeasance,^ there- fore an action of trespass will not lie in favor of the mortgagor against the mortgagee or his assignee for entering peaceably upon the mortgaged premises. Thus, a mortgagee entering peaceably upon the premises and digging up and carrying away and converting to his own use portions of the soil cannot be sued in trespass,* or for any other trespass.^ If the mort- gagor, by agreement, is a tenant of the mortgagee, then tres- pass will lie.'^ § 844. Injunction — Damages. — A mortgagor in possession is entitled to an injunction to restrain the mortgagee from unrea- sonably depositing sawdust from his mill upon the mortgaged premises, by throwing it into the stream on which his mill stands on his own land, whereby it is floated down upon the mortgaged premises below. The mortgagee has no right to injure the possession of the property.^ So long as the mort- 1 Brown v. Bookstaver (111.), 31 N. E. Rep. 17. 2 Brown v. Bookstaver (111.), 31 N. E. Rep. 17. 3 Oilman v. Wills, 66 Me. 275. *Furbush v. Goodwin, 29 N. H. .321. 5 Chellis V. Stearns, 22 N. H. 312 ; Howe v. Lewis, 14 Pick. (Mass.) 329 ; Wilson V. Ring, 40 Me. 116 ; Jones v. Smith, 79 Me. 447 ; Parsons v. Welles, 17 Mass. 419; Lackey v. Holbrook, 11 Met. (Mass.) 458 ; Taylor v. Townsend, 8 Mass. 411. * Marden v. .Jordan, 65 Me. 9. ' Morse v. Whitcher, 64 N. H. 590. THE EIGHTS OF THE MORTGAGOR. 869 gagor is entitled to remain in possession, he is entitled to dam- ages to his possession, though such damages were caused by his mortgagee of the same premises/ And the mortgagor after dispossession may recover for dam- ages he received while in possession.^ The mortgagee is also liable for flowing the mortgaged land by means of a dam erected on other premises.^ So when the title of fixtures is in the mortgagor, for a removal of them by the mortgagee, the mortgagor can recover of him their value.* Where a mortgagee takes a deed absolute to defraud the mortgagor's creditors, the court will order a reconveyance on the ground that he cannot take advantage of his own fraud upon others to defraud the creditors. After the conditions had been broken, the grantor rented the premises, and the mortgagee notified the tenant that he must pay the rent to him ; the mortgagee also used the land. It was held on a bill to redeem that the mortgagee had taken possession of the land, and was accountable for such rents and profits as he ought to have received.* § 845. In Equity. — It is well settled that the mortgagee having entered into possession for breach of condition, and thus having the legal estate at common law, may successfully resist the suit of the mortgagor at law, though the debt may have been paid since entry. In such case the mortgagor's remedy is by bill in equity.® And the mortgagee may defend against an action at law of the owner of the equity of redemp- tion if the mortgage has not been discharged, although the mortgage debt has been satisfied. The mortgagor's only remedy is in equity.^ 1 Vaugh V. Wetherell, 116 Mass. 138 ; Paine v. Woods, 108 Mass. 160. ' Walker v. Oxford Woolen Manuf. Co., 10 Met. (Mass.) 203. 3 Great Falls Co. v. Worster, 15 N. H. 412, 445. * Hill V. Gwin, 51 Cal. 47. * Still V. Buzzell, 60 Vt. 478. * Parsons ('. Welles, 17 Mass. 420 ; Wilson v. Ring, 40 Me. 116; Rowell v. Jewett, 69 Me. 293 ; Rowell v. Mitchell, 68 Me. 21 ; J^wett v. Hamlin, 68 Me. 172 ; Hill V. Payson, 3 Mass. 559, 560. J New England Jewelry Co. v. Merriam, 2 Allen (Mass.), 390. 870 RIGHTS OP PARTIES BEFORE DEFAULT. Likewise a purchaser from the mortgagor whose purchase was made subsequent to the date of the mortgage, cannot maintain ejectment against the purchaser at foreclosure sale, although such subsequent purchaser was not made a party to the proceedings in chancery. He must file a bill to redeem/ But if the mortgagee owes a • balance to the mortgagor he cannot have judgment in equity and execution for such ]>al- ance, but must proceed at law.^ And a court of equity will not sustain a bill for relief if from the allegations it appears that the complainant has a remedy at law. Thus, after the debt for which a mortgage on personal property was given is paid, the mortgagor may maintain an action at law to recover the personal property.^ Article 4. Relative Rights as to Third Persons. ^ 846. Mortgagor in Possession. § 851. Land Attached in the Maiden § 847. Equity of Redemption Subject Name of a Single Woman, to Levy. which was Mortgaged in Her § 848. Surplus. Married Name. I 849. Effect on Mortgagee's Rights. ? 852. Homestead Exemptions. § 850. Mortgagee in Possession. § 853. Dower. § 846. Mortgagor in Possession. — As to third persons, the mortgagor in possession has the same rights as if there was not a mortgage on the land.* He has the right to the absolute control of the income of the property prior to the institution of proceedings to foreclose,^ so long as he does not commit waste.^ No third person can interfere with the land or his enjoyment of it, and claim justification because the land is mortgaged.^ He may recover for waste committed by third ^ Frische v. Kramer, IG Ohio, 125. ^ Taylor v. Townsend, 6 Ma?s. 264. 'Blanchard v. Kenton, 4 Bibb. (Ky.) 451 ; Comyn's Digest, 99. * Hall V. Lance, 25 111. 277 ; Bird v. Decker, 64 Me. 550 ; Ellison v. Daniels, II N. H. 274. 5 Central Trust Co. v. Wabash, etc., Railroad Co., 30 Fed. Rep. 332. « Kimball v. Lewiston Steam Mill Co., 55 Me. 494. ^ Denby v. Mellgrew, 58 Ala. 147 THE RIGHTS OF THE MORTGAGOR. 871 parties ; ' and maintain ejectment against a stranger who has entered wrongfully.^ § 847. Equity of Redemption Subject to Levy. — The equity of redemption may be attached and sold on execution,* and the title dates only from the seizure on the execution ; * and this equity may be sold either before or after the law day and default, or whether the mortgagor or mortgagee is in pos- session.^ In Massachusetts and in Maine it has been held that the creditor may extend his execution upon the whole estate, and such levy will pass the interest of the debtor whatever it may be.« In Massachusetts under the statute,^ a sale under the execu- tion of a judgment creditor's right of redemption of mortgage land does not pass any interest not covered by the mortgage which he has in the land and which he retains in the land. Thus, a judgment creditor owning the fee in land mortgaged a life estate therein. The right of redeeming the mortgage was taken and sold on execution under the statute. It was held that the sale did not cover his reversion in fee after the life estate.^ And although the statute ^ authorizes an estate not subject to a mortgage to be levied upon by sale instead of by extent, it does not authorize an estate which is subject to a mortgage when attached, and which, at the time of the levy is free from mortgage to be levied upon and sold as an equity of redemption. The discharge of the mortgage after attach- ^ Abney v. Austin, 6 111. App. 49 ; Bird v. Decker, 64 Me. 550. ^ Bartlett v. Borden, 13 Bush (Ky.), 45 ; Stinson v. Ross, 51 Me. 556 ; Duval V. McLoskey, 1 Ala. 708. 'Bodwell Granite Co. v. Lane, 83 Me. 168; Crane r. March, 4 Pick. (Mass.) 131; Warren i'. Childs, 11 Mass. 222; Aiken r. Medex, 15 Me. 157; N. W. Forwarding Co. r. INIahaffey, 36 Kan. 152. *CoggsweIl r. Warren, 1 Curtis, C. C. 223. ^Gassenheinier r. ^Nlolton, 80 Ala. 521 ; Lovelace v. Webb, 62 Ala. 271. « Litchfield r. Cud worth, 15 Pick. (Iklass.) 23; Brown v. Clifford, 38 Me. 210; Freeman on Ex., sect. 382. ^ Gen. Stat., ch. 103, sect. 39. ^Laflin v. Crosby, 99 Mass. 446. »Stat. 1874, ch. i88. 872 EIGHTS OF PARTIES BEFORE DEFAULT. ment and before levy caused the equity of redemi^tion to cease to exist/ In general, the mortgagor's right of redemption may be levied upon before or after default, either by a third person, or by the mortgagee for some other debt reduced to judgment against the mortgagor.^ A mortgage lien for the purchase price of a coal lease, is not divested by a sale of the lease on execution against the lessee.* The mortgagor's interest in land may be sold under execu- tion, even when the mortgage was given to support the mort- gagee, although there is no provision in the mortgage that the mortgagor's assigns may perform its conditions/ And a judgment against the grantor in a deed absolute on its face, but in reality a mortgage, is a lien on the land. The owner of such judgment may, in an action in aid of his execution, have the deed declared a mortgage.^ And a purchaser of a grantee in a deed which is in reality a mortgage, but who does not pay for the same in full, is not entitled to the land, as against the mortgagor or his creditors, even though he had no notice that the deed was a mortgage, but he is entitled to be reimbursed the part payment he has actually made before the property can be taken from him.^ In order to maintain the defense that it is a bona fide purchase without notice, he must have paid all the purchase-money.'^ And when the judgment creditor has levied on the grantor's land thus sold, he may go into equity to have the execution enforced free from the obstruction that the deed was absolute ^Hackett v. Buck, 128 Mass. 369. * Walters v. Defcnbaugh, 90 111. 241 ; Finley v. Thayer, 42 111. 350; Gotten V. Blocker, 6 Fla. 1 ; Crow r. Tinsley, 6 Dana (Ky.), 402. 'First, Nat. Bank v. Sheafer (Pa.),' 24 At. Rep. 221 ; 30 W. N. C. 232. *Bodwell Granite Co. v. Lane, 83 Me. 168. *Macauley v. Smith, 132 N. Y. 524. «Macauley v. Smith, 132 N. Y. 524. 'Sargent v. Apparatus Co., 46 Hun (N. Y.), 19 ; Harris v. Norton, 16 Barb. (N. Y.) 264 ; Patten v. Moore, 32 N. H. 382; Boone v. Chiles, 10 Pet. (U. S.) 179 ; Jewett v. Palmer, 7 Johns. Ch. (N. Y.) 65 ; Jackson v. Cadwell, 1 Cow. (N. Y.) 622. THE EIGHTS OF THE MORTGAGOR. 873 and not a mortgage in reality. Such an action is within the equitable jurisdiction of the court.' § 848. Surplus. — The purchaser takes the property subject to the mortgage, and the surplus of the purchase price after payment of the judgment and costs, is to be returned to the judgment creditor, and not paid over to the mortgagee.^ If no means are provided by statute for the attachment creditor to enforce his right to the surplus, equity will afford a remedy, so that the judgment creditor may enforce his claim against the surplus.^ Upon the foreclosure of the mortgage, the levy is defeated, when the mortgagee has a right to purchase for the amount of the mortgage.* § 849. Effect on Mortgagee's Rights. — The levy of an execution upon the mortgagor's equity of redemption does not affect the rights of the mortgagee ; ^ the purchaser at such sale succeeds to the equitable rights of the mortgagor, and may redeem the estate.^ The interest of the debtor passes at such sale, whatever that may be.'' Such sale extinguishes the mortgagor's rights in the property, unless such sale is declared void for irregularity and reversed.^ The mortgagee may be estopped, by consenting to the levy and sale, from set- ting up his mortgage.^ The purchaser at such sale acquires a title on which he may recover in ejectment, against any one who does not show a iBeck V. Burdett, 1 Paige (N. Y.), 305 ; Heye v. Bolles, 33 How. Pr. (N. Y.) 266; Rinchey v. Stryker, 28 N. Y. 48; Frost v. Mott, 34 N. Y. 253; Thurber V. Blanek, 50 N. Y. 80. 2 Jenkins v. Green, 22 Kan. 562. ^ Wiggin r. Heywood, 118 Mass. 514. * German-American Seminary v. Saenger, 66 Mich. 249. 5 Gotten r. Blocker, 6 Fla. 1 ; Crow v. Tinsley, 6 Dana (Ky.), 402; Atcheson V. Broadhead, 56 Ala. 414 ; Childress v. Monette, 54 Ala. 317. « Jenkins v. Green, 22 Kan. 562; Turner v. Watkins, 31 Ark. 429; Shaw v. Lindsey, 60 Ala. 344. ^Dunbar v. Starkey, 19 N. H. 160; Pettee v. Peppard, 125 Mass. 66; Perrin V. Reed, 35 Vt. 2. « Delano v. Wilde, 11 Gray (Mass.), 17. ^8 Smith V. Sweetser, 32 Me. 246; Graces. Mercer, 10 B. Hon. (Ky.) 157. 874 RIGHTS OF PARTIES BEFORE DEFAULT. paramount title, provided the mortgage reserves to the mort- gagor the possession and enjoyment of the property with the right to rent it, until default is made in payment of notes or interest/ § 850. Mortgagee in Possession. — If the mortgagee is in possession after condition broken, it is no longer in the power of the mortgagor, or any one claiming under him by virtue of a sale or a judgment lien, to recover the possession in eject- ment. The only right the purchaser acquires in such case is to redeem the premises by paying the mortgage, because the mortgagee in that case is the holder of the legal title ; but if the mortgagor is in possession, the sale on the judgment will convey the mortgagor's interest to the purchaser subject to the mortgage.^ § 851. Land Attached in the Maiden Name of a Single Woman, which was Mortgaged in Her Married Name. — A deed to a married woman by her maiden name vests the title in her. It is the common case of a person being known by different names.^ Hence, land conveyed to a single woman may be attached and the attachment prevail, though she afterward mortgages it by her married name. Thus, land was conveyed to an un- married woman, and after her marriage was attached in an action against her by her maiden name, the creditor being ignorant of her marriage. After the attachment and before judgment, the woman, by her married name, and adding her former name, mortgaged the same land to a person who had no actual notice of the attachment. The land was sold uuder the execution. It was held that the attachment was the para- mount lien, that the fact that, after her marriage and before attachment, she made a conveyance of land in the same county by her married name was not constructive notice to the attaching creditor of the mortgage.* 1 Bernstein v. Humes, 60 Ala. 582. '^Hall V. Tunnell, 1 Houst. (Del.) 320. 'Scanlan v. Wright, 13 Pick. (Mass.) 523. * Cleaveland v. Boston Five Cents Sav. Inst., 129 Mass. 27. THE RIGHTS OF THE MORTGAGOR. 875 § 852. Homestead Exemptions. — As against subsequent attachment or judgment creditors, the mortgagor is entitled to his homestead exemptions out of the surplus proceeds of a sale under a inortgage containing a waiver of the homestead. Be- cause when the right to a homestead is waived or relin- quished by the mortgage, it does not inure to the benefit of all the creditors of the debtor, but to such only as the mortgage was intended to secure.^ § 853. Dower. — A widow can have dower in land sold subject to a mortgage, only by paying her ratable share of the sum necessary to discharge the mortgage, which will be an amount bearing the same proportion to the whole debt that the computed present value of her dower bears to the whole value of the land.^ In the equity of redemption she has dower, although she has released her right of dower.^ The doweress cannot be forbidden to bid in the mortgaged land under the same conditions that her husband could.* Where land has been mortgaged by the husband before marriage, or where after marriage, he has executed mortgages in which his wife has joined, she is entitled to dower as against all persons except the mortgagees and those claiming under them ; and she is entitled to dower in any surplus that may be realized on foreclosure.^ To redeem the land as against the mortgagee, she must pay the whole amount due on the mortgage.^ ^ Quinn's Appeal, 86 Pa. St. 447 ; Vermont Sav. Bank v. Elliott, 53 Mich. 256 ; White v. Fulghum, 87 Tenn. 281 ; First Nat. Bank v. Briggs, 32 111. App. 228 ; McTaggert v. Smith, 14 Bush (Ky.), 414. See, also, Colby v. Crocker, 17 Kan. 527 ; Hill v. Johnston, 29 Pa. St. 362 ; Swan v. Stephens, 99 Mass. 7. ''Noffisi;. Koss, 29 111. App. 301. 'Snow V. Stevens, 15 Mass. 278 ; Leary v. Shaffer, 79 Ind. 567 ; Titus v. Neil- son, 5 Johns. Ch. (N. Y.) 452. But in England dower is a legal estate, so there is no dower interest in an equity of redemption : Story's Eq. Jur., sect. 529. * Walker v. Doane, 131 111. 27. 5 Burrall v. Hurd, 61 Mich. 608 ; Burrall v. Clark, 61 Mich. 624 ; Mandel v. McClave, 46 Ohio St. 407 ; Seibert v. Todd, 31 S. Car. 206 ; Hinchman v. Stiles, 9 N. J. Eq. 454. ^McMahon v. Russell, 17 Fla. 698, 705 ; Campbell v. Campbell, 30 N. J. Eq. 415; Graves v. Braden, 62 Ind. 93; McCabe v. Bellows, 7 Gray (Mass.), 148. 876 RIGHTS OF PARTIES BEFORE DEFAULT. Foreclosure effectually divests her dower right, if she has joined in the mortgage, and there be no surplus.^ She can redeem the mortgage in equity, and thus take her dower.^ Unless she redeems, and there be no surplus, she has no dower.^ But she is entitled to dower in the surplus, even though the mortgage provides that such surplus shall go to the mortgagor.* Where during divorce proceedings a mortgage is executed by the husband without the wife's signature, the amount of the mortgage cannot be deducted from the wife's right of dower, though executed to raise money to pay alimony pendente lite.^ Where the mother paid a mortgage on land owned by her and her son as tenants in common, and given by them before the son's marriage, and at the time assigned to her, the dower estate on the death of the son is subject to the lien for this payment.^ If a party purchases the equity of redemption on an execu- tion sale, and then pays the amount of the debt without any assignment of the mortgage to him, which is release of record by the mortgagee, then the dower right vests in the property free from the incumbrance/ A widow is not endowable of an equity of redemption in the District of Columbia.^ ^ Roach ^\ Dion, 39 Minn. 449 ; Crawford v. Hazelrigg, 117 Ind. 63 ; Meyer V. Cahen, 111 N. Y. 270 ; Johnson r. Watson, 87 111. 535. ^Trenholm v. Wilson, 13 S. Car. 174 ; Eaton v. Simonds, 14 Pick. (Mass.) 98 ; Hawley v. Bradford, 9 Paige (N. Y.), 200; Collins v. Torry, 7 Johns. (N. Y.) 278. 3 Sparrow v. Kelso, 92 Ind. 514 ; Elder v. Robbins, 122 Ind. 203. *New York L. Ins. Co. v. Mayer, 14 Daly, 318 ; 19 Abb. N. C. 72. 5 Rea V. Rea, 63 Mich. 257. «Lake v. Nolan, 81 Mich. 112. ' Eaton V. Simonds, 14 Pick. (Mass.) 98 ; Wedge v. Moore, 6 Cush. (Mass.) 8. See, also, Kemerer v. Bournes, 53 Iowa, 172 ; Strong v. Converse, 8 Allen (Mass.), 557. «In re Thompson, 6 Mackey (Dist. Col.), 536. the rights of the mortgagor. 877 Article 5, Iirtprovements. 1 854. Money Expended in Improve- § 856. Rights of Parties Furnishing ments. Labor and Material. I 855. Improvements by Third Persons. 1 857. Corporations. § 854. Money Expended in Improvejments. — Money ex- pended in improvements by the mortgagor upon the mortgaged premises, or by his grantee subsequent to the mortgage, can- not be a Hen prior to that of the mortgagee.^ And where land is sold and conveyed by mortgage, the improvements consti- tute a part of the realty, irrespective of the question by whom made ; the improvements are clearly subject to the lien of the mortgagee as the land upon which they are made.^ And when the mortgagee covenants to allow the mortgagor for improvements, the debt being first paid, the improvements will come under the lien, if the land does not sell for enough to pay the mortgage debt.^ In no case, in the absence of cov- enants, is a mortgagor to be allowed for improvements as against the mortgagee.* § 855. Improvements by Third Persons. — This rule holds the same as to third persons. Thus, if a party makes im- provements on the mortgaged land with the consent of the owner, with notice of the mortgage, he has no greater rights than the mortgagor if he had made the improvements, unless a covenant in the mortgage provides for an allowance to the mortgagor in case of foreclosure.^ § 856. Rights of Parties Furnishing Labor and Mati:- RiAL. — The relation held by the mortgagee does not itself make him responsible for permanent improvements or essen- ' Martin v. Beatty, 54 111. 100 ; Asher v. Mitchell, 9 111. App. 335. '^ Rice V. Dewey, 54 Barb. (N. Y.) 455 ; Union Water Co. v. ^Murphy, 22 Cal. 621 ; McCumber v. Gibnan, 15 111. 381 ; Childs v. Dolan, 5 Allen (Mass.), 319. 3 Phillips V. Holmes, 78 N. Car. 191. *Baird v. Jackson, 98 111. 78 ; Wharton v. INIoore, 84 N. Car. 479. * Coleman v. Witherspoon, 76 Ind. 285 ; Catterlin v. Armstrong, 79 Ind. 514 ; Frierson v. Blanton, 1 Baxt. (Tenn.) 272. 878 RIGHTS OF PARTIES BEFORE DEFAULT. tial adclitioiis made to the estate by the mortgagor, or enable a party furnishing work or material for improvements to maintain a case against the mortgagee without proof of any further facts than is disclosed by the mortgage. There must be a promise on the part of the mortgagee to pay for such work or material, or the party cannot obtain satisfaction from the mortgagee.^ § 857. Corporations. — Corporations in making improve- ments cannot claim privileges not given to a person. If it makes improvements before the land is condemned, it is not material. If the land is sold at foreclosure sale, it cannot redeem by paying the value of the land before the improvements were made. The court said that it was negligence on the part of the corporation to proceed with improvements without first obtaining a release of the mortgage, or condemning the inter- est of the mortgagee if it had that power. That the corpora- tion stood in the relation of a purchaser with notice of the mortgage, and that it could not have advantage as to improve- ments which the mortgagor could not have.^ Article 6. Tlie Right of Eminent Domain. § 858. Damap;eH- Condemnation. § 861. Assessments. \ 859. Massachusetts Rule. I 862. Pleadings. § 860. Connecticut Rule — Statutory- Provisions. § 858. Damages — Condemnation. — Where mortgaged land has been damaged for public use, the mortgagee has an equita- ble lion on the award to the extent of the deficiency of the mortgage debt after foreclosure.^ This equitable lien is well established.* Damages thus awarded are to take the place of the land used in respect to all the rights and interests which were dependent upon and inci- ^ Holmes v. Morse, 50 Me. 102. ^Booraem v. Wood, 27 N. J. Eq. 371. 'Utter V. Richmond, 112 N. Y. 610. *Bank v. Roberts, 44 N. Y. 192 ; In re Eleventh Avenue, 81 N. Y. 436. THE RIGHTS OF THE MORTGAGOR. 879 dent to it. If not paid to the mortgagee when his debt is unsatisfied by the security remaining, he may recover the deficit by action against the person or corporation who has entered upon the land/ Where the debt is not discharged and the land is not suffi- cient to pay tlie mortgage debt, and especially when the mort- gagor is insolvent, the mortgagee has as against the mortgagor a lien on the damages awarded for the right of way over the premises ; ^ and this lien is superior to that of an attachment creditor's.^ But in some States, for all purposes of establishing and opening highways through mortgaged premises, the mortgagor in possession is to be regarded as the owner of the land, and is entitled to the damages.* But in equity this may be changed. Chief Justice Strange says : " Whether a mortgagee may by proceeding in equity intervene, and have the damages applied in accordance with what the court, under all the circumstances might consider as equitable, we are not called upon in this case to decide, and therefore leave that question open to be settled in a case when it is raised." ^ It is generally held that the damages awarded to the owner stand instead of tlie land, andean be subjected to the payment of the incumbrance.^ § 859. Massachusetts Rule. — In this State the mortgagor of land taken in condemnation proceedings may recover 1 Colehour v. State Sav. Inst., 90 111. 152 ; Severin v. Cole, 38 Iowa, 463 ; Michigan, etc., Railroad v. Barnes, 40 Mich. 383 ; Trogden v. Winona, etc., Railroad Co., 22 Minn. 198 ; Stewart v. Raymond Railroad Co., 7 Sm. & M. (Miss.) 568 ; Wilson v. European, etc., Railroad Co., 67 Me. 358 ; State v. Eas- ton, etc., Railroad Co., 36 N. J. L. 181 ; Bright v. Piatt, 32 N. J. Eq. 362 ; War- wick Inst. V. Providence, 12 R. I. 144 ; Kennedy v. Milwaukee, etc., Railroad Co., 22 Wis. 581. * Schafer v. Sehafcr, 75 Iowa, 349. ^ Sawyer v. Landers, 56 Iowa, 422. * Railroad Co. v. Wilder, 17 Kan. 239; Goodrich v. Commissioners, 47 Kan. 355. ^ Goodrich v. Commissioners, 47 Kan. 355. 8 Railway Co. v. Brown, 136 111. 322; 12 Lawy. Rep. Ann. 84, and note; Thompson v. Railway Co. (Mo.), 19 S. W. Rep. 77. See sect. 899. 880 EIGHTS OF PARTIES BEFORE DEFAULT. the full amount of damages without regard to the mort- gagee.^ In equity the damages assessed to the owner of the land shall be deemed to be land, and the mortgagee can follow such assessed damages and have the same applied to the pay- ment of the mortgage. He must show to what extent he has a lien upon the money .^ § 860. Connecticut Rule — Statutory Provisions. — Before the statute, in Connecticut, when land was taken which was covered by a mortgage, the mortgagor, and not the mortgagee was the owner of the land, and to him the damages must be paid.^ Under a statute * now damages are assessed to the mort- gagee to the extent of his interest, and the balance to the mortgagor, as in case of lands condemned by railroad corpora- tions.^ § 861. Assessments. — When the mortgage stipulates that the mortgagor shall have the benefit accruing from the taking any part of the land for a street by a city, and that the city shall pay the condemnation money directly to him, the mort- gagor must pay the assessment made upon the remaining part of the land for the improvements to that part. If he takes the damages on one part, he must also pay the assessment on the other part.^ § 862. Pleadings. — The condemnation money is not a fund within the jurisdiction and control of the court in a foreclosure action. In order to give the court jurisdiction, the mortgagee 'Breed v. Eastern Railroad Co., 5 Gray (Mass.), 470; Ballard v. Ballard Vale Co., 5 Gray (Mass.), 468. '^Pond v.. Eddy, 113 Mass. 149; Paine v. Woods, 108 Mass. 160. See, also, Farnsworth v. Boston, 126 Mass. 1, 9 ; Read r. Cambridge, 126 Mass. 427 ; Barnstable Savings Bank v. Boston, 127 Mass. 254. 3 Whiting V. New Haven, 45 Conn. 303 ; Mills v. Shepard, 30 Conn. 98, 101 , Norwich v. Hubbard, 22 Conn. 587. *Actsof 1881, ch. 110. 6 Acts of 1874, ch. 372, sect. 110. « United States Mortgage Co. v. Gross, 93 111. 483. THE RIGHTS OF THE MORTGAGOR. 881 must file supplemental bill in the foreclosure case, thus bring- ing all the parties directly into court, who are connected with the award made or to be made, setting forth the facts respecting the condemnation proceedings, and insist that the money paid for condemnation should be held as a fund for the satisfaction of the mortgage. Or this may be accomplished by an inde- pendent action. A motion to this effect, though served on the attorneys of the mortgagor, is of no avail.^ Article 7. Remedies Against Mortgagor for Waste. 1 863. In Equity. § 872. Trover. \ 864. Injunction— English Rule. I 873. License to Cut Timber. § 865. Injunction — American Eule. 1 874. In Possession of the Farm § 866. Injunctions Will Issue — Render- after Condition Broken. ing the Security Insufficient. ? 875. Damages for Injury to the § 867. Legal Title Remaining in the Property. Vendor. 1 876. Statutory Provisions. §868. Rights of Third Party. §877. Rights of Second Mortgagee. § 869. At Law. I 878. Accounting to Mortgagor for ^ 870. Replevin. Damages Recovered. §871. Trespass. § 879. Burden of Proof. § 863. In Equity. — Courts of equity will interfere to pre- vent the commission of waste by the mortgagor in possession. This interference is based upon two grounds : 1. The right of the mortgagee to the protection of the entire security unim- paired during the life of the mortgage.^ 2. As between the mortgagor and mortgagee the latter is deemed in law the owner of the fee and as such entitled to protection.^ And where the mortgage is considered but a lien, the mortgagee is entitled to protection of equity against the commission of 'waste.* The mortgagor in possession may exercise all acts of ownership, if he does not impair the security ; ^ he must not ' Schermerhorn v. Peck, 43 Kan. 667. "^ Nelson r. Pinegar, 30 111. 473. ^Nelson v. Pinegar, 30 111. 473. * Brady v. AValdron, 2 Johns. Ch. (N. Y.) 148 ; Cooper v. Davis, 15 Conn. 556. ^Kekewich v. Marker, 3 Mac. & G. 329. 56 882 RIGHTS OF PARTIES BEFORE DEFAULT. depreciate the value of tlie premises and render the security insufficient.' And courts of equity will take jurisdiction especially where the mortgagor has been declared a bankrupt, and his property vested in an assignee.^ The mortgagee's lien will be protected in equity.^ And the ordinary remedy for the mortgagee against the mortgagor to protect the premises is by bringing a bill in equity for an injunction.* § 864. Injunction — English Rule. — It is said to be the established rule in England that if the security of the mort- gagee is insufficient, and the court is satisfied of that fact, the mortgagor will not be allowed to do that which will directly impair the security — cut timber upon the mortgaged premises. The cases decide, that a mortgagee out of possession is not, of course, entitled to an injunction to restrain the mortgagor from cutting timber on the mortgaged property. If the security is sufficient, the court will not grant an injunction merely be- cause the mortgagor cuts, or threatens to cut timber. There must be a special case made out before the court of equity will interfere. The difficulty is in determining what is meant by a sufficient security. " Suppose the mortgage debt, with all the expenses, to be £1,000, and the property to be worth £1,000, that is, in one sense, a sufficient security ; but no mortgagee, who is well advised, would lend his money, unless the mort- gaged property was worth one-third more than the amount lent at the time of the mortgage." This is considered the rule, and the only safe rule, under English values.^ ' Ensign v. Colburn, 11 Paige (N. Y.), 503 ; Bunker v. Locke, 15 Wis. 635. 2 Ensign r. Colburn, 11 Paige (N. Y.), 503. 3 Verner v. Betz, 46 N. J. Eq. 256. * Cooper V. Davis, 15 Conn. 556 ; Brady v. Waldron, 2 Johns. Ch. (N. Y.) 148 ; Salmon v. Clagett, 3 Bland (Md.), 180; Scott v. Wharton, 2 Hen. & M. (Va.) 25; Gray v. Baldwin, 8 Blackf. (Ind.) 164; Bunker ?». Locke, 15 Wis. 635 ; Vanderslice r. Knapp, 20 Kan. 647 ; Hampton v. Hodges, 8 Yes. 105 ; Goodman v. Kine, 8 Beav. 379. ^ King V. Smith, 2 Hare, 239, 244 ; Humphreys v. Harrison, 1 Jac. & W. 581 ; Ilippesley v. Spencer, 5 Madd. 256 ; Harper v. Apin, 54 Law T., N. S. 383 ; Kekewich v. Marker, 3 Mac. & G. 329 ; Farrant v. Lovel, 3 Atk. 722. THE RIGHTS OF THE MORTGAGOR. 883 § 865. Injunction — American Rule. — It appears that a sufficient security in England is where the mortgaged property- is worth at least one-third more than the debt secured. But in England, land values are, in a measure, stationary. In the United States they are fluctuating. So to be a sufficient secur- ity in this country, there should be a much broader margin between the amount of the debt and the estimated value of the property mortgaged for its security than is considered suffi- cient in England.^ § 866. Injunction Will Issue — Rendering the Security Insufficient. — While some authority holds that the mortgagee is entitled to injunction, restraining any acts of waste by the mortgagor in possession w^hich may diminish the value of the mortgaged property, yet the great weight of authority is to the effect that equity w411 not interfere in such cases unless the acts complained of are such as may render the security insuf- ficient for the satisfaction of the debt, or of doubtful security.^ In other cases, the courts in stating the ground upon which equity will interfere, seem to regard it as a necessary condition that the sufficiency of the security be threatened.^ Judge Dickinson says that the mortgagee is entitled to be protected from acts of waste which would so far impair the value of the property as to render the security of doubtful suf- ficiency. " He is entitled to have the mortgaged property ^ Moses t;. Johnson, 88 Ala. 517. ^Coker v. Whitlock, 54 Ala. 180; Scott v. Wharton, 2 Hen. & M. (Va.) 25; Buckout V. Swift, 27 Cal. 433 ; Vanderslice v. Knapp, 20 Kan. 647 ; Harris v. Bannon, 78 Ky. 568 ; Van Wyck v. Alli Judkins v. Woodman, 81 Me. 351. 890 RIGHTS OF PARTIES BEFORE DEFAULT. purposes, according to the well-known and existing usages of ordinary husbandry.' If the wood is cut in good faith for firewood, it may be re- moved to another place.^ He is entitled to take the wood and the annual crops.^ § 875. Damages for Injury to the Property. — The mort- gagor is liable to the mortgagee, at common law, for injury done to the premises.* If the mortgagee has foreclosed his mortgage after damages have been done by a mob, and he has become the purchaser at the sale, in order to recover such damages, he must prove the injury to the property and his own loss of a part of the mortgage debt in consequence, in order to make the city liable.^ Where a mortgage is regarded as a lien only, the damages a mortgagee may recover against a third person in trespass on the case are the amount of injury to the mortgage as a se- curity, however great the injury to the land may be,*^ and he must show that the mortgagor is insolvent.^ At common law he may recover for a permanent injury to the land which injures his security.* § 876. Statutory Provisions. — In Connecticut the statute provides that any person claiming the right of possession, whether as mortgagor or otherwise, to any land subject to any mortgage duly executed and recorded, who shall, while such mortgage is unreleased of record, impair the value of the premises subject to such mortgage b}^ removing, destroying, or injuring any building or fixture on the land so mortgaged, or ^Hapgood V. Blood, 11 Gray (Mass.), 400 ; Smith v. Moore, 11 N. H. 55, 62; Page V. Robinson, 10 Cush. (Mass.) 99, 102. 2 Wright V. Lake, 30 Vt. 206; Judkins v. Woodman, 81 Me. 351. 3 Woodward v. Pickett, 8 Gray (Mass.), 617; Searle v. Sawyer, 127 Mass. 491, 494. * King V. Bangs, 120 Mass. 514 ; Byrom v. Chapin, 113 Mass. 308. 5 Levy V. New York, 3 Robt. (N. Y.) 194. « Morgan v. Gilbert, 2 Flip. C. C. 645. 'Gardner v. Heartt, 3 Denio (N. Y.), 232. 8 Atkinson v. Hewett, 63 Wis. 396 ; Searle v. Sawyer, 127 Mass. 491 ; Wilbur V. Moulton, 127 Mass. 509 ; James v. Worcester, 141 Mass. 361. THE EIGHTS OP THE MORTGAGOR. 891 by cutting wood not necessary for firewood to be used on said land by the family of the mortgagor, or by any other means, without the consent in writing of whoever appears of record to be the owner of or interested in such mortgage, and wdth intent to defraud any owner or person interested in such mort- gage or with intent to lessen the value of the property subject to such mortgage, to the injury of any person owning or inter- ested in such mortgage, shall be guilty of a misdemeanor, and shall be punished by a fine not exceeding one hundred dol- lars, or by imprisonment not exceeding three months, or by both.i § 877. Rights of Second Mortgagee. — One holding land both as mortgagee and grantee of the mortgagor or grantor is liable for waste to the junior mortgagee.^ However, if the senior mortgagee settles for the damages to the premises in good faith, the second mortgagee has no remedy, unless he shows that such settlement was inadequate to compensate for the injury.^ So a junior mortgagee is entitled to damages between the date of the judgment of foreclosure and the date of the sale there- under.* § 878. Accounting to Mortgagor for Damages Recov- ered. — When the mortgagee is in possession and settles for a trespass to the property committed by a third party, who carries away timber, he discharges the trespasser, and the mortgagor cannot then hold the trespasser for the injury. The mortgagor's remedy is against the mortgagee in possession for the timber cut and carried away, as for profits received by the mortgagee for which he is liable.^ § 879. Burden of Proof. — The burden of proof is upon the mortgagee ; but when the defense is affirmative then the burden changes to the mortgagor. Thus, when the mortgagee seeks 1 Acts of 1879, p. 392. * Scott V. Webster, 50 Wis. 53. 'Byrom v. Chapin, 113 Mass. 308. MVhorton v. Webster, 56 Wis. 356. . 8 Guthrie v. Kahle, 46 Pa. St. 331. 892 RIGHTS OF PARTIES BEFORE DEFAULT. to enjoin the mortgagor from cutting timber on the land, be- cause the value of the land is thereby diminished, and tliat he has no other security, an averment in the answer that the land is fertile, and that its value would be increased by clear- ing and reducing it to cultivation, is affirmative matter in avoidance, and must be proved by the mortgagor/ Article 8. Right to Emblements. § 880. General Rule — Crops. § 884. As to Lessee of Mortgagor. § 881. After Severance. § 885. Estoppel of Purchaser to take § 882. Trees and Shrubs. the Emblements. § 883. Tenant at Will — and at Sufferance. § 880. General Rule — Crops. — As regards the question of crops growing on the mortgaged premises at the time of the foreclosure sale, it is the general rule that the doctrine of em- blements does not apply, and that such crops properly belong to the purchaser at the foreclosure sale.^ As between the mort- gagor or a stranger and the mortgagee, a sale of the mortgaged premises covers growing crops.^ If the mortgagor removes the emblements pending foreclosure, the value of them may be included in the damages awarded the mortgagee.* § 881. After Severance. — After severance of the crops, the mortgagor in possession, they belong to him ; ^ however, a mort- gagor of land who simply continues in possession after right of redemption under foreclosure proceedings has expired has no right to cut and sell hay from the premises.^ But prior to 1 Moses V. Johnson, 88 Ala. 517. See, also, Harrill v. Stapleton, 55 Ark. 1. ''Crews V. Pendleton, 1 Leigh (Va.), 297. 3 Wallace v. Cherry, 32 Mo. App. 436. *Aldrich v. Reynolds, 1 Barb. Ch. (N. Y.) 613. 5 Rankin v. Kinsey, 7 111. App. 215 ; Welp v. Gunther, 48 Wis. 543 ; Wood- ward V. Pickett, 8 Gray (Mass.), 617 ; Cooper v. Cole, 38 Vt. 185 ; Allen v. El- derkin, 62 Wis. 627 ; Column v. Duke, 3 Ves. Jr. 25 ; Toby v. Reed, 9 Conn: 216. « Perley v. Chase, 79 Me. 519. THE RIGHTS OF THE MORTGAGOR. 893 the foreclosure the mortgagee has no right to the emble- ments. Thus the mortgagee does not acquire title to ice cut and stored in an ice-house prior to the foreclosure of the mortgage.* A mortgagee out of possession cannot maintain trespass quare clausum against one who cuts and removes the grass or other annual crop ; " but when the foreclosure becomes perfect the mortgage, if the premises are of sufficient value, thereby becomes paid.^ § 882. Trees and Shrubs. — Trees and shrubs planted in an inclosure for the temporary purpose of cultivation and growth so that they shall become sufficiently mature for the market, when they are to be taken up and sold, pass by a mortgage of the land on which they are planted, so that the mortgagor or his assignee cannot remove them as personal chattels.^ But a purchaser could make a valid agreement with the mortgagee to remove such shrubs and trees.^ And if the mort- gagee had notice that they were planted on the land of one of a firm, and that they belonged to the firm, the firm has a right to remove them.^ When the purchaser has permission to remove the trees, this implies a reasonable time according to the circumstances, in the absence of contract.^ And when the mortgagee in posses- sion allows the mortgagor to enter and cut bark from the trees, which the mortgagee agrees to sell and apply the pro- ceeds on the mortgage debt, a sale of the bark to an innocent purchaser by the mortgagor will divest the lien of the mort- gagee.^ ^ Gregory v. Rosenkrans, 72 Wis. 220. See, also. Wood v. Trask, 7 Wis. 56G ; Brinknian v. Jones, 44 Wis. 498. ''Hewes v. Bickford, 49 Me. 71 ; Page v. Robinson, 10 Cush. (Mass.) 99. ' Hurd V. Colman, 42 Me. 182 ; Morse v. Merritt, 110 Mass. 458. * Maples V. Millon, 31 Conn. 598. This rule is different between landlord and tenant. * Chiles V. Wallace, 83 Mo. 84 ; Glasscock v. Glasscock, 66 Mo. 627. 8 King V. Wilcomb, 7 Barb. (N. Y.) 263. ^Salisbury v. Renick, 44 Mo. 558 ; Glasscock v. Glasscock, 66 Mo, 627. ^^Moisant v. McPhee, 92 Cal. 76. 894 RIGHTS OF TARTIES BEFORE DEFAULT. § 883. Tenant at "Will — and at Sufferance. — A mort- gagor is not entitled to emblements as a tenant at will. Hence, a mortgagee may evict the mortgagor without notice and re- tain the emblements, after foreclosure, no statute to the con- trary as to giving notice.^ So if the mortgagor continues in possession after the determination of the particular estate he thereby brings himself within the definition of tenant at suf- ferance at common law ; ^ and if a tenant at sufferance he is not entitled to emblements.^ An evicted mortgagor cannot maintain trespass against the mortgagee.* But if the mortgagor occupies the premises by assent of the mortgagee by agreement, then he has an action against him for trespass for appropriating the crops.^ While a mortgagor after foreclosure and sale is a tenant at sufferance at common law," yet a statute may make it neces- sary to give such a mortgagor notice to quit and to allow him the ripened crops upon the land.^ § 884. As TO Lessee of Mortgagor. — The law applies to a lessee of the mortgagor. Hence, a mortgagee may evict Such a lessee without notice and retain the emblements, because every person who takes under a mortgagor takes subject to all the rights of the mortgagee, unimpaired and unaffected.® So when the mortgagee obtains the absolute estate in fee of the mortgaged premises by becoming the pur- chaser under a foreclosure and sale, he is entitled to the em- blements, and may maintain trespass against the mortgagor or his lessee for taking and carrying away the crops growing at the time of the sale.^ The title and interest of the mortgagor ^ Downard v. GrofF, 40 Iowa, 597. "Livingston v. Tanner, 12 Barb. (N. Y.), 481, 484 ; 1 Washb. on Eeal Prop. 534, sect. 2. 3 Bennett v. Turner, 7 Mees. & Wei. 226. * Gilman v. Wills, 66 Me. 273. ^Gilman v. Wills, 66 Me. 273. « Livingston v. Tanner, 12 Barb. (N. Y.) 481, 484. ^ Allen V. Carpenter, 15 Mich. 25. * Downard v. GrofF, 40 Iowa, 597. 8 Jones ('. Thomas, 8 Blackf. (Ind.) 428; Lane t;. King, 8 Wend. (N. Y.) 584 ; Anderson v. Strauss, 98 III. 485. THE RIGHTS OP THE MORTGAGOR. 895 or his lessee being subject to the mortgage are liable to be divested by the foreclosure sale of the premises.^ And then the mortgagee may evict the mortgagor without notice and retain the emblements.^ In Ohio the rule is different, and seems to be based upon the construction of the appraisement law. The decision is conspicuous because it stands alone and unsupported by authority. It declares that where lands, subject to a mort- gage, are sold under a decree of foreclosure, the emble- ments of the lessee are protected and do not pass to the pur- chaser under the decree.^ § 885. Estoppel of Purchaser to Take the Emblements. — A purchaser may be estopped from claiming the emblements. Thus, a mortgagor who was in default sowed grain on the mortgaged premises. He died and the administrator sold the crop. The mortgage was foreclosed before severance of the crop, and the mortgagee announced at the sale that the crop would not be sold, as it had already been sold. Under these circumstances the purchaser was estopped to claim the emble- ments.'* 1 Shepard v. Philbrick, 2 Den. (N. Y.) 174 ; Keech v. Hall, 1 Doug. 21 ; Thun- der V. Belcher, 3 East, 149. 2 Scriven v. Moote, 36 Mich. 64 ; Coote on Mort. 351 ; 2 Cruise Dig. 108 ; 1 Powell on Mort. 149, 160, 161, 162, 163 ; Com. Dig. L., tit. Liens, G. 2 ; Co. Litt. 55 ; Aldrich v. Reynolds, 1 Barb. Ch. (N. Y.) 613. 3 Cassilly v. Rhodes, 12 Ohio, 88. * Sherman v. Willett, 42 N. Y. 146. CHAPTER XXII. the rights of the mortgagee. Article 1. Ilie Mortgagee's Interest. § 886. Right to Possession. ^ 892. Right to Partition, i 887. His Interest Passes to His Ad- ^ 893. Parties. ministrator. I 894. Prior Mortgagees. § 888. His Interest is not Subject to 1 895. Mortgage on One of Several Levy. Separate Parcels. § 889. The INIortgagor Holds the Title § 896. The Mortgage Cannot be Ex- in Privity with the Mortgagee. tended over Land not Cov- § 890. Tenants in Common. ered by it. § 891. Joint Tenancy. § 886. Right to Possession. — At common law the mortgagee, or trustee in a deed in the nature of a mortgage, is entitled to immediate possession, and may maintain an action for use and occupation against a tenant in possession, unless the mort- gage contains some stipulation, express or implied, postponing his right to take possession.^ And this right is recognized by statute in some States.^ And when there is no stipulation that the mortgagor shall retain possession, the mortgagee may maintain an action of ejectment against the mortgagor or those claiming under him.^ The mortgagee has any action at law which an owner could bring to oust the mortgagor and those claiming under him.* In some of the States the mortgagee's right of possession has 1 Barrett v. Hinckley, 124 HI. 32; Finlon v. Clark, 118 111. 32; Watford r. Gates, 57 Ala. 290 ; McMillan v. Otis, 74 Ala. 560 ; Taylor v. Adams, 115 III. 574 ; Woodward v. Parsons, 59 Ala. 625. 2 Hadley v. Hadley, 80 Me. 459 ; Maine's Rev. Stat., ch. 90, sect. 2. nValcop V. McKinney, 10 Mo. 229. * Fletcher v.- Chamberlin, 61 N. H. 438 ; Shute v. Grimes, 7 Blackf. (Ind.) 1 ; Jackson v. Hull, 10 Johns. (N. Y.) 481 ; Brown v. Stewart, 1 Md. Ch. 87 ; Clark V. Reyburn, 1 Kan. 281 ; Den v. Stockton, 12 N. J. L. 322 ; Ely v. Mc- Guire, 2 Ohio, 223 ; Fuller v. Eddy, 49 Vt. 11. 896 THE RIGHTS OF THE MORTGAGEE. 897 been changed so that he cannot take possession. But such statutes do not prevent the mortgagor's allowing the mortgagee to go into possession and hold possession until the mortgage is paid.^ This subject is fully treated in the first chapter, where the law of the States is explained. § 887. His Interest Passes to His Administrator. — Though the legal title to the mortgaged lands on the death of the mortgagee descends to his heirs, they hold it in trust for the administrator as an incident to the debt ; and he may release it, or transfer it by an assignment of the debt.^ The mortgage is a mere chose in action and devolves upon the personal representatives of the mortgagee in event of his death. ^ At common law, on the death of the mortgagee the legal title or estate descends to his heirs ; but it is, however, a mere drj'-, naked, legal estate, subsisting only for the purpose of keeping the mortgage alive as a security for the debt, and is held in trust by the heir, for the benefit of the personal repre- sentative, to whom the debt passes as an asset.* The personal representatives may handle the mortgage in the same manner as the mortgagee could if living/ and this is provided by statute in some States.^ The assignment of the mortgage cannot be made by an heir ; ^ and when devised it passes only as a bequest of personal property.* ^ Fee V. Swingly, 6 Mont. 596 ; Hennesy v. Farrell, 20 Wis. 42 ; Edwards v. Wray, 11 Biss. c' C. 251 ; Minkler v. Minkler, 10 Johns. (N. Y.) 480 ; Sahler V. Signer, 44 Barb. (N. Y.) 606. ' Baldwin v. Hatchett, 56 Ala. 461 ; Collamer v. Langdon, 29 Vt. 32 ; Conner V. Whitmore, 52 Me. 185. * Wilson r. Troup, 2 Cow. (N. Y.) 195 ; Scott v. McFarland, 13 Mass. 309 ; Knox V. Easton, 38 Ala. 345. *Taft V. Stevens, 3 Gray (Mass.), 504. * Collamer v. Langdon, 29 Vt. 32. ^ Ohio, Rev. Stat. 1880, sect. 6070; Wisconsin, Rev. Stat. 1878, sect, 3829 ; Massachusetts, Gen. Stat., ch. 96, sects. 9, 10. ''Douglass V. Durin, 51 Me. 121. « Martin v. Smith, 124 Mass. 111. 57 898 RIGHTS OF PARTIES BEFORE DEFAULT. § 888. His Interest is Not Subject to Levy. — The inter- est of the mortgagee in the mortgaged premises before foreclos- ure or entry for condition broken, is not liable to levy and sale under execution.^ Neither can his interest be sold under exe- cution against him and the mortgagor..^ And his interest cannot be taken in execution, whether his title be considered legal or equitable.^ And so the beneficiary's interest in a deed of trust cannot be sold under execution,* and the same rule applies as to an absolute deed with agreement to recovery.^ § 889. The Mortgagor Holds the Title in Privity with the Mortgagee. — The mortgagor or his assignee holds in privity with the mortgagee and in subordination to his rights. Judge Stiness says whether we regard one who owns the equity of redemption as a tenant or as one holding in privity with and subject to the mortgagee's right to enter, his holding is. not inconsistent with the title to a purchaser at the mortgagee's sale. There is, therefore, no adverse holding, no ouster of the owner, and no disseisin until the possession, before consistent with the title of the real owner, becomes tortious and wrongful by the disloyal action of the tenant, which must be open and notorious, so as to preclude all doubt as to the character of the holding or want of knowledge on the part of the owner.^ The mortgagee may treat any person found on the mortgaged 1 Blanchard v. Colburn, IG Mass. 346 ; Huntington v. Smith, 4 Conn. 237 ; Glass V. Ellison, 9 N. H. 69 ; Jackson v. Willard, 4 Johns. (N. Y.) 41 ; Free- man on Ex., sects. 118, 184 ; Nicholson v. Walker, 4 111. App. 404. nCing V. Cushman, 41 111. 31. 3 Rickert v. Madeira, 1 Eawle (Pa.), 325 ; Brown v. Bates, 55 Me. 520 ; Trap- nail V. Bank, 18 Ark. 53 ; Scott v. Mewhirter, 49 Iowa, 487 ; Buck v. Sanders, IDana (Ky.), 187; Cooch v. Gerry, 3 Harr. (Del.) 280; Marsh v. Austin, 1 Allen (Mass.), 235; Eaton v. Whiting, 3 Pick. (Mass.) 484; Drake on Attach. (6th ed.) sect. 235 ; Freeman on Ex., sect. 184 ; Morris v. Barker, 82 Ala. 272 ; Collins V. Torry, 7 Johns. (N. Y.) 277 ; Brooks v. Kelly, 63 Miss. 616. * Beckett v. Dean, 57 Miss. 232. * Scott V. Mewhirter, 49 Iowa, 487. 6 Doyle V. Mellen, 15 R. I. 523; Whittington v. Flint, 43 Ark. 504; 51 Am. Rep. 572 ; Hunt v. Hunt, 14 Pick. (Mass.) 374 ; Jones v. Williams, 5 Adol. & Ell. 291 ; Partridge v. Bere, 5 Barn. & Aid. 604 ; Zeller v. Eckert, 4 How. (U. S.) 289 ; Kruse v. Scripps, 11 111. 98 ; Conner v. Whitmore, 52 Me. 185 ; Herbert V. Hanrick, 16 Ala. 581 ; Medley v. Elliott, 62 111. 532. See section 836. THE RIGHTS OF THE MORTGAGEE. 899 premises without a good title as a disseisor.^ Between the mortgagor and the mortgagee, so long as the latter does not treat the former as holding adverse possession, the possession of the mortgagor is not hostile to or inconsistent with the mortgagee's right ; to this extent the possession of the mort- gagor is the possession of the mortgagee.^ But there cannot be a mixed possession by a mortgagor and a mortgagee as tenants in common, after condition broken, as the law would adjudge the possession to the latter.^ The mortgagee is in privity of estate with the mortgagor only in respect to the estate as it existed when the mortgage was executed/ § 890. Tenants in Common. — Mortgagees may become ten- ants in common. Thus, where a mortgage is given to two or more mortgagees jointly, but to secure the amount of the separate indebtedness of the mortgagors to each of them, they take as tenants in common,^ each having an undivided in- terest in proportion to his claim ; therefore the fact that the mortgage is void as to one of the mortgagees as against his creditors does not affect the validity as to the others.^ In such case the mortgagees do not take as joint tenants, but as tenants in common ; each taking an undivided interest as tenant in common of the property conveyed by the mort- gage in proportion to the respective debts,^ and each may enforce his claim according to law,^ and his personal represen- tative may enforce the lien after his death.^ 1 Wheeler v. Bates, 21 N. H. 460. 2 Doe r. Barton, 11 Adol. & El. 307; Smartle v. Williams, 1 Salk. 245; Nichols V. Reynolds, 1 R. I. 30 ; Boyd v. Beck, 29 Ala. 703. 3 Hall V. Tunnell, 1 Houst. (Del.) 320. * Mathes v. Cover, 43 Iowa, 512. ^Farwell v. Warren, 7(5 Wis. 527 ; Brown v. Bates, 55 Me. 520 ; Donnels v. Edwards, 2 Pick. (Mass.) 617. ^Farwell v. Warren, 76 Wis. 527. ' Donnels t-. Edwards, 2 Pick. (Mass.) 617 ; Tyler v. Taylor, 8 Barb. (N. Y.) 585; Howard v. Chase, 104 Mass. 249; Alderson v. Schulze, 64 Wis. 460; Burnett v. Pratt, 22 Pick. (Mass.) 556. « Burnett v. Pratt, 22 Pick. (Mass.) 556 ; Gilson v. Gilson, 2 Allen (Mass.), 115. 9 Kinsley r. Abbott, 19 Me. 430; Smith v. Trenton Delaware Falls Co., 4 N. ^. Eq, 505. 900 RIGHTS OF PARTIES BEFORE DEFAULT. If there be a joint mortgage made to two, to secure a debt due to one of them the legal estate vests in them as tenants in common, the one having no interest in the mortgage debt being a trustee of the estate for the benefit of him who owns the debt.' The estate of a tenant in common is chargeable in favor of his co-tenant for his share of the expenses necessarily incurred by the latter for the repairs and preservation of the property, and a mortgagee of an undivided interest, whose mortgage lien is subject to such charge, may protect his security by paying the claim of his mortgagor's co-tenant, and holding the mort- gage estate for his reimbursement.^ § 891, Joint Tenancy. — The estate may be held as a joint tenancy. Thus, a mortgage made to partners to secure a joint debt is a joint tenancy, because the debt itself would in case of the death of one partner vest in the survivor for the purpose of collection, so that the mortgage security may, by the doctrine of survivorship, accompany the debt.^ By foreclosure of such mortgage, then the estate would be a tenancy in common.* If one of two joint mortgagees die before foreclosure of the mortgage, the survivor may bring an action to foreclose the same.^ But if the debts are distinct, the survivor of the mort- gagees cannot sustain an action in his own name to foreclose the mortgage for the debt due the deceased.® § 892. Right to Partition. — Though the mortgagees are tenants in common in proportion to the amount of the balance of their several debts, yet, until foreclosure, their estate in the land is not subject to partition.^ But when an 1 Root V. Bancroft, 10 Met. (Mass.) 44. ^Darling II. Harmon, 47 Minn. 166. ='Appleton V. Boyd, 7 Mass. 131. See Randall v. Phillips, 3 Mason, C. C. 378. * Goodwin v. Richardson, 11 Mass. 469 ; Johnson r. Brown, 31 N. H. 405 ; Rigden v. Vallier, 2 Ves. Sr. 252 ; Tyler v. Taylor, 8 Barb. (N. Y.) 585. 5 Williams v. Hilton, 35 Me. 547 ; Appleton v. Boyd, 7 Mass. 131. « Burnett v. Pratt, 22 Pick. (Mass.) 556. ''Ewer V. Hobbs, 5 Met. (Mass.) 1. THE RIGHTS OF THE MORTGAGEE. 901 owner allows the mortgagee to a portion of the land to fore- close before condition broken, he does not thereby become tenant in common with him ; and a judgment creditor of such mortgagor cannot on levying an execution on the land main- tain against the mortgagee a petition for partition/ But when the mortgagee has foreclosed his lien on one part of the land, then he may have partition with the owner of the other part.^ If one of the tenants mortgage his share to his co-tenant, he cannot have partition against him, since in respect to his co- tenant he has not sufficient seisin to maintain partition against his own mortgagee.^ § 893. Parties. — Judgment of partition on a petition by one tenant in common against a co-tenant, who has mortgaged his interest in the land, is not binding on the mortgagee if he is not made a party to the suit and does not elect to affirm the petition.* When tenants in common, for the purpose of making par- tition, execute mutual deeds of release of specific portions of the land to each other, and the mortgagee who has a mortgage from tenant upon an undivided half of the land joins with the mortgagor in his release, such release and partition have as to the interest of both the mortgagor and the mortgagee, the effect to substitute for an undivided half of the whole the part set off to the mortgagor in severalty.^ And a mortgage executed by a tenant in common upon his interest, pending a suit for partition, is subordinate to the rights of the other co-tenants whose right is superior to that of such mortgage.^ And where a mortgage was executed by a tenant in common upon his interest in the land, pending suit for partition, and he became the purchaser of part of the property at the sale, and the amount of his share of the proceeds was allowed to him upon ' Norcross v. Norcross, 105 Mass. 265. * Phelps V. Townsley, 10 Allen (Mass.), 554. * Bradley r. Fuller, 23 Pick. (Mass.) 1. *Loomi8 V. Riley, 24 111. 307. *Torrey v. Cook, 116 3Iass. 163 ; Bradley v. Fuller, 23 Pick. (Mass.) 1. 8 United States, etc., Co. v. Long Dock Co., 42 N. J. Eq. 547. 902 RIGHTS OF PARTIES BEFORE DEFAULT. his bid, it was held that although if a stranger had bought the property the lieu of the mortgage would have been cut off, yet since the mortgagor had bought it the lien still subsisted in equity upon the land so purchased, but only to the extent of the mortgagor's interest in the proceeds of the sale of the whole of the lands held in common and sold under the decree. The liens of mortgages given upon the property of the purchaser to other tenants in common, for their shares of the proceeds of the sale, were held to be, of course, prior to the lien of that mortgage.^ A voluntary partition of land between the owners thereof is not binding upon the holders of existing liens upon the prop- erty unless they consent thereto.^ § 894, Prior Mortgagees. — The general rule is that prior mortgagees cannot be compelled to join in the partition pro- ceedings between co-tenants. Prior mortgagees or incum- brancers are not necessary or proper parties to partition proceedings between co-tenants ; and the rights of such prior mortgagees are not affected by such partition proceedings.^ And the lien of a mortgage executed by one co-tenant prior to the institution of a suit for partition, and for the recovery of rents and profits, is superior to the claim for rents and profits decreed in such suit.* If partition is had, a prior mortgage by one of the co-tenants may be foreclosed and enforced after partition against the lot set apart to the mortgagor, though this lien is not named in the suit.^ If one tenant in common take an assignment of a mortgage ^Westewelt v. Haff, 2Sandf. Ch. (N. Y.) 98. 2 Emson v. Polhemus, 28 N. J. Eq. 439. ^McArthur v. Scott, 31 Fed. Rep. 521, opinion by Jackson, J. ; Wotten v. Copeland, 7 Johns. Ch. (N. Y.) 140; Hannan v. Osborn, 4 Paige (N. Y.), 343; Meads v. Lansingh, Hopk. (N. Y.) 125 ; Freem. Co-Tenancy, sects. 452, 478, 479. *McArthur v. Scott, 31 Fed. Rep. 521. Compare Hines v. Munnerlyn, 57 Gra. 32. But this case does not say when the mortgage was executed, whether before or after the co-tenant's claim for rents and profits accrued, hence it is not direct authority on this subject. * Watson V. Priest, 9 Mo. App. 263. flii THE RIGHTS OF THE MORTGAGEE. 903 upon the estate, his co-tenant is debarred from partition against him. The co-tenant must redeem the whole mort- gage or contribute his share of the incumbrance.' § 895. Mortgage ox One of Several Separate Parcels. — It is settled in Massachusetts as a rule of law, in relation to land, that the conveyance of any separate estate, by a tenant in common, by metes and bounds, is void as against the co- tenants, and is available only by way of estoppel against the grantor and his heirs.^ Generally when the estate covers several separate parcels, and one tenant has mortgaged his undivided interest in one parcel, then this separate parcel should be considered as a sep- arate estate, and should be separately partitioned.^ In some States it is held, against the weight of authority, that one of two or more tenants in common cannot convey his interest, or any part of his interest, in less than the entire estate so as to bind his co-tenant ; that this rule invalidates the conveyance or mortgage of an undivided interest in one or more of several distinct estates which are held in common, unless all the estates so held are embraced.* But this rule carried to this extent is disapproved by other courts, which hold that the rule is applicable only to prevent the dismemberment of a single estate, and not to prevent a tenant from selling his interest, or any part of his interest, in any one of several distinct estates, provided he does not sell it in less than the whole of any of such estate. Thus, it was held improper to levy on an undivided interest in two parcels when an undivided interest in one of them could have satisfied the claim .^ So it has been held that platting lots for sale iBlodgett V. Hildreth, 8 Allen (Mass.), 186. ^ Peabody v. Minot, 24 Pick. (Mass.) 329 ; Bartlet v. Harlow, 12 Mass. 348 ; Adam r. Briggs Iron Co., 7 Cush. (Mass.) 361. * Carroll v. Norwood, 1 Harr. & J. (Md.) 167 ; Reinicker v. Smith, 2 Harr. & J. (Md.) 421 ; Primm v. Walker, 38 Mo. 94 ; Butler v. Roys, 25 Mich. 53. * Peabody v. Minot, 24 Pick. (Mass.) 329 ; Thompson v. Barber, 12 N. H. 563 ; Freeman on Co-Tenancy and Partition, sects. 197-208 ; Marks v. Sewall, 120 Mass. 174. , 5 Starr v. Leavitt, 2 Conn. 243. 904 RIGHTS OF PARTIES BEFORE DEFAULT. converts the lots into separate estates, and that an undivided interest in any one of the lots so platted may be lawfully sold and conveyed,^ It is held in Rhode Island that the aggregate parcels cov- ered by each single mortgage of one co-tenant must, for the purpose of partition, be considered as one separate estate, in equity,^ In Massachusetts, where parcels are subject to a mortgage, in a suit under the statute by the mortgagor, the mortgagee objecting, partition was refused.^ But when the suit is brought in equity by the mortgagee, the mortgagor assenting, partition can be made.* This conflict of authority cannot be reconciled. § 896. The Mortgage Cannot be Extended over Land NOT Covered by it. — As between tenants in common a sale or mortgage of land by one of them is valid, provided such sale or mortgage covers the vendor's or mortgagor's interest in the whole or any separate parcel or estate, notwithstanding the tenancy in common may extend to other parcels or estates.^ But a mortgage cannot be extended over land which it does not cover.^ Where one of two or more tenants in common mortgages his entire interest in the common estate, the mort- gage will cover the part allotted to the mortgagor in a partition subsequently made.^ And where one of several tenants in common mortgages less than his entire interest in the whole of the common estate, and the estate is afterward divided, the mortgage will cover a proportional interest in the whole of the part allotted to the mortgagor. * ^ Primm v. Walker, 38 Mo. 94. " Green v. Arnold, 11 R. I. 364. ' Fuller V. Bradley, 23 Pick. (Mass.) 8 ; Blodgett v. Hildreth, 8 Allen (Mass.), 186. * Green v. Arnold, 11 R. 1. 364, and see Moore v. Moore, 47 N. Y. 467. ^ Green v. Arnold, 11 R. I. 364. « Jackson r;. Fierce, 10 Johns. (N. Y.) 417; Crosby v. Allyn, 5 Me. 453; Williams College v. Mallett, 12 Me. 398. ' Crosby v. Allyn, 5 Me. 453 ; Watson v. Priest, 9 Mo. App. 263. See, also, Loomis V. Riley, 24 111. 307 ; Thurston v. Minke, 32 Md. 571. « Randell v. Mallett, 14 Me. 51. the rights of the mortgagee. 905 Article 2. Relative Rights as to Mortgagor. ^ 897. Privity of Estate. ^ 903. May Have a Reasonable Com- § 898. Eight to Condemnation Money pensation. Arising from the Mortgaged § 904. Rents and Profits. Premises. ? 905. Improvements. § 899. The Mortgagee May Purchase | 906. Grantee in a Deed of Trust. the Right of Redemption. ^ 907. Accounting. § 900. Mortgagee in Possession. § 908. Taxes. § 901. Must Exercise Reasonable Care. ? 909. Mortgagee Out of Possession — § 902. He May Take Possession by Taxes. Agreement. § 897. Privity of Estate. — The mortgagee is in privity of estate with the mortgagor only in respect to the estate as it existed when the mortgage was executed.^ It is a well-settled rule that mortgagees are not bound by judgments or decrees rendered against the mortgagor and affecting the mortgaged premises in suits begun by third parties subsequent to the exe- cution of the mortgage, unless the mortgagees themselves are made parties to the litigation.^ The doctrine of privity cannot be invoked to bind mort- gagees by decrees against the mortgagor in suits between him and third parties, unless the mortgage was executed pendente lite or after decree.^ The mortgagee is entitled to a lien on the whole property mortgaged.* He must be made a party in an application to set apart a homestead;^ to a bill to set aside a previous sale under proceed- ings in insolvency ]^ to a bill to compel performance of a con- tract by the owner to convey the estate;^ to a suit to avoid a pur- 1 Mathes v. Cover, 43 Iowa, 512. "^ Secor V. Singleton, 41 Fed. Rep. 725. 3 Campbell v. Hall, 16 N. Y. 575 ; Scales v. King, 110 111. 456 ; Cutter i-. Jones, 52 111. 84 ; Zoeller v. Riley, 100 N. Y. 102 ; Doe v. Derby, 1 Adol. & E. 783. * Spencer v. Waterman, 36 Conn. 342 ; Tarbell v. Page (Mass.), 29 N. E. Rep. 585. ^Lies V. De Diablar, 12 Cal. 327. «Coiron v. Millaudon, 19 How. (U. S.) 113. J Hoxie V. Carr, 1 Sumner, C. C. 173. 906 RIGHTS OF PARTIES BEFORE DEFAULT. chase of real estate by an administrator who had given a mort- gage while in possession and claims title under his purchase.^ He is not a necessary party to a proceeding which relates to an injury done to the possession of the mortgagor.^ § 898. Right to Condemnation Money Arising from the Mortgaged Premises. — The mortgagee of land which is con- demned for public improvements has a lien on the money paid for damages, notwithstanding the amount has already been paid to the mortgagor.^ A foreclosure and sale under the mortgage to secure the purchase-money avoid a previous dedication by the mortgagor, and a purchaser at such sale buys free from it.* But if the mortgagee releases lots laid out as an addition to a city, by referring to the map of the land as laid out, such a release discharges the lien on those lots and half of the street in front of them.^ The surplus arising from the sale of a prior mortgage is sub- ject to the lien of the junior mortgage.^ The condemnation money is substituted in the place of the land and must be applied in payment of the mortgage debt.^ The sum awarded arises from and grows out of the land by reason of the injury which has diminished its value. In equity it is the land itself.^ There is much reason for providing that a mortgagee, whose security is enhanced in value by the construction of a public iWoodruflfr. Cook, 2 Edw. (N. Y.) 259. ^ Paine v. Woods, 108 Mass. 160. 3 Sherwood v. Lafayette, 109 Ind. 411 ; Parks v. Boston, 15 Pick. (Mass.) 198, 203 ; Baltimore, etc.. Railroad Co. v. Thompson, 10 Md. 76 ; White v. Rittenmeyer, 30 Iowa, 268 ; Choteau v. Thompson, 2 Ohio St. 114 ; Kennedy V. Milwaukee, etc.. Railroad Co., 22 Wis. 581 ; Philadelphia, etc.. Railroad Co. V. Williams, 54 Pa. St. 103 ; Astor v. Hoyt, 5 Wend. (N. Y.) 603 ; Piatt v. Bright, 31 N. J. Eq. 81 ; Bank v. Roberts, 44 N. Y. 192 ; Railroad Co. v. Chamberlain, 84 111. 333. * Moore v. Little Rock, 42 Ark. 66. 5 Hague V. West Hoboken, 23 N. J. Eq. 354. «Bartlett v. Gale, 4 Paige (N. Y.), 503. ^ Astor V. Hoyt, 5 Wend. (N. Y.) 603 ; Sherwood v. Lafayette, 109 Ind. 411 ; Astor r. Miller, 2 Paige (N. Y.), 68 ; Gimbel v. Stolte, 59 Ind. 446 ; In re John and Cherry Streets, 19 Wend. (N. Y.) 659. 8 Bank v. Roberts, 44 N. Y. 192. See sect. 858. THE RIGHTS OF THE MORTGAGEE. 907 drain should have the lien of his mortgage subordinated to the lien of a fair assessment for the cost of its construction. But if the statute contains no such provision, the mortgage will not be affected.^ A mortgagee cannot, before maturity of the debt, recover compensation for the impairment of his security by condemning part of the mortgaged land for the pur- pose of a public road.^ § 899. The Mortgagee May Purchase the Equity of Redemption. — The mortgagee may become the purchaser of the equity of redemption, if he does not use his power over the estate to induce the mortgagor to part with it.^ The mortgagee is under no obligations to protect the equity of redemption, and under circumstances showing a bona fide purchase, and that no unconscionable advantage was taken, has a right to purchase it.* Where such a sale to the mortgagee is fair under all the circumstances, it will be sustained.^ In Minnesota, however, it is held that, when a mortgagor could not pay the debt and asked for an extension which was refused, and then agreed to take a certain amount of money and the notes back from the mortgagee and convey him the land absolutely, such transaction did not discharge the right of the mortgagor to redeem.^ ^Pierce v. Ins. Co. (Ind.), 31 N. E. Eep. 68. See, also, Killian v. Andrews (Ind.), 30 N. E. Rep. 700. ^'Aggs V. Shackelford Co. (Tex.), 19 S. W. Rep. 1085. 3 Hinkley v. Wheelwright, 29 Md. 348 ; Hicks v. Hicks, 5 Gill & J. (Md.) 85 ; Russell V. Southard, 12 How. (U. S.) 154 ; Villa v. Rodriquez, 12 Wall. (U. S.) 333, 3.39 ; Walker v. Bank (Del.), 10 At. Rep. 94. * Knight V. Majoribanks, 2 Mac. & G. 10 ; Shelton r. Hampton, 6 Ired. L. (N. Car.) 216 ; Dennis v. Tomhnson, 49 Ark. 568 ; Ten Eyck v. Craig, 62 N. Y. 406 ; Remsen v. Hay, 2 Edw. (N. Y.) 535. Compare Whitehead v. Hellen, 76 N. Car. 99 ; Lee v. Pearce, 68 N. Car. 76 ; McLeod v. Bullard, 84 N. Car. 515, 531. nVest V. Reed, 55 111. 242 ; 1 Washb. Real Prop. 62 ; 1 Powell on ]Mort. 122, note n ; Hyndman r. Hyndman, 19 Vt. 1 ; Green r. Butler, 26 Cal. 595 ; Pugh V. Davis, 96 U. S. 332 ; Thompson v. Lee, 31 Ala. 292 ; 2 White & Tudor's Lead. Cas. in Eq. (4th Am. ed.) pt. 2, pp. 1983-4-5 ; Trull v. Skinner, 17 Pick. (Mass.) 213 ; Wynkoop v. Cowing, 21 111. 570 ; Oliver v. Cunningham, 7 Fed. Rep. 689 ; Blythe v. Richards, 10 Serg. & R. (Pa.) 261 ; WalthaU v. Rives, 34 Ala. 91 ; Harrison v. Roberts, 6 Fla. 711. ^ ^ Jones V. Blake, 33 Minn. 362. 908 RIGHTS OF TARTIES BEFORE DEFAULT. If the mortgagee in bujang the redemption gains an uncon- scionable advantage, and has j^urchased it for a less sum than others would have given, then a court of equity will set the sale aside/ When the mortgagee has taken a mortgage he is a bo7ia fide purchaser,^ and is not affected by his mortgagor's fraud iu acquiring his title.^ The mortgagee can likewise purchase, in good faith, the equity of redemption, though he be in possession of the premises/ Constructive fraud, however, is enough to set aside such a sale,* and a grossly inadequate price will render such sale voidable." And when the mortgagee has taken the property in full satisfaction of his debt, there being subsequent liens, the burden of proof is on him to show that his debt was equal to the value of the property/ § 900. Mortgagee in Possession. — In some States where the mortgage is only a lien the mortgagee cannot take posses- sion before foreclosure without the mortgagor's consent. Thus, in Oregon, where he takes possession of such premises in a peaceable manner, without foreclosure, he may retain posses- sion as against the mortgagor or any person claiming under him subsequent to the mortgage, and hold possession until the mortgage debt is paid.^ And in general, when he has right- ful possession, he may hold it until his debt is satisfied.^ 1 Webb V. Rorke, 2 Sch. & Lef. 661 ; Ford v. Olden, L. R. 3 Eq. 461 ; Russell V. Southard, 12 How. (U. S.) 154. ^Plaii^ted r. Holmes, 58 N. H. 619. ' Stockton V. Craddick, 4 La. Ann. 282 ; Bailey r. Crim, Biss. C. C. 95. * King V. Ins. Co., 7 Cush. (Mass.) 1 ; Duval v. Bank, 10 Ala. 636 ; Clark v. Bush, 3 Cow. (N. Y.) 151; Cholmondeley v. Clinton, 2 Jac. & Walk. 183; Austin V. Bradley, 2 Day (Conn.), 406; Trimm v. Marsh, 54 N. Y. 599; Woodlee v. Burch, 43 Mo. 231 ; Harrison v. Roberts, 6 Fla. 711 ; Walthall v. Rives, 34 Ala. 92. s Perkins v. Drye, 3 Dana (Ky.), 170 ; Lee v. Pearce, 68 N. Car. 76 ; McLeod V. Bullard, 84 N.'Car. 515, 531.' «McKinstry v. Conly, 12 Ala. 678. ' Yates V. Mead, 68 Miss. 787. ® Cooke r. Cooper, 18 Oreg. 142. "Van Duyne v. Thayre, 14 Wend. (N. Y.) 234; Phyfe v. Riley, 15 Wend. « THE RIGHTS OF THE MORTGAGEE. 909 And if the mortgagee obtains possession lawfully, after for- feiture, the mortgagor cannot recover possession without satis- fying the mortgage ; ^ the assignee of the mortgagor has no better right." If the mortgagee gets possession by some other title than by the mortgagor, before maturity of the debt, he will be deemed as holding as a mortgagee at forfeiture.^ But obtaining possession by collusion of mortgagor's tenant confers no right where the legal title is not conveyed by the mortgage on condition broken,^ And after the expiration of the time within which a mort- gage may be enforced by foreclosure, the mere entering into pos- session b}^ the mortgagee, without objection on the part of the mortgagor, does not restore the mortgage to efficacy, but entitles the mortgagee to the rights of a mortgagee in possession.^ When the mortgagee is in possession with the right of re- demption in the mortgagor, if anything is found due the mort- gagor, it is error to grant a writ of assistance to recover possession before an accounting is made.*' A release by the mortgagor to the mortgagee of the premises passes all the former's right to the land.'^ § 901. Must Exercise Reasonable Care. — The mortgagee in possession must exercise reasonable diligence in taking care of the income of the premises ; because, by taking possession he imposes upon himself the duty of a provident owner, and (N. Y.) 248 ; Hubbell v. IMoulson, 53 N. Y. 225 ; Dickason v. Dawson, 85 111. 53 ; Nicholson v. Walker, 4 111. App. 404 ; Fee v. Swingly, Mont. 57G ; Brink- man V. Jones, 44 Wis. 498 ; Martin v. Fridley, 23 Minn. 13 ; Roberts v. Suth- erlin, 4 Oreg. 219 ; Chase v. Peck, 21 N. Y. 581 ; Rodriguez v. Havnes, 76 Tex. 225. 1 Wills V. Rice, 34 Ark. 346; Brobst v. Brock, 10 Wall. (U. S.) 519 ; Harper V. Ely, 70 111. 581 ; Hennesy v. Fan-ell, 20 Wis. 42 ; Pace v. Chadderdon, 4 Minn. 499. 2 Kilgour V. Gockley, 83 111. 109. 3 Winslow r. McCail, 32 Barb. (N. Y.) 241 ; Bolton r. Brewster, 32 Barb. (N. Y.) 389. Compare Cable v. Ellis, 86 111. 525. * Sahler v. Signer, 44 Barb. (N. Y.) 606 ; Russell v. Ely, 2 Black (U. S.), 575. ^ Banning v. Sabin, 45 Minn. 431. « Dickerson v. Thomas, 68 IMiss. 156. , 'Clark V. Clough, 65 N. H. 43. 910 RIGHTS OF PARTIES BEFORE DEFAULT. is bound to recover what such owner would, with reasonable diligence, have received.' When he has used due diligence he is only chargeable with the receipts actually coming to him.^ And a mortgagee in possession under an agent selected by both parties is held to the exercise of reasonable diligence in the management of the mortgaged property, and is not liable as a trustee.^ § 902. He May Take Possession by Agreement. — The mortgagee can go into possession at any time by consent of the mortgagor,'* and the mortgagor's assent to such possession of the mortgagee may be inferred by circumstances.* And this possession may be presumed sometimes from the mortgage itself, unless there be some agreement to the contrary.^ § 903. May Have a Reasonable Compensation. — The mortgagee for his own services may have in some States a rea- sonable compensation. He may have a compensation for the care and management.^ But he is not allowed any com- pensation for his personal trouble in taking care of the estate and renting it, when such allowance would facilitate usury and oppression.^ § 904. Rents and Profits. — A mortgagee in actual posses- sion must devote the entire rents and profits to the payment of the mortgage, and cannot divert any part thereof toward the satisfaction of other unsecured claims due him from the mort- gagor, without express assent of the latter.* ^ Moshier v. Norton, 100 111. 63 ; Gresham v. Ware, 79 Ala. 199 ; Shaeffer v. Chambers, 6 N. J. Eq. 548 ; Scruggs v. Railroad Co., 108 U. S. 375. ■■' Brown v. Bank, 148 Mass. 300. ^Murdock v. Clarke, 90 Cal. 427. *Snowr. Warwick Inst. (R. I.), 20 At. Rep. 94. ^ Rogers v. Benton, 39 Minn. 39. « Madison Ave. Church v. OUver St. Church, 41 N. Y. Superior Ct. 369 ; 73 N. Y. 82. ^ Brown v. Bank, 148 Mass. 300. 8 Snow V. Warwick Inst, for Savings (R. I.), 20 At. Rep. 94. See, also, Mil- ler V. Curry, 124 Ind. 48. ® Harrill v. Stapleton, 55 Ark. 1 ; Jefferson v. Edrington, 53 Ark. THE RIGHTS OF THE MORTGAGEE. 911 He is chargeable for such income which may be set oflf against him under the mortgage in a suit for foreclosure.^ But he may enter into a contract with the mortgagor that such rents and profits in excess of the interest due on the mortgage, may be applied to other unsecured debts due or to become due from the mortgagor to the mortgagee,^ and such contract will be enforced if it be not unconscionable and op- pressive.^ But where the mortgagee is only in possession as the husband of one of the mortgagors, and emploj^ed a party to care for the premises, and received no rents and profits, he cannot be held for the rents and profits.* And a party who is put in trust or charge of personal property in the hands of the law, upon the mortgaged premises, is not responsible for rents and profits.^ And when the mortgagor has possession by will of the mort- gagee, the crops raised by him must go to the mortgagee until the secured debt is paid.^ The mortgagee in possession may defend against the owner of the equity of redemption or his representative except where it is an action for accounting for the rents and profits and to redeem.'^ Where the mortgagee has been in possession, and fails to ac- count for the rents and profits, his mortgage will be declared satisfied.^ § 905. Improvements. — A mortgagee in possession may lawfully take down and carry away buildings erected by him 545 ; Caldwell v. Hall, 49 Ark. 508 ; Swegle v. Belle (Oreg.), 25 Pac. Rep. 633. 1 Clark V. Clark, 62 N. H. 267. ^Demick v. Cuddihy, 72 Cal. 110. ^ Bryson r. James, 55 N. Y. Superior Ct, 374. See, also, Simpson v. Deane, 39 Mo. App. 635. * Young r. Omohundro, 69 Md. 424. * Davis V. Flagg, 44 N. J. Eq. 109. «Coor V. Smith, 101 N. Car. 261. ' Case V. Buttolph, 12 Barb. (N. Y.) 637 ; Winslow v. McCall, 32 Barb. (N. Y.) 241 ; Trimm v. Marsh, 54 N. Y. 599 ; Cummings v. Cummings, 75 Cal. 434 ; Fee )•. Swingly, 6 Mont. 576. ^ « Morgan v. Morgan, 48 N. J. Eq. 399. 912 EIGHTS OF PARTIES BEFORE DEFAULT. on the land mortgaged, and materials which were his, and not so connected with the soil that they cannot be removed with- out injury to it.^ And he is entitled to compensation for taxes and judgment liens paid by him and repairs made, but not for improvements though the mortgage is on its face an abso- lute deed, and he believes himself to be the owner in fee.^ If the mortgagor be in possession and removes buildings, which are attached in a permanent manner, to other realty, the mort- gagee's remedy is at law and not in equity against the mort- gagor.^ The devisee of a grantee of land by absolute deed as a se- curity, holds it in trust for the grantor or mortgagor, and the mortgagor is not guilty of laches for the mere delay in fore- closing.* The mortgagee in possession cannot be allowed anj^thing for improvements except those for the necessary repairs.*^ But the mortgagor may agree to allow the mortgagee for improve- ments, which will be considered in a settlement of the debt." But a third person cannot make improvements on the mortgaged premises by agreement with the mortgagor so as to affect the right of the mortgagee to sell them with the land.'' When the mortgagee has agreed with the mortgagor for compensation for his improvements, he can only have such recompense for those that he has made on the premises, and not for those previously put upon the land.^ In Louisiana the respective values of the land and improvements are ascer- tained and the mortgagee receives the value which the land bears relatively to the amount of the sale.* ^ Cooke V. Cooper, 18 Oreg. 142. 2 Miller v. Curry, 124 Ind. 48. 3 Verner v. Betz, 46 N. J. Eq. 256. * Jackson v. Lynch, 129 111. 72. 6 Robertson v. Read, 52 Ark. 381. ^Harrill v. Stapleton, 55 Ark. 1. ' Meagher v. Hayes, 152 Mass. 228. ® Harrill v. Stapleton, 55 Ark. 1. S'ee, also,. Miller v. Curry, 124 Ind. 48 ; Verner v. Betz, 46 N. J. Eq. 256. 9 Taylor v. Marshall, 43 La. Ann. 10601 THE RIGHTS OF THE MORTGAGEE. 913 § 906. Grantee in a Deed op Trust. — After condition broken, but without entry or attornment, the grantee in a deed of trust has no right to collect rents from a person in posses- sion who was not a party to the deed.^ A beneficiary in a trust deed, after condition broken, entered upon the premises, no sale under the trust deed having taken place, and sold the estate. The trustor brought an action of ejectment against the purchaser, and it was held that the pur- chaser was an assignee of the ec{uity of the beneficiary, and could hold possession until the grantor paid the money se- cured ; ^ that he was not a mere stranger setting up a title in a third person.^ A condition in a note and trust deed that, on default in payment of interest, the holder of the note may declare the entire debt due, is not the enforcement of a penalty or forfeit- ure, and is valid even in equity.* § 907. Accounting. — Where the amount of the mortgage trust was filed and confirmed, and the fund shown thereby dis- tributed by a court of competent jurisdiction, its decree is con- clusive in all collateral proceedings, not only as to the matters that were actually raised, but as to all that might have been raised.^ And when a conveyance absolute in form is made as a security for advances to nearly the full value of the property, conveyed, the debtor has no right to vary the form of the security, and demand a conveyance of the equity of redemjD- tion." And under the New York statute,'' providing that when real estate is subject to a mortgage and shall descend to the heir of the mortgagor, the heir shall discharge such mortgage himself 1 Forlouf V. Bowlin, 29 111. App. 471. ^ Johnson v. Houston, 47 INIo. 227. See, also, Stallings v. Thomas, 55 Ark. 326. * Woods V. Hilderbrand, 46 :\ro. 284. * Magnusson r. Williams, 111 111. 450. ° Estate of Helfenstein, 135 Pa. St. 293 ; 26 Week. N. Cas. 194. ® Rawson r. Plaisted, 151 Mass. 71. ' 1 Eev. Stat., p. 749, sect. 4. 58 914 RIGHTS OF PARTIES BEFORE DEFAULT. without resorting to the ancestor's^ estate, unless tlic ancestor directs that the mortgage shall be paid from the estate, the mortgagee can maintain an action for the amount of the de- ficiency directly against the heir/ A court upon entering the final decree, may make a supple- mental finding, showing the expenditures and receipts since the former accounting.^ If the mortgagee makes up his account from memory after the lapse of several years, the court may disregard it, and fix his liability from other evidence.^ And where a mortgagee in possession of an undivided interest in a milling projDerty forms a partnershi]^ with another to carry on the business, he will be charged, on an accounting in equity, with the fair rental value of the half interest.* The mortgagee's accountability for rents and profits is not the same when he enters under a tax title as it would be if he enters under the mortgage.^ § 908. Taxes. — The mortgagee in possession must apph'- the rents and profits in payment of the taxes.^ The j^ayment of taxes is a duty on his part, and he is like a trustee, and can get no title by payment of the taxes.^ But he can pay the taxes and add the amount to the mortgage debt, but he cannot ob- tain an adverse title by a purchase at a tax sale.^ The same rule applies as between a subsequent and a prior mort- gagee.^ iHauselt v. Patterson, 51 Hun (N. Y.), 321. 2 Murdock v. Clarke, 88 Cal. 384. See, also, Estate of Helfenstein, 135 Pa. St. 293 ; 26 Week. N. Cas. 194. 3 Hall V. Westcott (R. I.), 23 At. Rep. 25. * Engleman Transp. Co. v. Longwell, 48 Fed. Rep. 129. ^Hall V. Westcott (R. I.), 23 At. Rep. 25. « Gorham v. Farson, 119 111. 425. ' Burchard v. Roberts, 70 AVis. Ill ; Eck v. Swennumson, 73 Iowa, 423 ; Ten Eyck V. Craig, 62 N. Y. 406, 422 ; Moore v. Titman, 44 111. 367 ; Chickering v. Failes, 26 111. 508 ; Brown v. Simons, 44 N. H. 475. 8 Brown v. Simons, 44 N. H. 475 ; Johnson v. Payne, 11 Nebr. 269 ; Martin V. Swofford, 59 Miss. 328 ; Brevort v. Randolph, 7 How. Pr. (N. Y.) 398 ; Moore v. Titman, 44 HI. 367. »Horton v. Ingersoll, 13 Mich. 409 ; Smith v. Lewis, 20 Wis. 350. THE RIGHTS OF THE MORTGAGEE. 915 The mortgagee is regarded as holding the title in trust for the mortgagor's benefit.^ The mortgagee of lands has a right to raise the question of the invalidity of tax sales subsequent to his mortgage.^ The grantee of mortgaged land cannot acquire a title superior to the mortgage by permitting the land to be sold for taxes and buying it in.^ In Minnesota a mortgagee may acquire a tax title to the mortgage premises as against the mortgagor, where the mort- gagee is neither legally nor equitably bound to protect the property against the taxes for which the sale is made, since the mortgagee is not among the persons forbidden by the statute to acquire tax titles.* A mortgagee may sue to set aside an illegal tax sale of part of the mortgaged land, even though the mortgage debt could be collected by a sale of the rest of the mortgaged land, and a suit against the mortgagor.^ § 909. Mortgagee out of Possessiox — Taxes. — Where the mortgagee is out of possession, then a different rule applies, and he may lawfully acquire for his own benefit any outstanding paramount title to the mortgagor's." He being out of posses- sion, is under no obligation to pay the taxes on the mortgaged premises ; so he may acquire title to the property by a fair purchase at a tax sale ; "^ so out of possession, he may buy in the land at a tax sale and hold it like any other purchaser.^ ^ Gorham v. Farson, 119 111. 425. 2 Cromwell v. MacLean, 12,3 N. Y. 474. See, also, Rawson v. Plaisted, 151 Mass. 71 ; Mandeville v. Avery, 57 Hun (N. Y.), 78. ^ Harding v. Durand, 36 111. App. 238. * Eeimer v. Newell, 47 Minn. 237. 5 Miller v. Cook, 135 111. 190. ^Gjerness v. Mathews, 27 Minn. 320. ' Eastman v. Thayer, 60 N. H. 408 ; Summers v. Kanawha, 26 W. Va. 159 ; Waterson v. Devoe, 18 Kan. 223 ; Coombs v. "Warren, 34 Me. 89 ; Smith v. Lewis, 20 Wis. 350 ; Chapman v. Mull, 7 Ired. Eq. (N. Car.) 292. ^Waterson v. Devoe, 18 Kan. 223 ; Williams v. Townsend, 31 N. Y. 411 ; Morrow v. Dows, 28 N. J. Eq. 459 ; Cornell v. Woodruff, 77 N. Y. 203. 916 rights of parties before default. Article 3. Remedies Against the Mortgagor. § 910. Ejectment. | 913. Writ of Entry. I 911. Evidence. I 914. Limitation. § 912. Forcible Entry and Detainer. § 910. Ejectment. — In those States where the mortgagee is not allowed to take possession, he cannot bring ejectment against the mortgagor for the premises ; ^ and so, when the mortgagee gets possession without the mortgagor's consent, the mortgagor can oust him by ejectment.^ Under the common-law rule, after the maturity of the mort- gage, the mortgagee has a right to the possession, and may bring ejectment against the mortgagor v/ithout foreclosure and sale, and without giving him previous notice.^ A cestui que trust in a deed of trust is not a mortgagee and cannot bring ejectment.^ In those States where a mortgage is but a lien, the mortgagee cannot maintain ejectment against the mortgagor, even if the security is in the form of an absolute deed.^ In Oregon the mortgagee cannot take possession against the mortgagor's will, but if allowed to take possession then he can hold it ; ^ but in Michigan the mortgagee cannot take posses- sion, if so agreed in the mortgage, so as to abridge the mort- gagor's rights.'' At common law a lease to the mortgagee by the mortgagor who has not stipulated for possession in the mortgage does not bar the mortgagee from bringing a real action for the posses- 1 Fox V. Wharton, 5 Del. Ch. 200 ; Teal v. Walker, 111 U. S. 242. 2 Newton v. McKay, 30 Mich. 380 ; Reading v. Waterman, 46 Mich. 107 ; Morrow v. Morgan, 48 Tex. 304 ; Mills v. Heaton, 52 Iowa, 215, 217. 3 Ford ;;. Steele, 54 Vt. 562 ; Allen v. Ranson, 44 Mo. 263 ; Johnson v. Wat- son, 87 111. 535 ; Carroll v. Ballance, 26 111. 9. * Barnum v. Cook, 14 Mo. App. 590. 5 Berdell v. Berdell, 33 Hun (N. Y.), 535. See, also, Murray v. Walker, 31 N. Y. 399 ; Hazeltine v. Granger, 44 ]\Iich. 503. ^ Cooke V. Cooper, 18 Oreg. 142. 7 Batty V. Snook, 5 Mich. 231. THE RIGHTS OF THE MORTGAGEE. 917 sion of the premises before breach of the condition.^ One claiming through the mortgagor who lias placed the mortgagee iu possession cannot maintain ejectment against the mortgagee while the mortgage debt remains unsatisfied, even though an action thereon by the mortgagee is barred by the statute of limitations.^ § 911. EviDEXCE. — The mortgage may be introduced to show the mortgagee's title without producing the notes which it secures ; ^ and the admissions of the mortgagee that the mortgage is no lien are not admissible as evidence for the mortgagor ; only subsequent purchasers or incumbrancers can avail themselves of such declarations.* Nor can the mortgagor introduce evi- dence to show tliat the mortgage is one of indemnity, and that the mortgagee has not been damnified.^ § 912. Forcible Entry and Detainer. — A mortgagee or purchaser under the mortgage having only the right of pos- session, cannot maintain the action of forcible entry and detainer." And the mortgagor is not a tenant within the act relating to this mode of action.'' The mortgagee cannot resort to the process of forcible entry and detainer for the purpose of obtaining possession, as his remedy is of a different character.^ Nor can a purchaser at a sale under the power bring this action for possession.^ But if the grantor in a trust deed acknowledges himself as a tenant of the trustee, and covenants that he may be dispos- 1 Brastow v. Barrett, 82 Me. 456. ^ Spect V. Spect, 88 Cal. 4o7. See, also, Bailey v. Winn, 101 Mo. 649. 'Smith V. John?, 3 Gray (Ma«H.), 517. * Jackson v. Jackson, 5 Cow. (N. Y.) 178. ^Jackson v. Jackson, 5 Cow. (N. Y.) 173. « Necklace i;. West, 33 Ark. 682. 'Reed v. Elwell, 46 Me. 270; Hastings v. Pratt, 8 Cush. (Mass.), 121; Clement v. Bennett, 70 Me. 207. « Pioneer Sav. & L. Co. r. Powers, 47 Minn. 269 ; Lamed r. Clarke, 8 Cash. (Mass.) 29; Gerrish v. Mason, 4 Gray (Mass.), 4.32; Walker f. Thayer, 113 Mass. 36. V ^ Boyle V. Boyle, 121 Mass. 85 ; Woodside v. Ridgeway, 126 Mass. 292. 918 EIGHTS OF PARTIES BEFORE DEFAULT, sessed by an action of forcible entry and detainer if he fails to comply with the condition, then this action may be maintained against him after forfeiture.' § 913. Writ of Entry. — ^When the mortgagee is in posses- sion, he then may maintain his title and his right of possession by a writ of entry, declaring on his own seisin, and may be awarded judgment for possession at common law, and receive damages for the rents and profits of which he was wrongfully deprived. His action in such case is against wrong-doers and not against mortgagors.^ If the mortgagee has the right to possession he may have judgment, but the mortgagor may redeem notwithstanding this judgment.^ After entry he may maintain trespass for mesne profits against one who holds possession under the mortgagor.* He can maintain trespass at common law after condition broken, for damages to the freehold b}^ the mortgagor.'^ § 914. Limitation. — AVhere the mortgagee has authority to sell the land and receive the money, the statute of limitations does not begin to run against an action for the excess over the mortgage debt until he assumes a position antagonistic to that of the mortgagor.^ And when the mortgagee's possession is by agreement and he is to appropriate the proceeds until his debt is paid, such possession is not adverse until his claims are sat- isfied or the mortgagee asserts an absolute title in himself.^ 1 Chapin v. Billings, 91 111. 539. 2 Stewart v. Davis, 63 Me. 539; Miner v. Stevens, 1 Cush. (Mass.) 468. 3 Treat v. Pierce, 53 Me. 71, 77 ; Howard v. Houghton, (M Me. 445. * Northampton Paper Mills v. Ames, 8 Met. (Mass.) 1. And see Ballard v. Ballard Vale Co., 5 Gray (Mass.), 468 ; Miner v. Stevens, 1 Cush. (Mass.) 482. s Stowell V. Pike, 2 Me. 387 ; Page v. Robinson, 10 Cush. (Mass.) 99. 6 Mills r. Mills, 48 Hun (N. Y.), 97. ^ McPhersou v. Hay ward, 81 Me. 329. the rights of the mortgagee. 919 Article 4. Relative Rights as to Junior Mortgagee. I 915. Foreclosure by Second Mort- § 920. Releasing Part of the Prem- gagee. ises — Mortgagor's Personal I 916. Cannot Charge the Prior Mort- Liability. gage. § 921. Marshalling Securities. § 917. Estoppel by ^Mortgagee. I 922. Mortgages Embracing both I 918. The Second Mortgagee May Ee- Land and Personalty. deem. I 923. Mortgage Covering the Home- I 919. Subrogation. stead with other Realty. § 915. Foreclosure by Second Mortgagee. — A second mortgagee, though he has foreclosed under a power of sale, and having become the purchaser, may, notwithstanding the time of redemption has not expired, bring an action to have a prior mortgage adjudged paid.^ And when he has obtained a decree of foreclosure against the mortgagor and then executes a quit-claim deed to the land to the first mortgagee, who, in a written contract accompanying the deed, agrees to disj^ose of the land to the best advantage, and after satisfying his mort- gage and to apply the balance to the second mortgage, it was held that conveyance of the land by the first mortgagee to the mortgagor, who had never paid the second mortgage, and who, when he paid the last installment of the purchase price, had actual notice of the rights of the second mortgagee under the written contract, clothed the mortgagee with a trust in favor of the second mortgagee, who was entitled to an enforcement of his equity as against the mortgagor's interest in the land." § 916. Cannot Charge the Prior Mortgage. — The prior incumbrance will hold all the property covered by it. The owner of land whicli was incumbered by a mortgage conveyed a portion of it subject to the whole mortgage debt, which by the terms of the deed was assumed by the grantee who also subsequently executed a second mortgage upon the land so conveyed. It was held that the fact of the stipulation in the ^Redin v. Branhan, 43 Minn. 283. ^ * Blandin v. Silsby, 62 Yt. 69. I 920 EIGHTS OF PARTIES BEFORE DEFAULT. deed was to charge the hind in question with the payment of such prior mortgage, and that the second mortgagee and his assigns were affected with notice of such charge or incumbrance upon the land mortgaged to them, and were bound by it ; and that they cannot acquire any title to the other portions under a redemption of the first mortgage from the sale upon fore- closure, which equity will permit them to assert against the first named grantor/ The junior mortgagee can redeem the property upon the maturity of the first mortgage, and cannot be affected by any agreement not in the mortgage.^ Where a part of the mortgaged premises is conveyed with covenants of warranty by a second mortgage, the second mort- gagee is entitled to be paid out of the balance left after paying the first mortgage, and before any part thereof is applied on a third mortgage covering the premises embraced in the first.^ § 917. Estoppel of Mortgagee. — A mortgagee under a first mortgage who receives a second mortgage as in- demnity as security to creditors of the mortgagor, which has the usual covenants of warranty, and does not mention the first mortgage, is not thereby estopped from claiming the se- curity of the first mortgage as against any claims of the creditors to the benefit of the second mortgage.* A mortgagee may be estopped by statement of his agent. Thus, on sale of the first mortgage his auctioneer inserted in the particulars a statement as to the condition of the roads on the premises which turned out to be incorrect, and the purchaser declined to complete the purchase without compensation. ComjDensa- tion was allowed and the sale was completed. It was held that the first mortgagee was liable to a subsequent mortgagee 1 Miller v. Fasler, 42 Minn. 366 ; Kellogg v. Rand, 11 Paige (N. Y.), 59. " Gardner v. Emerson, 40 111. 296 ; Whittacre v. Fuller, 5 Minn. 508. And see Davis v. Rogers, 28 Iowa, 413 ; Kinney v. M'Cullough, 1 ISandf. Ch. (N. Y.) 370. ' Converse v. Ware Sav. Bank, 152 Mass. 407. See, also. Parsons v. Little (N. H.), 20 At. Rep. 958 ; Orr v. Blackwell (Ala.), 8 South. Rep. 413 ; Blandin V. Silsby, 62 Vt. 69. * Gerrish v. Gerrish, 62 N. H. 397. I THE EIGHTS OP THE MORTGAGEE. 921 for the loss occasioned by the mistake, which loss was not the same allowed as compensation, but the difference between the price realized and that which the property would have realized had there been no misdescription/ § 918. The Second Mortgagee May Redeem. — The second mortgagee may redeem the first mortgage and hold it against parties subsequent in interest ; but such parties cannot, except under unusual circumstances, redeem the first mortgage and hold it against the second mortgagee. Equity will regard it as a payment.^ The holder of a second mortgage cannot control the sale or dispose of proceeds under the first mortgage, without making payment.'^ Where the first mortgagee sells the premises on foreclosure, but the purchase has not been completed, he may be required, on motion of the junior mortgagee, on payment of the amount of the first mortgage, with interest and cost, to assign it to him.^ And where the second mortgagee, in order to protect his mort- gage, pays the interest and costs of foreclosure on a prior mort- gage, he may " tack " the amount thus paid to his own mort- gage, if there be no intervening equity, but he is not entitled to an assignment of any share of the j)rior mortgage.^ And before the right of redemption expires, a first mort- gagee in possession has the rights of a mortgagee in possession.^ A purchaser at a sale under a senior mortgage cannot inter- vene to keep down the amount claimed in a suit by the mort- gagor by a junior mortgagee.'' A subsequent mortgagee cannot use a tax title adversely to the first mortgage.^ , § 919. Subrogation. — It is sufficient to entitle a junior in- cumbrancer to be subrogated to the rights of the senior mort- 1 Tomlin r. Luce, 43 Ch. Div. 191. ''Lewis r. Hinman, 56 Conn. 55. * Andrews r. Fiske, 101 :Mas8. 422 ; Meysenburg v. Schlieper, 46 Mo. 209. * Citizens' Sav. Bank v. Foster, 22 Abb.'N. C. (N.Y.) 425. ^Magilton v. Halbert, 62 Hun (N. Y.), 444. ^ Jones ('. Rigby, 41 Minn. 530. ^ Bronson v. Railroad Co., 2 Black (U. S.), 283. / V 8 Horton v. Ingersoll, 13 Mich. 409. 922 KIGHTS OF PARTIES BEFORE DEFAULT. gagee, if he tender to such senior mortgagee the amount secured by his mortgage, with interest and cost before the foreclosure sale, though the amount tendered be not accepted until after such sale.^ Where the equity of redemption has been cut off by the foreclosure of the first mortgage, the second mortgagee may sometimes have the right to subrogation, or even be entitled to an assignment, but it will depend on circumstances showing- its equity, and he will not be entitled to restrain the sale with- out clearly showing that the payment of the first or its fore- closure or sale will work him injustice.^ And where the prior mortgagee holds such a second mortgage on another piece of land, and the first mortgagee of that piece is about to foreclose and there is a considerable value in his second mortgage, the subsequent mortgagee of the first piece cannot require him lo redeem the other piece, but can himself redeem the prior mortgage on the first piece, and thus become subrogated to that mortgagee's rights, and, standing on those rights, can himself redeem the other piece.^ With knowledge of subsequent incumbrances, a prior mort- gagee cannot release the security to the injury of a second mortgagee, having a lien on portions of his security without applying the value of the equity released to reduce his debt/ § 920. Releasing Part of the Premises — Mortgagor's Personal Liability. — If a first mortgagee diminishes the se- curity of a second mortgagee by releasing the mortgagor's personal liability, he at least subordinates his lien to that of s^ch second mortgagee.^ But where a prior mortgagee has a second mortgage on another piece of land, but does not know of a subsequent mortgage on the first piece, he may release his mortgage on the other piece without being chargeable, for ' Marshall v. Ruddick, 28 Iowa, 487 ; Dings v. Parshall, 7 Hun (N. Y.), 522; Citizens' Sav. Bank v. Foster, 22 Abb. N. C. (N. Y.) 425. ^ Bloomingdale v. Barnard, 7 Hun (N, Y.), 460 ; Lewis v. Hinman, 56 Conn. 55. ^ Lewis V. Hinman, 56 Conn. 55. *Hawhe v. Snydaker, 86 111. 197. 5 Sexton V. Pickett, 24 Wis. 346. I THE EIGHTS OF THE MORTGAGEE. 923 the benefit of the subsequent mortgagee, with tlie value of tliat security upon his mortgage debt.^ The holder of a second mortgage upon one of two lots em- braced in a prior mortgage may compel the prior mortgagee to resort in the first place to the other lot upon which there is no other mortgage.^ If the other lot is also incumbered by another party, then the prior mortgagee will be required to satisfy his debt out of the proceeds of both lots, in proportion to the amount which each has produced.^ And when the court decrees that the prior mortgage shall be satisfied out of the security on which there is no record lien, it will provide for the subrogation of the mortgagee to the other security/ The first mortgagee with notice of subsequent mortgages has no right to release any portion of the mortgaged premises to the injury of subsequent mortgagees.^ He is not respon- sible until he has notice of such liens.^ However, where the unreleased parcels subsequently mortgaged are amj^ls security for both mortgages, no injury can be claimed by the subsequent mortgagee, and the first mortgagee is not then responsible to the second for releasing a portion of the mortgaged premises.^ § 921. Marshalling Securities. — A prior mortgagee hav- ing other security for the payment of his debt secured by the mortgage, with notice of a second mortgage upon the same premises, is bound in equity to apply in the first instance to the payment of the debt the security in which the second mortgagee does not share.^ Judge Lurton says : " That the equity to marshal assets is not one which fastens itself upon the situation at the time the successive securities are taken ; but on the contrary, is one to ^ Lewis V. Hinman, 56 Conn. 55. ^Henshaw v. Wells, 9 Humph. (Tenn.) 568. ^ Green v. Ramage, 18 Ohio, 428. *King V. McVickar, 3 Sandf. Ch. (N. Y.) 192. 5 Kelley v. AVhitney, 45 Wis. 110 ; Wolf v. Smith, 36 Iowa, 454 ; Cogswell v. Stout, 32N. J. Eq. 240 ; Paxton v. Harrier, 11 Pa. St. 312. ® Vanorden v. Johnson, 14 N. J. Eq. 376. ^Kelley v. Whitney, 45 Wis. 110. ^ ^ Bergen Savings Bank v. Barrows, 30 N. J. Eq. 89. 924 EIGHTS OF PARTIES BEFORE DEFAULT. be determined at the time tlie marslialling is invoked. The equity can only become a fixed right by taking steps to have it enforced ; and until this is done it is subject to displacement and defeat by subsequently acquired liens upon the funds. The qualification upon the doctrine of marshalling — that mar- shalling will not be permitted to the prejudice of the third person, whether wholly or only partially dependent upon this principle — is one well settled." ^ The general rule is that where a mortgagee holds a prior mortgage on two parcels of land, and a subsequent mortgage on but one of the parcels is given to another — the former must seek satisfaction out of that fund which the latter cannot touch.^ But where equity cannot be had by all the parties, this will not be applied. Thus, S. mortgaged five lots to R. Afterward four of these became incumbered with a mechanic's lien, and the fifth lot by a second mortgage to C. The contention was that S. should first exhaust the fifth lot upon which C. had his mortgage, so as to disincumber the four lots upon which the mechanic's lien was an incumbrance secured to that of S. This was refused upon the ground that the assets would not be mar- shalled to the prejudice of C, who had no notice of the ecpity of the complainant.^ § 922. Mortgages Embracing Both Land and Person- alty. — If the mortgage covers both land and personal propert}'^, or if the first mortgagee has an additional security on personal property or pledge of stock, and releases it, or by his negligence loses it, with knowledge of a subsequent mortgage of the land, the subsequent mortgagee may compel him, on foreclosure, to deduct from his mortgage the value of the security released or lost, so the mortgage can be foreclosed only for the balance.* 1 Gilliam v. McCormack, 85 Tenn. 597, 607. ^ Pomeroy Eq. Jur., gcct. 1414. 3 Leib V. kribling, 51 Md. 285. See, also, Green v. Eamage, 18 Ohio, 428 ; Gilliam v. McCormack, 85 Tenn. 597 ; Marr v. Lewis, 31 Ark. 20.3 ; McArthur V. Martin, 23 Minn. 75 ; 2 White & Tudor's Lead. Cas. in Eq. (4th Am. ed.) pt. 1, 205. Compare Conrad v. Harrison, 3 Leigh (Va.), 532. * Moody V. Haselden, 1 S. Car. 129 ; Washington Build, and Loan Asdo. v. I the rights of the mortgagee. 925 § 923. Mortgage Covering the Homestead with Other Realty. — In giving a mortgage on a homestead, the debtor waives the homestead right, but only to the mortgagee, and does not tliereby open tlie door to other creditors or increase their equities.^ So, when a first nnjrtgage is made without a release of homestead, and a subsequent mortgage is made with such release, the junior mortgage has priority to the extent of the homestead right.^ It is held, however, that if a debtor waives his homestead lien to one creditor he waives it to all — that is, if he waives to a second mortgagee, he thereby waives it as to the first ; ^ and hence the two mortgagees take preference in payment of their debts according to the dates of their liens.* The rule as to marshalling securities when the homestead is embraced is this : If the husband and wife give a mortgage on a tract of land part of which is a homestead, and the husband afterward exe- cutes a mortgage upon the part not covered by the homestead to secure his debt, the second mortgagee cannot insist that the homestead shall be sold upon foreclosure of the first mortgage. The part not covered by the homestead will be first sold, and if the proceeds satisfy the first mortgage the homestead will not be sold. The second mortgagee must rely on the surplus, if any, arising from the sale of the part not exempt from exe- cution as a homestead.^ Beaghen, 27 N. J. Eq. 98 ; Red Bank Miit. Build, and Loan Asso. v. Patterson, 27 N. J. Eq. 223 ; Alexander v. Welch, 10 111. App. 181 ; George v. Wood, 9 Allen (Mass.), 80 ; Gaskill v. Sine, 13 N. J. Eq. 400 ; Guion v. Knapp, 6 Paige (N. Y.), 35 ; Deuster v. McCamus. 14 Wis. 307 ; James v. Brown, 11 Mich. 25. 1 McLaughlin v. Hart, 46 Cal. 638 ; Brown v. Cozard, 68 111. 178 ; Mc Arthur V. Martin, 23 Minn. 74 ; La Rue v. Gilbert, 18 Kan. 220. Compare Thomp. Home, and Ex., sects. 656-650. ^Eldridge v. Pierce, 90 111. 474 ; Shaver v. Williams, 87 111. 469. ^Pittman's Appeal, 48 Pa. St. 315. *Shelly's Appeal, 36 Pa. St. 373 ; In re Coghill, 2 Hughes, C. C. 313 ; White V. Polleys, 20 Wis. 503. 5 McCreery v. SchafFer, 26 Nebr. 173, opinion by Chief Justice Reese. See Thompson on Homesteads and Exemptions, sects. 660 et seq. ; Horton v. Kelly, 40 Minn. 193. 926 rights of parties before default. Article 5. Relative Rights as to Purchasers and Creditors of Mortgagor. § 924. Mortgagee Cannot Release Part § 928. Releasing the Mortgagor from of the Security when Third Personal Liability. Persons have Subsequent § 929. Marshalling Securities. Liens. § 930. Mortgage of Homestead with § 925. The Mortgagee must have No- other Lands. tice of the Subsequent Lien. § 931. Estoppel of Mortgagee. § 926. Surety's Rights. § 927. A Mortgage by a Debtor to His Surety. § 924. Mortgagee Cannot Release Part of the Security WHEN Third Persons Have Subsequent Liens. — If the mort- gagee knows that portions of the mortgaged premises have been subsequently conveyed or incumbered, he is not allowed in equity to release those parts over which he has the only security and to enforce his entire claim upon those portions in which others have become interested ; and if he does release a part which is liable to the payment of his debt only, he cannot charge the other i:)ortions of it without deducting the value of the parts released.^ He has no right to release any part of the mortgaged premises to the injury of subsequent lienors.^ If the mortgagee releases part of his security, a subsequent lienor may compel him, on foreclosure, to deduct from his mortgage debt the value of the security released.^ This rule does not apply when the portion remaining subse- 1 Alexander v. Welch, 10 111. App. 181 ; Dodds v. Snyder, 44 111. 53 ; Taylor V. Maris, 5 Rawle (Pa.), 51 ; Parkman v. Welch, 19 Pick. (Mass.) 231. ^M'Lean v. Lafayette Bank, 3 McLean, C. C. 587; Wolf v. Smith, 36 Iowa, 454 ; Kelley v. Whitney, 45 Wis. 110 ; Harrison v. Guerin, 27 N. J. Eq. 219 ; Cogswell V. Stout, 32 N. J. Eq. 240 ; James v. Brown, 11 Mich. 25 ; Gaskill v. Sine, 13 N. J. Eq. 400 ; Guion v. Knapp, 6 Paige (N. Y.), 35 ; Vanorden v. John- son, 14 N. J. Eq. 376 ; Paxton v. Harrier, 11 Pa. St. 312 ; Blair v. Ward, 10 N. J. Eq. 119. * Moody V. Haselden, 1 S. Car. 129 ; Washington Build, and Loan Asso. v. Beaghen, 27 N. J. Eq. 98 ; Palmer v. Hendrie, 27 Bev. 349 ; Walker v. Jones, L. R. 1 P. C. 50 ; WulfF v. Jay, L. R. 7 Q. B. 756 ; Polak v. Everett, 1 Q. B. 669 ; Red Bank Mut. Build, and Loan Asso. v. Patterson, 27 N. J. Eq. 223 ; Townsend Sav. Bank v, Munson, 47 Conn. 390. THE RIGHTS OF THE MORTGAGEE. 927 quently mortgaged is fully sufficient to pay all the liens.^ And when the several subsequent purchasers have separate convey- ances from the mortgagor, their rights are several and not joint, as to the release of the mortgagee.^ § 925. The Mortgagee Must Have Notice op the Sub- sequent Lien. — To affect the rights of the mortgagee in this respect and oblige him to foreclose with reference to the subse- quent order of alienation or incumbrances, he must have actual or constructive notice of them. So long as he claims under his first mortgage only, the record of subsequent conveyances is not constructive notice to him. He is not bound to search the record from time to time for other incumbrances ; only subsequent purchasers and incumbrancers are charged with notice by the statute. But when the mortgagee, or a third person, afterward takes a deed or mortgage on a part of the same property described in the first mortgage, he is driven to the record, and is as to such conveyance a subsequent pur- chaser or incumbrancer, and is bound by the notice which the record affords at that time.^ So long as he claims under his first mortgage only, the record of subsequent conveyr.nces is not constructive notice to him.* Neither is it the duty of the mortgagee to make inquiry whether a junior incumbrancer has intervened.^ A second subsequent purchaser, in the examination of title to the part he proposes to buy, is led directly to the original mortgage, and he finds that his is but a part of an entire tract in which his grantor has only a right of redemption, and which was originally subject to a common burden, but liable to be ^Kelley i;. Whitney, 45 Wis. 110. 2 Hawhe v. Snydalier, 86 111. 197. 3 Alexander t;. Welch, 10 111. App. 181, 186, opinion by Presiding Judge Higbee ; Benton v. Nicoll, 2-1 Minn. 221 ; Hall v. Edwards, 43 :Mich. 473 ; Gil- bert V. Haire, 43 Mich. 283. * Patty V. Pease, 8 Paige (N. Y.), 277; Brown v. Simons, 44 N. H. 475; Meacham v. Steele, 93 111. 135; George v. Wood, 9 Allen (Mass.), 80; Dewey V. IngersoU, 42 Mich. 17. * Gage V. McGregor, 61 N. H. 47 ; Mcllvain v. Mut. Assur. Co., 93 Pa. St. 30. ^66, also, Johnson v. Bell, 58 N. H. 395. 928 RIGHTS OF PARTIES BEFORE DEFAULT. affected by a prior sale of another part of the entire tract. Under such circumstances the different parcels of the tract mortgaged cannot be considered as separate and distinct, so as to relieve him of the duty of inquiring into the title to the other part in examining the title to the part he proposes to buy ; he is led directly to a deed that puts him on inquiry as to the remaining part of the land/ In general, a purchaser takes his title with notice, and if he wishes to protect himself lie should inform the mortgagee of his interest. The record is constructive notice only to subsequent pur- chasers, or those claiming under the same grantor.^ A letter to the mortgagee giving the name of the purchaser is sufficient, provided the deed is on record.^ A mere naked possession with no facts is not a sufficient notice to the prior mortgagee ; * but if the purchaser goes upon the premises and makes permanent imjjrovements, and the mortga- gee has actual notice of the convej'^ance, the notice is sufficient,^ and if he releases part of the premises, he must abate a propor- tionate part of the mortgaged debt as against such purchaser.® § 926. Surety's Rights. — The surety has the same rights as subsequent lienors. As the surety is entitled upon paying the debt to subrogation to all the securities which the creditor may have acquired for the payment, it results that if this right is rendered unavailing by the act of the creditor, the surety is discharged to the extent he has been injured.'^ But he should not be further discharged than this, as he thus receives full indemnity for all the injury he can sustain.* ^ Brown v. Simons, 44 N. H. 475. =* Lake v. Shumate, 20 S. Car. 23, 32 ; Cheever v. Fair, 5 Cal. 337 ; Mcllvain v. Mat. Apsur. Co., 93 Pa. St. 30. 3 Hall V. Edwards, 43 Mich. 473. * Cogswell V. Stout, 32 N. J. Eq. 240. ^ Dewey r. Ingersoll, 42 Mich. 17. « Gilbert v. Haire, 43 Mich. 283 ; Hawhe v. Snydakcr, 86 111. 197. ^ Baker v. Briggs, 8 Pick. (Mass.) 122 ; American Bank v. Baker, 4 Met. (Mass.) 164 ; Fitchburg Sav. Bank v. Torrey, 134 Mass. 239. ** Worcester Mech. Sav. Bank v. Thayer, 136 Mass. 459. THE RIGHTS OF THE MORTGAGEE. 929 The creditor is bound to exercise reasonable diligence in the preservation and prosecution of such securities, and if they are lost by his neglect, the surety is to that extent discharged/ The principal cannot do any act impairing or releasing the security as against the surety.' § 927. A Mortgage by a Debtor to His Surety. — A mort- gage by a debtor to his surety is in effect a security for the debt.^ And the property thus mortgaged to one of several co- sureties in several debts, is, in the absence of special circum- stances, to be applied as if still the property of the debtor, to the exoneration of all, by a pro rata payment or reimburse- ment of the several debts, leaving the deficit of each to be made up by contribution.^ A surety cannot enforce a mortgage of indemnity until he has been injured ; ^ nor can he impair the rights of the princi- pal creditor so long as the debt is unpaid.® When a debtor conveys his equity of redemption and other j^roperty in trust to pay all his debts, the mortgagee can enforce his mortgage as to the property thereby covered, and then come in and share pro rata for his unsecured claims with the other debtors.^ The surety's mortgage must stand as security for the debt of the principal creditor.^ In case the mortgagor becomes bankrupt and makes an as- 1 White V. Life Asso., 63 Ala. 419 ; Hayes v. Ward, 4 Johns. Ch. (N. Y.) 123 ; Shutts V. Fingar, 100 N. Y. 539, 546 ; Third Kat. Bank v. Shields, 55 Hun (N. Y.), 274 ; Stephens v. Bank, 88 Pa. St. 157. * Hayes v. Ward, 4 Johns. Ch. (N. Y.) 123; Henshaw v. Wells, 9 Humph. (Tenn.") 568. ^'Bronston v. Robinson, 4 B. Mon. (Ky.) 142; AValler v. Tate, 4 B. Men. (Ky.) 531. * Morrison v. Poyntz, 7 Dana (Ky.), 307 ; Clay v. Goodloe, 6 B. Mon. (Ky.) 236 ; More v. Moberly, 7 B. Mon. (Ky.) 299. Compare Moore v. Moore, 4 Hawks (N. Car.), 358. ^ Hall V. Cushman, 16 N. H. 462 ; Jones v. Quinnipiack Bank, 29 Conn. 25. Compare M'Lean v. Lafayette Bank, 3 McLean, C. C. 587. «McMullan v. Neal, 60 Ala. 552. 'Bell V. Hammond, 2 Leigh (Va.), 416; Slack v. Emery, 30 N. J. Eq. 458. 8 Durham v. Craig, 79 Ind. 117 ; Rice v. Dewey, 13 Gray (Mass.), 47 ; Dick v. Truly, Sm. & M. (Miss.) Ch. 557. 69 930 RIGHTS OF PARTIES BEFORE DEFAULT. signment, this does not affect the mortgagee. But if he proves his wliole claims, the secured debts and unsecured, against the estate he thereby waives his mortgage security.* § 928. Releasing the Mortgagor from Personal Lia- bility. — If the mortgagee diminishes the security of a subse- quent purchaser of the mortgaged premises, without liis consent, by releasing the mortgagor from his personal liability, the land so purchased is discharged from the lien of the mortgage.^ An agreement to extend the time of payment of the mort- gage between the holder and grantee covenanting to assume, made without the consent of the mortgagor, discharges the mortgagor.^ So, where a party by deed assumes the payment of a mort- gage, executed by his grantor, he becomes the principal debtor, and the relation created between him and his grantor is that of principal and surety. The law requires that, if there is any agreement between the principal with reference to a contract, to the performance of which another is bound as surety, he ought to be consulted in regard to any proposed alteration, and if he is not or does not consent to the alteration he may be no longer bound.* It is held in England that, if the mortgagee releases or con- veys any of the mortgaged property, except according to the terms or under the authority of tlie mortgage, there remains no personal liability of the mortgagor for the debt which the mortgage was made to secure.^ But there seems to be no case in this country that upholds ^ Hooker r. Olmstead, 6 Pick. (Mass.) 481. And see Schuelenburg v. Mar- tin, 1 McCrary, C. C. 348 ; Patton v. Page, 4 Hen. & M. (Va.) 449 ; Jefferson CJollege V. Dickson, Freem. (Miss.) Ch. 474 ; Inge v. Boardman, 2 Ala. 331 ; Grafton Bank v. Doe, 19 Vt. 4G3 ; Walker v. Baxter, 26 Vt. 710 ; Bennett v. Calhoun Loan and Build. Asso., 9 Rich. Eq. (S. Car.) 163. ^ Coyle V. Davis. 20 Wis. 564. ^Caivo V. Davies, 8 Hun (N. Y.), 222, affirmed in 73 N. Y. 211. ♦Grant v. Smith, 46 N. Y. 93 ; Bangs v. Strong, 7 Hill (N. Y.), 250; Paine V. Jones, 76 N. Y. 274. 5 Palmer v. Hendrie, 27 Beav. 347 ; 28 Beav. 341 ; Walker v. Jones, L. R. 1 P. C. 50 ; Wulff V. Jay, L. R. 7 Q. B. 756 ; Polak v. Everett, 1 Q. B. Div. 669. THE RIGHTS OF THE MORTGAGEE. 931 this doctrine, except Townsend Sav. Bank v. Munson/ which holds that where a mortgagee had released, without the con- sent of the mortgagor, to a third party a portion of the prem- ises, the mortgagee had assumed the risk of the sufficiency of the portion retained to pay the mortgage debt, and could not, therefore, maintain an action against the mortgagor to make good the loss. But it appears in this case that the mortgagee had originally received, under mortgage, land of sufficient value to pay the mortgage notes, and a case presented where, without authority of the mortgagor, the mortgagee had dis- posed of property held as security to the full value of the miortgage debt. It is certainly the duty of the mortgagee not to release any security which he may hold, if the mortgagor is thereby ex- posed to personal liability for the debt secured, which he would not otherwise incur.^ § 929. Marshalling Securities. — As- between the grantees of different parcels of the mortgaged premises, their respective parcels are liable in the inverse order of their alienation by the mortgagor, and this rule applies also to subsequent purchasers who have notice actual or constructive.^ But the operation of this rule may be waived, limited or modified by the terms of the deed to the earlier grantee, which will bind those claiming under him.* When the judgment debtor sells or mortgages his land at different times to successive purchasers and mortgagees, the prior purchasers and mortgagees have an equity to require the creditor to enforce his judgment against the several parcels in the inverse order according to the date of the several sales and mortgages.^ § 930. Mortgage of Homestead with Other Lands. — Where the husband and wife have conveyed lands in whicli 1 47 Conn. 390. ^ Worcester ]\Iech. Sav. Banks v. Thayer, 1.36 Mass. 459. ^ Iglehart v. Crane, 42 111. 261 ; Vogelr. Brown, 120 111. 338. * Vogel V. Shertliff, 28 111. App. 516. V ^ Moore v. Trimmier, 32 S. Car. 511. 932 RIGHTS OF PARTIES BEFORE DEFAULT. they were entitled to homestead to secure the husband's debts, the mortgagors are entitled, as against the husband's general creditors to homestead out of any surplus realized at fore- closure sale, and the equity of marshalling securities will not be enforced in favor of such creditors to defeat the rights of the mortgagors.^ When no equities intervene the mortgagee may release the claim on the other land and still hold his security on the home- stead.^ If other equities intervene, it is proper to order that the other land than the homestead be first sold at foreclosure sale. Thus, where a judgment has been rendered against the mortgagor after the execution of the mortgage, the other land will be first sold.^ But in giving a mortgage on a homestead, the debtor waives this homestead right, but only to the mortgagee, and does not thereby increase the equities of other creditors. § 931. Estoppel op Mortgagee. — A mortgagee may be estopped from asserting his mortgage. Thus, where a mort- gagee induces another to take a mortgage on the premises by stating that his mortgage had been discharged, he cannot afterward set up a claim to a mortgaged property, nor can his assignee with notice, to the prejudice of the second mort- gagee.* So a mortgagee is estopped to set up his mortgage title, who stands by at an auction sale and allows the auctioneer to state, without contradiction, that the land has a free title from all incumbrances.^ The fact that the mortgagor and wife signed a written state- iGwynne v. Estes, 14 Lea (Tenn.), 673 ; Gilliam v. McCormack, 85 Tenn. 609; White v. Fulghum, 87 Tenn. 281, overruling on this point, Parr v. Funibanks, 11 Lea (Tenn.), 392. See, also, Dickson v. Chorn, 6 Iowa, 19; Marr v. Lewis, 31 Ark. 203 ; McArthur v. Martin, 23 Minn. 75. ''Abbott V. Powell, 6 Saw. C. C. 91 ; Searle v. Chapman, 121 Mass. 19 ; Chap- man V. Lester, 12 Kan. 592 ; White v. Polleys, 20 Wis. 503. » La Rue v. Gilbert, 18 Kan. 220. *Lasselle v. Barnett, 1 Blackf. (Ind.) 150. ^Markham v. O'Connor, 52 Ga. 183. See Mason v. Philbrook, 69 Me. 57. THE RIGHTS OF THE MORTGAGEE. 933 ment that the entire mortgage debt was for money advanced to the husband to pay for the land mortgaged does not estop them to deny such statement in a foreclosure suit, when the mortgagee knew that the statement was false/ And when a mortgagee stands by at an auction sale of the right, title, and interest of a bankrupt's estate he is not estojjped to assert his mortgage which is duly recorded.^ But he may be estopped from asserting his mortgage for a larger sum than he states to a purchaser of the equity of redemption to be due him.^ A mortgagee is not, in the absence of fraud, precluded from recovering upon a mortgage debt, because he permits the prop- erty covered by the mortgage to be sold under an inferior lien/ A mortgagor who, by his representations induces a third party to receive an absolute deed from the mortgagee, is estopped afterward to deny that the mortgagee had a right to convey an absolute title/ And where a mortgagor conveys land subject to a mortgage, and as an inducement to the vendees tells them that they can cut and convert into firewood the timber growing thereon, he is estopped from enjoining them/ 1 Kline v. Ragland, 47 Ark. 111. * Mason v. Philbrook, 69 Me. 57. 3 Preble v. Conger, 66 111. 370. * Jones V. Turck, 33 Iowa, 246. ^Gruber v. Baker, 20 Nev. 453. « Hurst V. Elliott, 52 Hun (N. Y.), 273. 934 rights of parties before default. Article 6. Relative Rights as to Lessee of Mortgagor. I 932. Taking Mortgages of Leased I 940. Iowa Rule. Lands. ^ 941. Attornment of Subsequent § 933. Lease Subsequent to the Mort- Lessee. gage. ? 942. Improvements by Lessee. § 934. In those States where the Mort- § 943. Emblements Under the Lease. gagee is Prohibited from Tak- g 944. Who May Attack the Lease. ing Possession. § 945. Lease by Moitgagee in Lawful ^ 935. Subsequent Mortgage — Attorn- Possession. ment. ^ 946. Assignment by Mortgagee in § 936. Prior Mortgagee's Remedy. Possession. I 937. The Mortgagor Cannot Bind the I 947. Leasehold Estate. Mortgagee. \ 948. Rule When the Mortgage Is § 938. Avoiding the Lease. Considered a Lien. I 939. Alabama Rule. § 932. Taking Mortgages of Leased Lands. — By the com- mon law the entire interest of the mortgagor in the property, which is the subject of the mortgage, is generally conveyed to the mortgagee, subject to the condition that if the money be repaid upon a certain day, the mortgagor may re-enter and re- possess himself of his former estate, otherwise the estate to the mortgagee is to become absolute. In most of the cases the mortgagor remains in possession by contract in the mortgage, and continues to receive the rents and profits just as before and pays to the mortgagee the interest of the borrowed money. So far as regards the possession of the land, the mortgagor is not even a tenant at will to the mortgagee,^ but he receives the profits of the land for his own use, and not as an agent of the mortgagee, and when he has once received them, is absolutely entitled to keep them as his own. After forfeiture, if the mortgagor leases the premises to a tenant, the devise is absolutely void as against the mortgagee, but is good between the mortgagor and his tenant until the mortgagee interferes. And the mortgagor is entitled to receive the rent for his own absolute use, and distrain for it in his own name if not paid when due.^ ^ Moss V. Gallimore, 1 Doug. 283. " Trent v Hunt, 9 Exch. 14, 22. THE EIGHTS OF THE MORTGAGEE. 935 But when the premises are leased before the conveyance by mortgage, the operation of the mortgage is to transfer to the mortgagee the reversion expectant upon the term demised, and with it the rent ; and that the mortgagee is the owner in law of the reversion and all its incidents, of which the rent is one, and that any action for the rent must be brought in his name, he being the legal owner of it/ But if instead of giving notice to the tenant to pay the rent to himself, he permits the mort- gagor to go on receiving the rent as before, and never interferes with the tenancy at all, but receives the interest upon his mortgage money as on an unsecured debt, the tenant then may pay his rent to the mortgagor.^ Hence, if the lessor has mortgaged his reversion, and is permitted by the mortgagee to continue in receipt of the rent incident to that reversion, after condition broken, he, having such permission, is presumptione juris authorized, if it becomes necessary, to realize the rent by distress, and to distrain for it.^ But he receives it for his own use and not for the mortgagee/ Until the mortgagee takes possession the mortgagor is owner to all the world, and is entitled to all the profits made/ In case the mortgagor is left in possession, he is not liable to the mortgagee for the rents and profits/ § 933. Lease Subsequent to the Mortgage. — When the lease is subsequent to the mortgage, the rule is well settled in this country that, as no reversion vests in the mortgagee, and no privity of estate or contract is created between him and the lessee, he cannot proceed, either by distress or action, for the recovery of the rents.^ ' Doe V. Edwards, 5 Barn. & Adol. 10(35 ; 27 E. C. ^4 Anne, ch. 1(5, pect. 10. 3 Trent v. Hunt, 9 Exch. 14, 24. *Keyper v. Hitz, 4 Mackey (Dipt. Col.), 179 ; Clarke v. Curtis, 1 Gratt. (Va.) 289 ; Noyes v. Rich, .52 Me. 11.5 ; Gibson v. Farley, 16 Mass. 280 ; Long v. Wade, 70 Me. 358 ; Colman v. Duke, 3 Ves. Jr. 25 ; M'Kircher v. Hawley, 16 Johns. (N. Y.) 289 ; Gresley r. Adderley, 1 Swan. 573. ^ Chinnery v. Blackman, 3 Douci. 391. «Higgins r. York Build. Co., 2 Atk. 107 ; Mead v. Lord Orrery, 3 Atk. 235; Ex parte Wilson, 2 Ves. & B. 252. 'Mayo V. Shattuck, 14 Pick. (Mass.) 525; Watts v. Coffin, 11 Johns. (X. Y.) 936 EIGHTS OF PARTIES BEFORE DEFAULT. Until notice is given or a demand is made by the mort- gagee, the tenant may pay the rent to the mortgagor.^ The mortgagee's remedy is to foreclose upon default of the mortgagor, or to take possession of the premises, and thereby place himself in position to obtain the future profits. Either step operates as an eviction of the tenant by title paramount, and leaves him at liberty to terminate the lease and quit.^ The mortgagee has no claim uj^on the rents and profits until he has taken possession,^ and he is not entitled to have a receiver appomted to take such rents until the debt is due.* § 934. In Those States Where the Mortgagee is Pro- hibited FROM Taking Possession. — In many of the States a mortgage is a mere security for a debt, and establishes abso- lutely the rule that the mortgagee is not entitled to the rents and profits until he gets possession under a decree of fore- closure. For if a mortgage is not a conveyance, and the mortgagee is not entitled to possession, his claim to the rents is without support.^ The assignee of the rents and profits from the mortgagor may enforce his right to them by an action in the nature of a foreclosure suit.^ And when the mortgagor makes a contract contrary to the public policy of the State, as 495 ; M'Kircher v. Hawley, 16 Johns. (N. Y.) 289 ; Sanderson v. Price, 21 N. J. L. 637 ; Price v. Smith, 1 Green Ch. (N. J.) 516. 1 Teal V. Walker, 111 U. S. 242 ; Weidner v. Foster, 2 Pen. & W. (Pa.) 23 ; Myers v. White, 1 Rawle (Pa.), 355 ; Massachusetts L. Ins. Co. v. Wilson, 10 Met. (INIass.) 126 ; Borden v. Thayer, 3 Met. (Mass.) 79 ; Coker v. Pearsall, 6 Ala. 542 ; Smith v. Taylor, 9 Ala. 633. ^Simers v. Saltus, 3 Denio (N. Y.), 214; Lane v. King, 8 Wend. (N. Y.) 584 ; Burr v. Stenton, 52 Barb. (N. Y.) 377 ; Austin v. Ahearne, 61 N. Y. 6 : Magill V. Hinsdale, 6 Conn. 469 ; Taylor's Land and Ten., sects. 121-125 ; Bogers v. Humphreys, 4 Adol. & Ell. 299-313 ; Partington v. Woodcock, 6 Adoll. & Ell. 690 ; Eawle's Cov. (3d ed.) 265 ; Moran v. Pittsburgh, etc.. Rail- road Co., 32 Fed. Rep. 878 ; Teal v. Walker, 111 U. S. 242. Reeder v. Dargan, 15 S. Car. 175. *Bank v. Arnold, 5 Paige (N. Y.), 38 ; Keyser v. Hitz, 4 Mackey (Dist. Col.), 179. *Besser v. Hawthorn, 3 Oreg. 129; Anderson v. Baxter, 4 Oreg. 105 ; Rob- erts V. Sutherlin, 4 Oreg. 219. « Dewey . Latson, 6 Cal. 609 ; Bank v. Tallman, 31 Barb. (N. Y.) 201. See, also, Clason v. Corley, 5 Sandf. (N. Y.) 447. THE RIGHTS OF THE MORTGAGEE. 937 expressed by statute, the contract is not binding on the mort- gagor or his vendee, and, although not expressly prohibited by law, like all contracts opposed to the public policy of the State, it cannot be enforced.^ At common law and in equity, if the mortgagee wishes to receive the rents and profits, he must take possession.^ When the rents and profits are not mortgaged, they belong to the tenant in possession.^ § 935. Subsequent Mortgage — Attornment. — The mere execution of a mortgage subsequent to the lease operates as an assignment of the reversion, and carries the rent as incident to it, and the mortgagee is entitled, by giving the tenant notice, to the rents and profits whenever he is entitled to possession ; he is entitled to all rents accruing and becoming due subsequent to the execution of the mortgage, as well as that in arrears at the time of giving notice as that which accrues afterward.^ There is no apportionment of the rent between the lessor and his assignee ; but whoever owns the reversion at the time the rent falls due is entitled to the entire sum then due ; and a lessor who has parted with the reversion, wdthout specially re- serving the rent, has no claim to it.^ The mortgagor may at the ^ Meguire v. Corwine, 101 U. S. 108 ; Marshall v. Baltimore, etc., Eailroad Co., 16 How. (U. S.) 314 ; Bank v. Adams Ex. Co., 93 U. S. 174 ; Railroad Co. V. Lockwood, 17 Wall. (U. S.) 357. 2 Wilder v. Houghton, 1 Pick. (Mass.) 87 ; Boston Bank v. Reed, 8 Pick. (Mass.) 459 ; Noyes v. Rich, 52 Me. 115 ; Hughes v. Edwards, 9 Wheat. (U.S.) 500 ; Oilman v. Illinois, etc., Telegraph Co., 91 U. S. 603 ; Kountze r. Omaha Hotel Co., 107 U. S. 378 ; American Bridge Co. v. Heidelbach, 94 U. S. 798 ; Clarke v. Curtis, 1 Gratt. (Va.) 289 ; Bank v. Arnold, 5 Paige (N. Y.), 38 ; Hun- ter V. Hays, 7 Biss. C. C. 362 ; Souter v. La Crosse Railway, 1 Woolw. C C. 80, 85 ; Foster v. Rhodes, 10 Bank. Reg. 523. 3 Hutchins v. King, 1 Wall. (U. S.) 53, 57, 58 ; Reeder r. Dargan, 15 S. Car. 175. * Moss V. Gallimore, 1 Doug. 279 ; Trent v. Hunt, 9 Exch. 14, 22 ; Mirick v. Hoppin, 118 ]\Iass. 582 ; King v. Housatonic Railroad Co., 45 Conn. 226 ; Kim- ball V. Pike, 18 N. H. 419 ; Rogers v. Humphreys, 4 Adol. & Ell. 299 ; Rawson V. Eicke, 7 Adol. & Ell. 451 ; 1 Smith's Lead. Cas. 310. = Burden v. Thayer, 3 Met. (Mass.) 76 ; Van Wieklen v. Paulson, 14 Barb. (X. Y.) 654; Demarest r. Willard, 8 Cow. (N. Y.) 206; Martin r. Martin, 7 Md. 368 ; Peck v. Northrop, 17 Conn. 217 ; Breeding v. Taylor, 13 B. ]\Ion. (Ky.) 477 ; Sampson v. Crimes, 7 Blackf. (Ind.) 176 ; Birch v. Wright, 1 Term Rep. 378. 938 RIGHTS OF PARTIES BEFORE DEFAULT. time of making the mortgage of the reversion release the ten- ant from the rents then due.^ Prior rent does not j)as3 as an incident to the mortgage.^ So long as the tenant attorns to the mortgagee in such case he has the same rights against the tenant as the mortgagor had.* The tenant is estopped, in any proceeding by his land- lord for the recovery of rent or possession, from denying the title of the latter ; yet he may show that he has been evicted under a paramount title, or that his landlord's title has been extinguished, or has passed from him, either by his own act, or by operation of law.* § 936. Prior Mortgagee's Remedy. — If the tenant refuses to attorn to the mortgagee before his possession, the mortgagee cannot distrain or bring action, nor can he enforce the cove- nants of the lease. Judge Jackson says, that when the lease, having been exe- cuted subsequent to the mortgage, no privity of estate or con- tract is thereby created between the mortgagee and lessee ; and inasmuch as no reversion vests in the mortgagee under such circumstances, he cannot distrain or bring an action, either at law or in equity, for the rents payable by the tenant, nor is he entitled to enforce the covenants and provisions of the lease. He has no election, either before or after the mortgagor's default, to adopt and demand the benefits of the lease without the consent of the lessee. His remedy is to foreclose upon de- fault of the mortgagor, or to take possession of the premises, and thereby place himself in position to obtain future profits. Either step operates as an eviction of the tenant by title para- mount, and leaves him at liberty to terminate the lease and 1 De NichoUs v. Saunders, L. E. 5 C. P. 589. ^ King V. Hougatonic Railway Co., 45 Conn. 226. ' Rogers v. Humphreys, 4 Adol. & Ell. 299, 313 ; Globe Marble Mills Co. V. Quinn, 7G N. Y. 23. * Clue's Case, 10 Coke, 128 ; Salmon v. Smith, 1 Wm. Saunders, 206, note ; Wood V. Partridge, 11 Mass. 488 ; Boardman v. Osborn, 23 Pick. (Mass.) 295 ; Morse v. Goddard, 13 Met. (Mass.) 177 ; George v. Putney, 4 Cush. (Mass.) 351 ; Smith's Land and Ten. 134 ; Greenl. Cruise, tit. 28, ch. 3, sects. 1 et seq. THE RIGHTS OF THE MORTGAGEE. 939 quit.^ Taking possession with notice to pay rent to him is sufficient.^ So, when the lease is made by a mortgagor, after the mortgage, it does not bind the mortgagee, nor in any man- ner affect his rights. Hence, a mortgagee of a dwelling-house is not liable for misrepresentations as to its sanitary condition made by the mortgagor in possession in renting the same to a tenant.^ After notice by the mortgagee entitled to possession to pay him the rent, if the tenant pays it to the mortgagor, he is still liable to the mortgagee.* § 937. The Mortgagor Cannot Bind the Mortgagee. — When a lease is made by a mortgagor, after the mortgage, it does not bind the mortgagee, nor in any manner affect his rights.® The mortgagor cannot bind the mortgagee.® The mortgagee is not liable for the mortgagor's wrongs in leasing the prem- ises.^ After right of possession by the mortgagee he may enter and treat the lessee as a trespasser, and without notice eject the tenant.^ However, if the tenant is allowed to attorn to the mortgagee, then he cannot be treated as a trespasser,^ but a tenant from year to year. ^ Moran v. Pittsburgh, etc., Railway Co., 32 Fed. Eep. 878, 886 ; Teal v. Walker, 111 U. S. 242 ; Rogers v. Humphreys, 4 Adol. & Ell. 299-313 ; Part- ington V. Woodcock, 6 Adol. & Ell. 690. 2 Stone V. Patterson, 19 Pick. (Mass.) 476 ; Welch v. Adams, 1 Met. (Mass.) 494 ; Tilden v. Greenwood, 149 Mass. 567 ; Morse v. Goddard, 13 Met. (Mass.) 177. ^Tilden v. Greenwood, 149 Mass. 567. * Watford v. Gates, 57 Ala. 290. See, also, Crosby v. Harlow, 21 Me. 499. s Fitchburg Cotton Manuf. Co. v. Melven, 15 Mass. 268 ; Boston Bank v. Reed, 8 Pick. (Mass.) 459, 462 ; Mayo v. Fletcher, 14 Pick. (Mass.) 525, 531 ; Teal V. Walker, 111 U. S. 242. 6 Tilden v. Greenwood, 149 Mass. 567 ; Russum v. Wanser, 53 Md. 92 ; McDermott v Burke, 16 Cal. 580. ' Tilden v. Greenwood, 149 Mass. 567. 8 Rogers v. Humphreys, 4 Adol. & Ell. 299; Thunder v. Belcher, 3 East, 449. 3 Hughes V. Bucknell, 8 Car. & P. 566 ; Birch v. Wright, 1 Term R. 378 ; Henshuw v. Welles, 9 Humph. (Tenn.) 568. 940 RIGHTS OF PARTIES BEFORE DEFAULT. § 938. Avoiding the Lease. — When the lease is given, after the mortgage, the mortgagor has the right to the rents and profits until interference of the mortgagee under the law. As between the mortgagor and the lessee, the contract is valid, and if the mortgage debt is paid, the defect in the lessee's title is removed. If the lessee is damnified by the mortgagor, his remedy is at law for damages.^ It is avoided only by the pos- session of the mortgagee under the mortgage. § 939. Alabama Rule. — In Alabama a statute provides that every conveyance of an estate is good and effectual witliout attornment of the tenant, but no tenant is liable who has paid his rent without notice of such conveyance.^ So the mortgagee, after right of possession, is entitled to the rents upon giving notice to the tenant.^ § 940. Iowa Rule. — In Iowa the provision of the statute is that the attornment of a tenant to a stranger is void, unless made to a mortgagee after the mortgage has been forfeited ; and that the mortgagor may redeem within one year after fore- closure sale, and that in the meantime he is entitled to posses- sion. So there can be no valid attornment of a tenant to a mortgagee until the expiration of the mortgagor's right of redemption.* § 941. Attornment op Subsequent Lessee. — Until the mortgagee enters he cannot recover the rent. If, however, the tenant attorns to him after right of possession, he becomes the mortgagee's tenant,^ and the mortgagor cannot collect rent from the lessee," nor recover possession of the property. But he is 1 Costigan v. Hastier, 2 Sch. & Lef. 160. 2 Code 1867, sect. 1568. 3 Marx V. Marx, 51 Ala. 222 ; Branch Bank v. Fry, 23 Ala. 770 ; Knox v. Easton, 38 Ala. 345. * Mills V. Hcaton, 52 Iowa, 215 ; Mills v. Hamilton, 49 Iowa, 105. ^ Evans v. Elliot, 9 Adol. & Ell. 159 ; Kimball r. Lockwood, 6 R. I. 139 ; Rogers v. Humphreys, 4 Adol. & Ell. 299, 313 ; Hemphill v. Giles, 66 N. Car. 512; Adams r. Bigelow, 128 Mass. 365. « Blain v. Rivard, 19 111. App. 477 ; Cook v. Johnson, 121 Mass. 326 ; Magill V. Hinsdale, 6 Conn. 464 ; Jones v. Clark, 20 Johns. (N. Y.) 51. THE RIGHTS OF THE MORTGAGEE. 941 liable to the mortgagor until he has attorned to the mortgagee.^ But in those States where the mortgagee has no right to enter until foreclosure, this rule has no application.^ § 942. Improvements by Lessee. — The right of the mort- gagor to improvements cannot co-exist with the right of the mortgagee to enter, foreclosure, and sell. So it is not strained construction to say that this doctrine clearly limits his right to lease to others, in order that they may possess, occupy, and improve. For the right of the lessee cannot co-exist with the right of the mortgagee to enter, foreclose, and sell.^ So a tenant having taken title pendente lite, cannot be al- lowed compensation for any building and improvements made or entered on the premises by him, although he had rea- son to believe his title to be good.* And if the tenant pays the mortgagor in advance, according to agreement, that the mortgagor will make improvements upon the .land, which is accordingly done, after the lawful entry by the mortgagee, he cannot be allowed compensation for the buildings and improve- ments, although he had reason to believe that, under the terms of the mortgage, the mortgagor had the right to execute such lease.^ § 943. Emblements Under the Lease. — The mortgagor until foreclosure or lawful possession taken by the mortgagee, is entitled to emblements when they are severed, as an absolute right to them, without any liability to account for them. But if the land be sold for condition broken before severance, the purchaser will be entitled to the growing crops not only as against the mortgagor but against all persons claiming in any manner through or under him subsequently to the recording of the mortgage.® 1 McDowell V. Hendrix, 67 Ind. 513. See, also, Ca^ds v. Mcaary, 5 N. H. 529. ^ Hogsett r. Ellis, 17 Mich. 351 ; Besser v. Hawthorn, 3 Oreg. 129 ; Ander- son V. Baxter, 4 Oreg. 105 ; Roberts v. Sutherlin, 4 Oreg. 219. •''Haven v. Adams, 4 Allen (Mass.), 80. * Havens v. Adams, 8 Allen (Mass.), 363. ^ Haven v. Boston, etc., R. R. Co., 8 Allen (Mass.), 369. « Jones r. Thomas, 8 Blackf. (Ind.) 428 ; Lane r. King, 8 Wend. (N. Y.) 584; Gillett V. Balcom, 6 Barb. (N. Y.) 370 ; Rankin v. Kinsey, 7 111. App. 215. 942 RIGHTS OF PARTIES BEFORE DEFAULT. At a foreclosure and sale, if a lease has been given subsequent to the execution of the mortgage, without the concurrence of the mortgagee, he may evict the lessee without notice and retain the emblements/ § 944. Who May Attack the Lease. — It appears that no- body but the mortgagee can take advantage of the invalidity of a subsequent lease. Because if the mortgagee does not ob- ject to the lessee's possession of the j)remises after he has a law- ful right to enter, no stranger should be allowed to complain. So while the lessee so remains in possession he may protect his rights and bring trespass against a third party who interferes with his possession.^ § 945. Lease by Mortgagee in Lawful Possession. — If the mortgagee be in possession, he cannot lease it for a period exceeding the time allowed for redemption ; if the land is re- deemed within, that time the lease is thereby determined.^ The payment of the mortgage debt by the mortgagor termi- nates the right of possession by a lessee under the mortgagee, unless there has been some express or implied authority from the mortgagor to lease for a given time.^ But the mortgagee having neither the possession nor the right of possession of the mortgaged property, has no interest therein which he can convey by a lease.^ § 946. Assignment by Mortgagee in Possession. — There is no principle of law or equity which will authorize an as- signee of a mortgage to claim the rent due before the assign- ment to him, or allow him to bring any action that the mort- gagee had a right to maintain against the mortgagor or third person, for any appropriation of the rents and profits of the mortgaged premises.*' ^Downard v. GrofF, 40 Iowa, 597 ; Anderson v. Strauss, 98 111. 485. * Kennett v. Plummer, 28 Mo. 142. nVillard v. Harvey, 5 N. H. 252; Hungerford v. Clay, 9 Mod. 1. * Holt V. Rees, 46 111. 181 ; 44 111. 30. ^ Union Mutual Life Ins. Co. v. Lovitt, 10 Nebr.301. ^ Salmon v. Dean, 3 MacN. & Gord. 344 ; Kimball v. Lewiston Steam Mill Co., 55 Me. 494. THE RIGHTS OP THE MORTGAGEE. 943 § 947. Leasehold Estate. — A mortgage of a leasehold estate is equivalent to an assignment of the lease. And thus the mortgagee takes an assignment of the whole term, and subjects himself to the covenants in the original lease.^ And so when A. takes an assignment of a lease by way of mortgage as a security for a debt, the whole interest j^asses to him, and he becomes liable on the covenant for payment of rent, though he never occupied, or became possessor in fact. Lord Chief Justice Dallas shows from authority that the lessee is liable for the rent whether he enter or not, that he is liable by virtue of his lease, and that the assignee is under the same liability, whether he takes an absolute assignment or only by way of security, for the lessee conveys by the assignment his whole in- terest, which the assignee takes ; and as the lessee was liable before entry, so must the assignee be liable in like manner. He further holds that there was privity of estate ; for the ac- ceptance of the assignment was equal to actual entry and privity of contract, because the contract was with the lessee and his assigns, and the mortgagee is an assign ; therefore the contract was between the lessor and assignee.^ In Sparkes v. Smith, ^ the court said, it was the mortgagee's folly to take an assignment of the whole term, whereby he subjected himself to the covenants in the original lease. So under this rule, which is well established in England, if the mortgagee does not take for the whole term he will not become liable to pay rent according to the covenant of the lease, but if he takes for the whole term he becomes liable.* The mortgagee has no right to rents due before he took his mortgage ; ^ his lien attaches to a, renewal lease.*^ ^ See Sparkes v. Smith, 2 Vern. 275 ; Pilkington v. Shaller, 2 Vern. 374 ; Lucas V. Comerford, 1 Ves. Jr. 235. ^ Williams v. Bosanquet, 1 Brod. & Bing. "238 ; 5 Eng. C. L. fi09, overruling Eaton V. Jaques, 2 Doug. 455. See, also, Farmers' Bank r. Mut. Assn., 4 Leigh (Ya.), 69 ; Pingrey v. Watkins, 15 Vt. 479 ; Colvert v. Bradley, 16 How. (U. S.) 580 ; Lester v. Hardesty, 29 Md. 50. * 2 Vern. 275. * M'Murphy v. Minot, 4 N. H. 251. ^ Burden v. Thayer, 3 Met. (JNIass.) 76. «Slee V. Manhattan Co., 1 Paige (N. Y.), 48. 944 RIGHTS OF PARTIES BEFORE DEFAULT. In those States where the assignment of the mortgage as well as the mortgage itself must be recorded in order to be valid, if not recorded it does not pass the legal estate, and lia- bility upon the covenants does not affect a person taking such unrecorded instrument.' § 948. Rule When the Mortgage is Considered a Lien. — Where the mortgage is considered a mere lien, a mort- gagee of a term not in possession cannot be considered as an assignee ; but if he takes possession of the mortgaged premises, he has the estate with its liabilities.^ Under this view the as- signee is liable only in respect of the possession ; so a mortgagee out of possession is not liable as an assignee, though he has taken the whole term of the lease.^ So making a mortgage of a leasehold estate is not a breach of a covenant not to assign, under this rule of a mortgage being a mere security.* An assignee is not liable for breaches which have wholly accrued before the assignment. The assignee is not person- ally liable for rent due before the assignment ; no action of covenant will lie against him for such rent due before the as- signment ; no action of covenant will lie against him for such rent, as it will for rent accrued subsequent to the assignment, and before he conveys away the demised prem- ises. If the landlord is entitled by law or by his lease to proceed in rem to recover his rent, the assignment does not affect the remedy. If he can distrain and re-enter for want of distress as against the lessee, he may do the same against the assignee for rent accrued before the assignment. But when the remedy for the breach of the covenant is merely personal, then the assignee is not liable.^ 1 Mayhew v. Hardesty, 8 Md. 479. 2 Astor V. Hoyt, 5 Wend. (N. Y.) 604. 3 Walton V. Cronly, 14 Wend. (N. Y.) 63; Astor v. Miller, 2 Paige (N. Y.), 68 ; Childs V. Clark, 3 Barb. Ch. (N. Y.) 52. * Riggs V. Pursell, 66 N. Y. 193 ; the rule is otherwise where a mortgage is considered as a transfer of title. 5 Astor V. Hoyt, 5 Wend. (N. Y.) 604, 617 ; Grescot v. Green, 1 Salk. 199 ; Church Wardens v. Smith, 3 Burr. 1271. CHAPTER XXIII. assignment of mortgage and debt. Article 1. Rule at Common Law. § 949. Must Be By Deed. § 953. Consideration. § 950. Statutory Provisiona. § 954. After the Mortgagee has been § 951. Subsequent Assignee. Disseised. S 952. Consent of Mortgagor. ^ 955. Delivery. § 949. Must Be By Deed. — It is the settled rule of the adjudged cases in all those States where a mortgage j^reserves its character as conferring an estate in land rather than a mere lien or a security, that an assignment must be by deed ; the general rule prevailing is that the legal title of a mortgaged estate can only be transferred by deed.^ Therefore an assign- ment of a mortgage to be effectual in these States to convey the mortgagee's title and enable the assignee to maintain ejectment, must be by such a conveyance in form and words as is required to convey the legal title to land in ordinary cases.^ Hence, where lands are sold under a power contained in a mortgage at the instance of the mortgagee, who has not acquired the legal title, the auctioneer's deed to the purchaser does not invest him with the legal title.^ If the legal title is vested in the assignee by the transfer, he can foreclose the mortgage.* But if the instrument is not under seal and does not purport to convey an estate in land, it does 1 Adams v. Parker, 12 Gray (Mass.), 63 ; Smith v. Kellcy, 27 Me. 237 ; 46 Am. Dec. 295. 2 Sanders v. Cassady, 86 Ala. 246 ; Givan v. Doe, 7 Blackf. (Ind.) 210 ; Hen- derson V. Pilgrim, 22 Tex. 464, 478 ; Torrey v. Deavitt, 53 Vt. 331. 3 Sanders v. Cassady, 86 Ala. 246 ; Tripp t-. Ide, 3 R. I. 51. * Williams v. Teachey, 85 N. Car. 402 ; Phelps v, Townsley, 10 Allen (Mass.), . 554 ; Cottrell v. Adams, 2 Biss. C. C. 351. 60 945 946 RIGHTS OF PARTIES BEFORE DEFAULT. not give the assignee the mortgagee's title so he can exercise the power of sale/ An assignment by a mortgagee, sealed, acknowledged, and recorded, jjurporting to pass absolutely all his interest in the premises and the debt secured by the mortgage, vests the assignee with all the mortgagee's rights, though no words of inheritance are used therein.^ § 950. Statutory Provisions. — In New Jersey the statute provides that mortgages shall be assignable at law, and that the assignee may enforce them in his own name, when the as- signment is in writing, though it need not be under seal.^ And in North and South Dakota an assignee must have a written assignment to empower him to foreclose.* In Pennsylvania the assignment should be in writing, under seal and attested by two witnesses.^ § 951. Subsequent Assignee. — For all purposes of security to an assignee and to enable him to obtain any just remedy under a mortgage, the assignment of the debt and mortgage passes the legal estate, and the rights of a second or third assignee are co-extensive with those of the first.® The assignee takes by a duly executed assignment the interest in the mort- gaged premises.^ § 952. Consent of Mortgagor. — A mortgagor can waive by parol the condition specified in a written agreement, limit- ing the use of a mortgage given to secure advances, and con- sent to its assignment as collateral security for a loan.^ And where the mortgagor is informed by the mortgagee that he ^ Dameron v. Eskridge, 104 N. Car. 621 ; Williams v. Teachey, 85 N. Car. 402. ^ Barnes v. Boardman, 149 Mass. 106. 'Nixon's^tOig., p. 613 ; Mulford v. Peterson, 35 N. J. L. 127. * Hickey;. '. Richards, 3 Dak. 345. See Civil Code, Dak., sect. 313. * 1 Brigb.:ly's Purd. Dig., p. 485. See McCandless v. Engle, 51 Pa. St. 309. e Hills v. Eliot, 12 Mass. 26 ; Hoitt v. Webb, 36 N. H. 158; Cook v. Cooper, 18 Oreg. 142. ^ Torrey v. Deavitt, 53 Vt. 331. See, also, Johnson v. Beard (Ala.), 9 South. Rep. 535. * Hidden v. Kretzschmar, 37 Fed. Rep. 465. ASSIGNMENT OF MORTGAGE AND DEBT. 947 wishes to assign the mortgage to a creditor of his own, and the mortgagor makes no objection, he is estopped from denying that the assignment was made to secure a debt of the mort- gagee, instead of one of his own owing to the assignee.^ A bond and mortgage held by a mortgagee, which have been paid, can be assigned with the consent of the mortgagor ; and in the hands of an assignee for vahie they will be available as against the mortgagor and the mortgagee.^ § 9-":3. Consideration. — Marriage is such a consideration as will make the assignee a purchaser for full value.^ The consideration of a mortgage made or negotiated is the amount paid by the assignee.* If the assignee get the mortgage and debt at a discount, this does not give the mortgagor any right to have the debt corre- spondingly reduced ; ^ and the assignment to an attorney for collection is a valid assignment." The rule adopted by the courts as to a pre-existing debt being a consideration applies to assignments.^ To be entitled as a bona fide purchaser of the notes and mortgage, the party must have received them and made a substantial payment before notice of other party's rights ; a nominal payment without having received the notes and mortgage is not sufficient when the purchaser has notice that another party than the vendor owns the securities.^ And the assignee of a mortgage who has given no other considera- tion therefor than his own promissory note, upon which he has paid nothing, is not a bona fide holder for value.® ^ Matthews v. Warner, 33 Fed. Rep. 3fi9. '^ Purser v. Anderson, 4 Edw. Ch. (N. Y.) 17; Hoy r. Bramhall, 19 N. J. Eq. 503 ; Hubbell v. Blakeslee, 71 N. Y. 63 ; Houseman v. Bodine, 122 N. Y. 158. 'Mellick r. Mellick, 47 N. J. Eq. 86. * Croft V. Bunpter, 9 "Wis. 503 ; Schafer v. Reilly, 50 X. Y. 61 ; Westen^elt V. Scott, 3 Stoc-kt. (N. J.) 80 ; McCurdy v. Agnew, 4 Halst. (N. J.) 733. * Knox V. Galligan, 21 Wis. 470 ; Pease v. Benson, 28 Me. 336. See Adair v. Adair, 5 Mich. 204. * Russum V. Wanser, 53 Md. 92. ' Yates County Nat. Bank v. Baldwin, 43 Hun (X. Y.), 136. ^Haescig v. Brown, 34 Mich. 503. 9 Chancellor v. Bell, 45 N. J. Eq. 538. 948 RIGHTS OF PARTIES BEFORE DEFAULT. The extension of the time for payment and the forbearance of the creditor is a sufficient consideration.' A bona fide as- signee may convey the assigned mortgage to the children of the mortgagor without any consideration, so far as the second mortgagee is concerned.^ § 954, After the Mortgagee Has Been Disseised. — A mortgagee of land, who has been disseised cannot make a valid assignment of his mortgage.^ The doctrine that the disseisee, without entry and delivery of the deed of the land, cannot con- ve}^ any title which will be valid as against the disseisor is well settled.* But the possession of the mortgagor is not adverse to the mortgagee, and does not j)revent an assignment.^ ■ But if the mortgagor is desseised, then no valid assignment can be made,^ unless the mortgagee's possession is recognized/ § 955. Delivery. — Delivery of the deed is necessary to a valid assignment. When there is not an actual transfer of the deed, it must appear satisfactorily, either from the circum- stances of the transaction or the acts or words of the grantor that it was intended to part with the deed and title in the se- curity ; ^ the intention must be shown, and the acts lawful.^ In Massachusetts, the assignee may execute and acknowledge an assignment in blank, and orally instruct his agent to fill it up when transferred, and it will be a valid assignment.^" 1 Worcester Nat. Bank v. Cheeney, 87 111. 602. ^ Saenger v. Nightingale, 48 Fed. Rep. 708. 3 Poignard v. Smith, 6 Pick. (Mass.) 172 ; 8 Pick. (Mass.) 272 ; Richardson v. Hildreth, 8 Cush. (Mass.) 225. * Dadmun v. Lamson, 9 Allen (Mass.), 85 ; Brinley v. Whiting, 5 Pick. (Mass.) 348 ; Foster v. Abbot, 8 Met. (Mass.) 596 ; Barry v. Adams, 3 Allen (Mass.), 493. ^ Murray v. Blackledge, 71 N. Car. 492. 8 Poignard v. Smith, 6 Pick. (Mass.) 172; 8 Pick. (Mass.) 272. ^ Lincoln v. Emerson, 108 Mass. 87. See, also, Nichols v. Reynolds, 1 R. I. 30 ; Clark v. Clark, 56 N. H. 106. « Folly V. Vantuyl, 4 Halst. (N. J.) 153 ; Crawford v. Bertholf, Sax. (N. J.) 458 ; Pringle v. Pringle, 59 Pa. St. 281 ; Rankin v. Major, 9 Iowa, 297 ; Ruck- man V. Ruckman, 33 N. J. Eq. 354. »Shurtleffv. Francis, 118 Mass. 154. 10 Phelps V. Sullivaji, 140 Mass. 36; 54 Am. Rep. 442. ASSIGNMENT OP MORTGAGE AND DEBT. 949 The delivery is necessary as against bona fide assignees. Thus, a second assignment to a bona fide assignee, with de- livery, after a previous assignment, which has been recorded, but the delivery never having been made, is entitled to pri- ority.^ Article 2, Wlio May Make an Assignment. I 956. Attorney. I 962. Corporations. I 957. Unincorporated Association. § 963. Marriage. I 958. Joint and Several Estates. § 964. Support. I 959. Joint Tenants. | 965. Surety. I 960. Legatee. | 966. Rights of Mortgagee as to §961. Executors and Administrators. Subsequent Lienors. § 956. Attorney. — When a mortgage is considered an estate in land it can be assigned only by deed. The general rule is that authority to execute a sealed instrument for another must also be under seal. But the articles of a partnership, which are under seal, can confer upon an attorney authority to execute such instrument for the partnership. So if a copartner, in the course of the business, under such articles, which provide that he shall transact the partnership business, assigns a mortgage of the firm, the assignment is valid. It is not necessary to have such authority to execute an assignment recorded.^ § 957. Unincorporated Association. — An assignment by the trustees of a voluntary association of a mortgage held by them passes the legal title, in the absence of evidence that their power of alienation is restrained by the by-laws of the association.^ And when a mortgage is taken by certain per- sons described as trustees of an association which is not in- corporated, the legal title under the mortgage vests in those persons, and an assignment by the association is invalid.* 1 Brown v. Johnston, 7 Abb. N. C. (N. Y.) 188. 'Morrison v. Mendenhall, 18 Minn. 232. ^Manahan i'. Varnum, 11 Gray (Mass), 405. * Austin 1'. Shaw, 10 Allen (Mass), 552; Chapin v. Universalist Society, 8 Gray (Mass.), 580; Webster v. Vandeventer, 6 Gray (]\Iass.), 428. 950 RIGHTS OP PARTIES BEFORE DEFAULT. The association could convey no title because it was only a cestui que trust. All the trustees must join in conveyance in order to make a grant of the estate.' § 958. Joint and Several Estates. — If a mortgage is given to secure a joint debt, it will be construed to be a joint estate. But if the mortgage is given to secure separate debts or obligations, each mortgagee is entitled to enforce his rights in his own name.^ So, when the conveyance is to the mort- gagees "severally," each may assign his interest.^ And when a mortgage note is indorsed by the two mortgagees, each trans- fers only one-half interest.* Whenever the debts are separate, all the mortgagees must join in the assignment.^ § 959. Joint Tenants. — An assignment of a mortgage of two persons as trustees of an unincorporated society vests the title in them as joint tenants. Co-trustees are joint tenants.^ And the abandonment of a trust by one of two joint trustees who are joint tenants does not vest his title in the remaining trustee without deed or legal process,^ and it is impossible for one of several joint tenants to foreclose a mortgage without making the others parties.^ However, in Connecticut, one of several joint owners of real estate may recover the whole estate in attachment against a person who has no title, and will hold it when recovered as well for the other owners as for himself. But this is not the rule of the common law.' * Webster v. Vandeventer, 6 Gray (Mass.), 428; Chapin v. Universalist Society, 8 Gray (Mass.), 580; Peabody v. Methodist Society, 5 Allen (Mass.), 540. ^ Burnett v. Pratt, 22 Pick. (Mass.) 556. 'Gilson V. Gilson, 2 Allen (Mass.), 115; Blake v. Sanborn, 8 Gray (Mass.), 154. * Herring v. Woodhull, 29 111. 92. * Bruce v. Bonney, 12 Gray (Mass.), 107. «Appleton V. Boyd, 7 Mass. 131. ''Webster v. Vandeventer, 6 Gray (Mass.), 428; Wilbur v. Almy, 12 How. (U. S.) 180 ; Austin v. Shaw, 10 Allen (Mass.), 552. 8 Lowe V. Morgan, 1 Bro. C. C. 368. 9 Bush V. Bradley, 4 Day (Conn.), 303, 304. ASSIGNMENT OF MORTGAGE AND DEBT. 951 An assignment to two trustees for an unincorporated associ- ation vests in these trustees the legal title, and an assignment of the mortgage by one of these trustees is invahd, and the assignee caimot foreclose the mortgage.^ § 960. Legatee. — The validity of an assignment of a mort- gage is not impaired by a showing merely that the interest of the assignor was but a life estate, where it is not made to ap- pear that the transfer operates to diminish the bulk of the estate at the death of the life tenant. And this is so where it is necessary to make such assignment to obtain the income and to protect the property from impairment.^ § 961. Executors and Administrators. — The right of ex- ecutors and administrators to make assignments of mortgages belonging to the estate or to take assignments of mortgages is generally controlled by statutory provisions. Thus, in Maine an executor can assign a mortgage upon real estate held by the testator at the time of his death.^ And it has been held that an executor or administrator can gener- ally assign a mortgage without an order from court for that purpose, because such interest is only a chattel interest which vests in the personal representatives of the deceased mortgagee ; * but upon foreclosure this chattel interest has become real, and the executor should then apply to the court for license to sell.'^ It has been held that one of two or more executors or ad- ministrators may make a valid assignment of a mortgage.'' A foreign administrator cannot assign a mortgage,^ except 1 Austin V. Shaw, 10 Allen (Mass.), 552. ^ Sutphen v. Ellis, 35 Mich. 44H. 3 Libby v. Mayberry, 80 iNIe. 137 ; Crooker v. Jewell, 31 Me. 306. * Ladd V. Wiggin, 35 X. H. 421 ; Baldwin v. Hatchett, 56 Ala. 461 ; Ex parte Blair, 13 Met. (Mass.) 126. »Bald^v•in v. Timmins, 3 Gray (INIass.), 302. * INIutual Life Ins. Co. r. Sturges, 33 N. J. Eq. 328 ; George v. Baker, 3 Allen (Mass.), 326 ; Bogert v. Hertell, 4 Hill (N. Y.), 492 ; Hertell v. Bogert, 9 Paige (N. Y.), 52; Hitchcock v. Merrick, 15 Wis. 522. 'Cutter V. Davenport, 1 Pick. (Mass.) 81; Hutching v. Bank, 12 Met. (Mass.) 421. 952 RIGHTS OF PARTIES BEFORE DEFAULT. in those States where a mortgage is a mere lien ; ' and then he cannot maintain a suit upon tlie mortgage.^ § 962, Corporations. — An assignment of a mortgage exe- cuted by the treasurer of a corporation, though under seal of the corporation, of which he is the keeper, without the direc- tion or knowledge of the managers, and no subsequent ratifi- cation by the corporation, is void.^ But an assignment in the absence of all proof would be presumed to have been regularly made by him.* It is not necessary that the assignment of a mortgage exe- cuted by a corporation should be made by an attorney of the corporation, appointed for that purpose, as the mortgage has no existence independently of the debt, and is therefore assign- able as a debt by the corporation.^ Neither is the assignment void by reason of the omission of part of the corporate name of the assignor, where the full name appears in the mortgage, and the assignment is attested according to law — that is, by the corporate seal — and the identity of the corporation as assignor, is otherwise sufficient.^ § 963. Marriage. — Marriage is such a consideration for a subsequent assignment of a mortgage as will make the as- signee a purchaser for full value. It is common learning that marriage is a full consideration, quite as much so as cash, and the wife is a bona fide purchaser for full value.^ § 964. Support. — The assignment by the mortgagee of a mortgage for support, after condition broken, is not released and discharged of his claim for support under the condition of the mortgage. Such assignee of the mortgagee may claim for 1 Smith V. Tiffany, 16 Hun (N. Y.), 552. "^ McBride v. Bank, 26 N. Y. 450. See, also, McAdams v. Robinson (S. Car.), 14 S. E. Rep. 825. •■• Jackson v. Campbell, 5 Wend. (N. Y.) 572. * Johnson v. Bush, 3 Barb. Ch. (N. Y.) 207. * Chilton V. Brooks, 71 Md. 445. « Chilton V. Brooks, 71 Md. 445. ' MeUick v. Mellick, 47 N. J. Eq. 86. ASSIGNMENT OF MORTGAGE AND DEBT. 953 the future support of the mortgagee and other beneficiaries named in tlie condition, on the failure of the assignee of the mortgagor to furnisli support/ And such mortgage may be assigned, unless such support is required by the terms of the instrument to be furnished by one personally.^ § 965. Surety. — When a debt secured by a mortgage has been discharged by the debtor, the surety has no interest that can be passed by assignment ; ^ and if the condition is that, if the mortgage shall be paid by renewal of the notes or other- wise, then the mortgage should be void, and the notes are renewed, then the indemnitee has no interest assignable.* But if the mortgagee as surety has paid the debt for his mortgagor, then he may assign the mortgage ; ^ or he may have a third person pay the debt for his benefit, and transfer to him the mortgage.^ And the mortgagee may make this arrange- ment before the maturity of the notes.^ So a mortgage given to secure partly a debt of the mortgagor, and to indemnify the mortgagee against loss as surety, is assign- able, and the principal creditor is not entitled to subrogation to the mortgagor.^ But the assignment must be agreed upon or made at the time the third party pays the debt, otherwise the payment will discharge the debt for which the mortgage was given as in- demnity.* An indemnity mortgage may be assigned. ^"^ § 966. Rights of Mortgagee as to Subsequent Leinors. — It is held in Massachusetts that equity will not compel the first mortgagee, who has brought an action for foreclosure, to 1 Mitchell r. Burnham, 57 Me. 314. "^ Bryant v. Erskine, 55 Me. 153 ; Joslyn v. Parlin, 54 Yt. G70 ; Ottaquecliee Sav. Bank v. Holt, 58 Vt. 166. 3 Abbott r. Upton, 19 Pick. (Mass.) 434. * Bonham v. Galloway, 13 111. 68. nVeeks v. Eaton, 15 N. H. 145 ; Wallace v. Goodall, 18 N. H. 439. ^Murray v. Catlett, 4 Greene (Iowa), 108. ^ Camp V. Smith, 5 Conn. 80. « Waller v. Oglesby, 85 Tenn. 321. » Pelton V. Knapp, 21 Wis. 63. ^° Murray v. Porter, 26 Nebr. 288. 954 RIGHTS OF PARTIES BEFORE DEFAULT. assign his mortgage to a subsequent lienor on receipt of pay- ment.^ The subsequent Uenor may protect Iiis interest by paying the prior mortgage when due and succeed by subrogation, and not by assignment of the first mortgage.^ However, when the subsequent incumbrancer or surety can- not be protected under the principles of subrogation, the assign- ment may be made in equity proceedings,^ and then to be entitled to an assignment, the claimant must be the holder of the next lien/ Article 3. Priorities. § 967. Notice. § 969. Priority of Assigned Notes § 968. Statutory Provisions for Re- Secured by Mortgage, cording As3ignnients. § 967. Notice. — The assignee of a mortgage, in those States where the recording laws do not apply to assignments of mort- gages, should immediately inform the mortgagor of the transfer, so that he will no longer pay to the assignor or mortgagee ; be- cause such payments, in good faith, would be valid.^ When an assignee of a mortgage holds under an assignment made by the assignor to defraud a subsequent purchaser of the mortgage for value, constructive notice of the subsequent pur- chaser of the prior assignment arising from its record will not aifect the rights of such subsequent purchaser.® When there is no law authorizing the record of an assign- ^ Butler V. Taylor, 5 Gray (Mass.), 455 ; Lamb v. Montague, 112 Mass. 352. Compare Cole v. Malcolm, 66 N. Y. 363 ; Frost v. Yonkers Sav. Bank, 70 N. Y. 553. 2 Hubbard v. Ascutney Mill Dam Co., 20 Vt. 402 ; Ellsworth r. Lockwood 42 N. Y. 89 ; Burnet v. Denniston, 5 Johns. Ch. (N. Y.) 35. 3 Baker v. Terrell, 8 Minn. 195 ; Johnson r. Zink, 52 Barb. (N. Y.) 396. * Bishop V. Ogden, 9 Phila. (Pa.) 524. See, also, Lyon's Appeal, 61 Pa. St. 15. ^ Perkins v. Matteson, 40 Kan. 165 ; Union College v. Wheeler, 61 N. Y. 88, 111 ; Johnson v. Carpenter, 7 ]\Iinn. 176 ; Horstman v. Gerker, 49 Pa. St. 282; Reed v. Marble, 10 Paige (N. Y.), 409, 416; James v. Morey, 2 Cow. (N. Y.) 246 ; James v. Johnson, 6 Johns. Ch. (N. Y.) 417, 427. ^Mellick V. Melljck, 47 N. J. Eq. 86. ASSIGNMENT OF MORTGAGE AND DEBT. 955 ment of a mortgage, such record, if made, will not be notice to subsecjuent purchasers or mortgagees in good faith.^ In those States where assignments should be recorded, a second assignment, taken without notice, actual or constructive, of a prior assignment, will take preference.^ After assignment, the assignee is entitled to recover, though the mortgagor then paj's the mortgagee.^ § 968. Statutory Provisions for Recording Assign- ments. — In many States the recording acts apply to the record- ing of assignments of mortgages. Chief Justice Mitchell saj^s that if the recording act afford the assignee of a mortgage the opportunity of giving notice of his rights by procuring and putting on record the assignment of mortgage, neglect on his part to do so will estop him from asserting the invalidity of a duly recorded release executed by his assignor after an innocent purchaser has paid his money on the faith of the public records.^ It is settled everywhere that unrecorded assignments of mortgages are void as against subsequent purchasers, whose interests ^nay be affected thereby, and whose conveyances are duly recorded, provided such assignments are embraced by the recording acts.^ So when assignments of mortgages are within the recording acts, a release executed by the person who appears by the re- cord to be the owner of the mortgage is sufficient to protect a purchaser who has in good faith parted with his money on the faith of such a release, and without notice than that offered by the record.^ A purchaser is chargeable with notice of an as- signment which has been recorded prior to his own purchase.^ ' Reeves v. Hayes, 95 Ind. 521 ; Purdy v. Huntington, 42 N. Y. 334 ; 1 Am. Rep. 532 ; Westerman v. Foster, 57 Ind. 408 ; 1 Story's Eq. Jur., sect. 404. ^ Pritchard /u. Kalamazoo College, 82 Mich. 587. ^ Shot well V. Matthews (X. J.), 21 At. Rep. 1067. See, also. Castle v. Castle, 78 Mich. 298. 'Connecticut Mut. L. Ins. Co. r. Talbot, 113 Ind. 373. ^ Bacon v Van Schoonhoven, 87 X. Y. 446 ; Decker v. Boice, 83 N. Y. 215 ; Swartz V. Leist, 13 Ohio St. 419 ; Yerger v. Barz, 56 Iowa, 77 ; Henderson v. Pilgrim, 22 Tex. 464 ; Reeves v. Hayes, 95 Ind. 521. « Blunt V. Norris, 123 Mass. 55 ; Kenyon v. Stewart, 44 Pa. St. 179. ' Brewster v. Carnes, 103 N. Y. 557. 956 RIGHTS OF PARTIES BEFORE DEFAULT. It is quite true that where a mortgage appears to have been discharged by an attorney, clerk, or some other than the mort- gagee, it has been held sufficient to excite inquiry as to the reason of the unusual circumstance.^ If the assignee of a mortgage fails to notify the mortgagor, and leads the mortgagor to believe that the mortgagee still owns it, he is estopped from denying the right of the mort- gagor to deal with the mortgagee.^ The assignment of a mortgage is entitled to record as a con- veyance in lowa.^ In New Hampshire ^ the statute provides that " no estate conveyed in mortgage shall be holden by the mortgagee for payment of any sum of money or the perform- ance of any other thing, the obligation or liability to the pay- ment or the performance of which arises, is made, or contracted after the execution and delivery of such mortgage." An as- signment by the mortgagee of a mortgage given for an exist- ing debt as security for future advances made by the assignee to the mortgagee is not within the provisions of this statute.® § 969. Priority of Assigned Notes Secured by Mort- gage. — Notes are often given, secured by a mortgage, which mature at different times, and the mortgage contains no stipu- lation as to the order in which they shall be paid. Then when the mortgagee assigns them to different parties, and at different dates, without any agreement with any of his as- signees as to the precedence which the notes shall have ; in the absence of such a stipulation, or special equities, the authorities are not agreed as to how the proceeds of the sale of property shall be appropriated, when the assigned notes cannot be paid in full for lack of proceeds from the sale of the mortgaged property. One line of authorities holds that the assigned notes shall be 1 Smith r. Kidd, 68 N. Y. 130 ; Harris v. Cook, 28 N. J. Eq. 345 ; Swarthout V. Curtis, 5 N. Y. 301. '^McCabe v. Farnsworth, 27 Mich. 52. ^ Kenosha Stove Co. v. Shedd, 82 Iowa, 540, following Parmenter v. Oakley, 69 Iowa, 388. * Gen. Laws, ch. 136, sect. 3. ^Lime-Rock Nat. Bank v. Mowry (N. H.), 22 At. Rep. 555. ASSIGNMENT OP MORTGAGE AND DEBT. 957 paid in the order of their assignment/ Another holds tliat the notes shall be paid in the order of their maturity.^ And still another class holds that the proceeds shall be aj^plied pro rata in part payment of the several notes, irrespective of their dates of maturity or assignments.^ Judge Battle, speaking for the court, says that the simple assignment of the notes does not change the mortgage and make it any less security for any of the notes than it was be- fore the assignment. The mortgage security, in following the transfer of the notes as an incident, does not pass by assign- ment any farther than it was an incident at the time the transfer was made. The holders of the notes, therefore, stand wquile jure, and consequently are entitled to participate ratably in the fund derived from the security, if there be not enough to satisfy all the notes.* And in Iowa it is held that the mortgagee may, without the consent of the mortgagor, assign the notes falling due, and, by agreement with the assignee, make the assigned notes the first lien.^ 1 McClintic v. Wise, 25 Gratt. (Va.) 448 ; Waterman v. Hunt, 2 E. I. 298 ; Culliim V. Erwin, 4 Ala. 452 ; Griggsby v. Hair, 25 Ala. 327. 2 Winters v. Bank, 33 Ohio St. 250 ; Kyle v. Thompson, 11 Ohio St. 616 ; Wilson V. Hayward, 6 Fla. 171, 190 ; Mitchell v. Ladew, 36 Mo. 526, 530 ; Sar- gent V. Howe, 21 111. 148 ; A^ansant v. Allmon, 23 111. 30 ; Koester v. Burke, 81 111. 436 ; State Bank v. Tweedy, 8 Blackf. (Ind.) 447 ; Doss v. Ditmars, 70 Ind. 451; Marine Bank ?;. Bank, 9 Wis. 57, 64; Eichardson v. McKim, 20 Kan. .346, .350 ; Hinds v. Mooers, 11 Iowa, 211 ; Walker v. Schreiber, 47 Iowa, 529 ; Morgan v. Kline, 77 Iowa, 681 ; Gordon v. Hazzard, 32 S. Car. 351. ^ Delespine v. Campbell, 52 Tex. 4 ; Wilson v. Eigenbrodt, 30 Minn. 4 ; Ex- change Bank v. Beard, 49 Tex. 363 ; Donley v. Hays. 17 Serg. & E. (Pa.) 403, 404; Cowden's Appeal, 1 Pa. St. 278; Mohler's Appeal, 5 Pa. St. 418, 420; Perry's Appeal, 22 Pa. St. 43, 45; Andrews v. Hobgood, 1 Lea (Tenn.), 693 ; Parker v. Mercer, 6 How. (Miss.) 320, 324 ; Cage v. Her, 5 Sm. & M. (Miss.) 410 ; Pugh V. Holt, 27 Miss. 461 ; Grattan v. Wiggins, 23 Cal. 16 ; Dixon v. Clayville, 44 ]\Id. 573, 578 ; English v. Carney, 25 Mich. 178, 181 ; McCurdy v. Clark, 27 Mich. 445, 448. *Penzel v. Brookmire, 51 Ark. 105. 5 Morgan v. Kline, 77 Iowa, 681. 958 rights of parties before default. Article 4. What Conditutes an Assignment. § 970. Assignment of the Mortgage ? 974. Conveyance by the Heir. without the Debt. ^975. Wliat Passes by Assign- § 971. Conveying Part of the Mort- ment. gaged Estate. § 976. The Note is the Proper Evi- § 972. The Doctrine that an Assign- dence of Ownersliij}. ment of the Mortgage witliout I 977. Possession of Notes without the Debt is a Nulhty. Indorsement by Persons § 973. Conveyance — Mortgagee in Pos- Other than the Payee. session. § 970. Assignment of the Mortgage without the Debt. -—In strict conformity with the theory that the mortgagee has no estate in the land, but a mere Hen as security for his debt, the courts of New York, and others taking the same view, hold that a conveyance by the mortgagee before foreclosure, without as assignment of the debt, is, in law, a nullity.^ And it is said that this rule may be qualified in this, that when the mort- gagee has lawful possession, or when not in possession, but the condition has been broken, a conveyance or assignment of the mortgaged joremises would be valid to transfer the right of possession.^ But these decisions are not consonant with other courts. The doctrine is fundamental, that if one sui juris, having the legal title to land, intentionally delivers to another a deed therefor containing apt wof-ds of conveyance, the title at law, at least, will pass to the grantee ; but for what purpose or uses the grantee will hold it or to what extent he will be able to 1 Jackson r. Curtis, 19 Johns. (N. Y.) 325 ; Wilson v. Troup, 2 Cow. (N. Y.) 231 ; Jackson v. Willard, 4 Johns. (N. Y.) 41 ; Cooper v. Newland, 17 Abb. Pr. (N. Y.) 342; Crow v. Vance, 4 Iowa, 434; Swan v. Yaples, 35 Iowa, 248; Peters v. Jamestown Bridge Co., 5 Cal. 335 ; Carter v. Bennett, 4 Fla. 283 ; Jordan v. Sayre, 24 Fla. 1; Hamilton v. Browning, 94 Ind. 242; Bailey i'. Gould, Walk. (Mich.) 478 ; Cleveland v. Cohrs, 10 S. Car. 224 ; O'Mulcahy v. HoUey, 28 Minn. 31. See, also, Duval v. McLoskey, 1 Ala. 708 ; Thayer v. Campbell, 9 Mo. 280 ; Bell v. Morse, 6 N. H. 205 ; Hutchins v. Carleton, 19 N. H. 487 ; Lunt v. Lunt, 71 Me. 377 ; Delano v. Bennett, 90 111. 533. ^ Campbell r. Birch, 60 N. Y. 214 ; Welsh v. Phillips, 5-1 Ala. 309 ; Pickett v. Jones, 63 Mo. 195. ASSIGNMENT OF MORTGAGE AND DEBT. 959 enforce it will depend upon circumstances. If the mortgagee conve^^s the land without assigning the debt to the grantee, the latter would hold the legal title as trustee for the holder of the mortgage debt.^ And Chancellor Kent says : " The mortgage interest, as distinct from the deljt, is not a fit sub- ject of assignment. It has no determinate value. If it should be assigned, the assignee must hold the interest at the will and disposal of the creditor who holds the bond." ^ So it is correctly- stated that by the common law a mortgagee in fee of land is considered as absolutely entitled to the estate, which he may de- mise or transmit by descent to his heirs.^ That is, in law, the mortgagee may convey the land itself by deed, or devise it by will, and on his death, intestate, it will descend to his heirs. In equity, his interest is a mere thing in action, assignable as such, and a deed by him would operate merely as an assign- ment of the mortgage ; and in administering the estate of a de- ceased mortgagee, a court of equity treats the mortgage as per- sonal assets, to be dealt with by the executor or administrator.* Justice Mulkey correctly lays down the rule when he says : " "We have alread}'^ seen, that under the decisions of this court, and by the general current of authority, a mortgage is not as- signable at law by mere indorsement, as in case of commercial paper ; but, on the other hand, the estate and interest of the mortgagee may be conveyed to the holder of the indebtedness, or even to a third party, by deed, with apt words of convey- ance, and the fact that it is, in form, an assignment, will make no difference."^ When the owner of notes and mortgage has notice of the custom of an investment company to advance interest on loans sold by it, when due, whether the same has been paid by the borrower or not, such payment is presumptively a transfer or ^ Barnard v. Eaton, 2 Cufh. (Mass.) 304 ; Sanger?'. Bancroft, 12 Gray (Mass), 367. See, also, Jackson v. "Willard, 4 Johns. (N. Y.) 40. 2 Jackson v. Willard, 4 Johns. (N. Y.) 40. ^4 Wait's Act. and Defen., p. 565. *3Pom.Eq. Jur., p. 150. 6 Barrett v. Hinckley, 124 111. 32, 46; 2 Washb. Real Prop. 115, 116. 960 RIGHTS OF PARTIES BEFORE DEFAULT. assignment of the coupon, and not an extinguishment.^ And a court of equity will treat a transaction as an assignment of the mortgage in order to protect a bona fide purchaser for value.^ § 971. Conveying Part op the Mortgaged Estate. — A conveyance of part of the mortgagee's interest, in like manner, is an equitable assignment of the mortgage proportionate to the amount of the purchase-money.^ So, a mortgage of a mortgagee's title is a legal assignment of his mortgage.* An irregular sale under a decree of foreclosure operates as an assignment to the purchaser ; ^ or a defective sale under a power is only an assignment.^ So, an assignment of a judg- ment on a mortgage note is an equitable assignment of the mortgage.'^ § 972. The Doctrine that an Assignment of the Mort- gage without the Debt is a Nullity. — The doctrine that the assignment of the mortgage without the debt is a nullity is modified by some of the States, where a mortgage is considered merely as a lien. Thus, in Florida it is held that though an assignment of simply the mortgage or of the mortgagee's in- terest in the land without the mortgage debt may be a nullity, ^Champion t'. Hartford Invest. Co., 45 Kan. 103. ^ Short V. Currier (Mass.), 26 N. E. Rep. 444. See, also, Rice v. McFarland, 41 Mo. App. 489. 'McSorley v. Larissa, 100 Mass. 270; Dudley v. Cad well, 19 Conn. 218; Wyman v. Hooper, 2 Gray (Mass.), 141 ; Grover v. Thatcher, 4 Gray (Mass.), 526. * Central Bank v. Copeland, 18 Md. 305 ; Murdock v. Chapman, 9 Gray (Mass.), 156 ; Dudley v. Cadwell, 19 Conn. 218. ^ Cooke V. Cooper, 18 Oreg. 142 ; Stackpole v, Robbins, 47 Barb. (N. Y.) 212 ; Brobst V. Brock, 10 Wall. (U. S.) 519 ; Johnson v. Robertson, 34 Md. 165 ; Moore v. Cord, 14 Wis. 213 ; Muir v. Berkshire, 52 Ind. 149. « Taylor v. Association, 68 Ala. 229 ; Johnson v. Sandhoff, 30 Minn. 197 ; Brown v. Smith, 116 Mass. 108 ; Robinson v. Ryan, 25 N. Y. 320. "> Wayman v. Cochrane, 35 111. 152. See, also, Lillibridge v. Tregent, 30 Mich. i05 ; Pattison v. Hull, 9 Cow. (N. Y.) 747 ; Drury v. Morse, 3 Allen (Mass.), 445; Hiltv..More,40 I^Ie. 515; Olmsted v. Elder, 2 Sandf. (N. Y.) 325. ASSIGNMENT OF MORTGAGE AND DEBT. 961 yet where the language of the instrument of assignment is suf- ficient to carry both tlie debt and the mortgage it will be sus- tained ; and particularly so when it is admitted upon the rec- ord by both the assignor and the assignee, as complainants, that both the debt and mortgage were assigned.^ § 973. Conveyance — Mortgagee in Possession. — ^\\''hen the mortgagee is in possession, his conveyance of the mortgaged property, is regarded as passing his interest in the mortgage, although no mention in terms is made of the debt.^ And when there is a void foreclosure sale, and the mortgagee be- comes the purchaser and enters into possession, and then sells and attempts to convey such premises by deed, such deed oper- ates as an assignment of the mortgage debt as well as the mort- gage securing the same, to the grantee in such deed, and each successive deed to such premises by persons holding under such mortgage has the same effect.^ If he fails to pass title, the sale will operate as an assignment of the mortgage to the successive grantees in such several deeds.'* Any conveyance is sufficient to pass the interest of the mortgagee in the mortgage,^ and a warranty deed would pass any subsequent title acquired by the assignor.'^ This rule applies if the grantee holds by a deed absolute, given as a security, where the purchaser has notice,'^ but if a bona fide purchaser has no notice, then the mortgagee will be treated in equity as a constructive trustee for the price received, after deducting the amount of the mortgage debt.* ^ Jordan v. Sayre, 24 Fla. 1, 19, opinion by Raney, J., citing Johnson v. Leonards, 68 Me. 237 ; Hunt v. Hunt, 14 Pick. (Mass.) 374 ; Ruggles v. Barton, 13 Gray (Mass.), 506 ; Devlin v. Collier, 53 N. J. L. 422. - Rodriguez v. Haynes, 76 Tex. 225. 2 Cooke V. Cooper, 18 Oreg. 142. * Robinson t-. Ryan, 25 N. Y. 320; Murdock ?-. Chapman, 9 Gray (Mass), 156 ; Hinds v. Ballon, 44 N. H. 619 ; Lamprey v. Nudd, 29 N. IL 290. *Hill r. Moore, 40 Me. 515, 525; Weeks v. Eaton, 15 N. H. 145; Severance V. Griffith, 2 Lans. (N. Y.) 38 ; Thompson r. Kenyon, 100 Mass. 108. ® Ruggles V. Barton, 13 Gray (Mass.), 506; Lawrence v. Stratton, 6 Cash. (Mass.) 163, 169. ' Union ]Mut. F. Ins. Co. r. Slee, 123 111. 222. ^Linnell v. Lyford, 72 Me. 280. 61 962 RIGHTS OF PARTIES BEFORE DEFAULT. If the mortgagee has already transferred the debt, the pur- chaser will hold a mere naked legal estate.^ And a conveyance of a part of mortgaged lands, operates as an equitable assignment of a proportionate part of the mort- gaged debt.^ § 974. Conveyance by the Heir. — A conveyance by the heir of the deceased mortgagee will operate as a good assign- ment in equity against all the world except the personal repre- sentatives and creditors whose rights might be affected.^ It is the right of the administrator to take possession of the premises and foreclose the mortgage if the debt is not paid at maturit}', as the mortgage debt rests solely in him.* § 975. What Passes by Assignment. — The sale and deliv- ery, before maturity, of mortgaged notes, carries with it an assignment of the real estate security, which, in equity, is a mere incident of the debt secured.^ And the sale and transfer of a non-negotiable note secured by a mortgage is valid and car- ries with it the security, and it is immaterial that the formal assignment of the mortgage is defective,^ and authorizes the transferree to foreclose the mortgage.^ And in Louisiana the transfer of a mortgage note of a special mortgage and vendor's privileges, carries with it both the mortgage and privilege.*^ Whether an assignment of a mortgage, without a transfer of the notes passes the beneficial interest in the security is deter- mined by the intention of the parties, as gathered from the 1 Hobson V. Roles, 20 N. H. 41 ; Bell v. Morse, 6 N. H. 205, 210. See, also, Ellison V. Daniels, 11 N. H. 274. ^ Smith i'. Hitchcock, 130 Mass. 570. Compare Greve v. Coffin, 14 Minn. 345 ; Gale v. Battin, 12 Minn. 287 ; Johnson v. Lewis, 13 Minn. 364 ; Kagle v. Macy, 9 Cal. 426, 428. 3 Cook V. Parham, 63 Ala. 456 ; Welsh v. Phillips, 54 Ala. 309. *Taft V. Stevens, 3 Gray (Mass.), 504; Douglass v. Durin, 51 Me. 121; Albright V. Cobb, 30 Mich. 355. ^Lee V. Clark, 89 Mo. 553 ; Joerdens v. Schrimpf, 77 Mo. 383 ; Goodfellow t;. Stillwell, 73 Mo. 19 ; King v. Harrington, 2 Aik. (Vt.) 33 ; Fletcher v. Car- penter, 37 Mich. 412 ; Hewell v. Coulbourn, 54 Md. 59. ® Lane v. Duchac, 73 Wis. 646. Comi^are Mason v. Ainsworth, 58 111. 163. ' O'Neal V. Seixas, 85 Ala. 80. * Succession of Forstall, 39 La. Ann. 1052. ASSIGNMENT OF MORTGAGE AND DEBT. 963 instrument, situation of the parties, and the nature of the trans- action.' An indorsement and dehvery of the mortgage notes by the mortgagee oj^erates as an assignment of the mortgage to the holder of the notes.^ And in the absence of an express agreement or controlling equity to the contrary, the assignment of one of a number of coupon interest notes secured thereby carries with it a pro rata share of the security.^ So the assign- ment of a part of the debt secured carries the benefit and con- trol of such security upon such terms as the relation between the assignee and the holder of the residue of the debt may require.* §976. The Note is the Proper Evidence of Owner- ship. — Generally the possession of the note is direct evidence of the debt, and if not produced its absence must be explained.'^ It is generally presumed that the note is included in the as- signment of the mortgage, whether so stated or not, when not already transferred to another,^ and an adequate consideration has been paid the mortgagee.^ If the purchaser does not find the note in the possession of the mortgagee, he takes the assign- ment subject to the prior rights of the first assignee.* § 977. Possession of Notes without Indorsement by Persons Other than the Payee. — The mere possession of a note and mortgage securing the same, by a person other than the payee or mortgagee to whom the note was made payable, the same being unindorsed, is not evidence of ownership in such person.^ The action to foreclose by a stranger can have no effect."' ^Bulkley v. Chapman, 9 Conn. 5. See, also. Miller v. Hicken, 92 Cal. 229. " ^ Converse v. Michigan Dairy Co., 45 Fed. Rep. 18. ' Champion v. Hartford Invest. Co., 45 Kan. 103. *Magloughlin r. Clark, 35 111. App. 251. *Edgell V. Stanford, 3 Vt. 202. « Philips V. Bank, 18 Pa. St. 394 ; Merrick r. Bartholick, 36 N. Y. 44. ^ Fletcher v Carpenter, 37 Mich. 412 ; Hewell v. Coulbourn, 54 Md. 50. 8 Kellogg V. Smith, 26 N. Y. 18 ; Haescig v. Brown, 34 Mich. 503 ; Wolcott v. Winchester, 15 Gray (Mass.), 461. See, also, Johnson v. Leonards, 68 ]Me. 237. ® Bausman v. Kelley, 38 ]Minn. 197 ; Van Eman v. Stanchfield, 10 Minn. 255 ; 13 Minn. 75 ; Hay ward v. Grant, 13 Minn. 165. 1" Hayes v. Lienlokken, 48 Wis. 509 ; Miller v. Clark, 56 Mich. 337. I 964 RIGHTS OF PARTIES BEFORE DEFAULT. So a mere delivery of the mortgage without the bond or note does not constitute a transfer of either by way of sale, or pledge, though the full consideration was paid for the debt.^ But if the mortgage has been formally assigned and the notes assigned without indorsement, the assignee has good title to the debt/ Such an assignment is a good equitable transfer of the mortgage and notes.^ When no notes are given and the mortgage has no cove- nants for the payment of the debt, then the remedy upon the mortgage is upon the property, and an assignment then trans- fers all the mortgagee's rights under it/ Judgment can only be entered upon the debt when it is separate from the mort- gage/ Article 5. Rule in Equity. ? 978. In Equity. § 982. Priority of the Secured Notes. 1 979. After the Assignment the Mort- § 983. No Intention or Circum- gagee Cannot Release the stances to Control. Mortgage. ^ 984. Remedy When the Assignee §980. The Mortgage Goes with the Does Not Have the Mort- Debt. gage. 2 981. Assignment of Part of the Notes. § 978. In Equity. — In equity the assignment of a debt will carry with it the right of the mortgagee in the mortgaged premises. But in a court of law an assignment of the mort- gage is a conveyance of lands, and will not pass the legal estate to the assignee, unless it be made by deed.® When the purchaser takes no legal transfer by indorsement of the note or by assignment of the mortgage, he acquires only 1 Warden v. Adams, 15 Mass. 233 ; Bowers v. Johnson, 49 N. Y. 432. ^ Pease v. Warren, 29 Mich. 9. Compare Kelly v. Burnham, 9 N. H. 20 ; Thorndike v. Norris, 24 N. H. 454. 3 Pratt V. Skolfield, 45 Me. 386. * Caryl v. Williams, 7 Lans. (N. Y.) 416 ; Hone v. Fisher, 2 Barb. Ch. (N. Y.) 559, 560 ; Coleman v. Van Renssalaer, 44 How. Pr. (N. Y.) 368. " * Webb V. Flanders, 32 Me. 175. « Kinna v. Smith, 2 Green Ch. (N. J.) 14 ; Den v. Dimon, 5 Halst. (N. J.) 156 ; 1 Washb. Real Prop. 519 ^ Mulford v. Peterson, 35 N. J. L. 127. ASSIGNMENT OF MORTGAGE AND DEBT. 965 an equitable interest. But that interest will enable him to deal with the mortgage for all purposes.^ And so a valid transfer of a note can be made by parol so as to vest the same and the mortgage debt of which it is the evidence, in the purchaser, and such sale will carry with it the mortgage, as an incident of the debt without any written as- signment thereof.^ The purchaser can in such case enforce the mortgagee's interest thus obtained against the property and person liable upon it ; at common law, in the name of the as- signor, or in the name of the person owning the legal title ; ^ under the codes of practice, adopted by many States, in his own name.'* Thus under the codes, the assignment is in effect a legal one.^ But where the notes are not indorsed nor the mortgage as- signed, the holder must prove his ownership." It is a conclu- sion of law that the mortgage passes with the debt as an in- cident to it.^ It has been held in Illinois that an assignment of the mort- gage without indorsement of the note, inasmuch as the mort- gage is not assignable, either at common law or by statute in that State, will not pass the power of sale to the assignee, but it will remain in the mortgagee, who alone can exercise it.^ But if the note be indorsed then the power of sale rests in the assignee.^ It is the general rule that an assignment or transfer of a mortgage debt carries with it an equitable right to an assign- 1 Nelson v. Ferris, 30 Mich. 497. ^ Lane v. Duchac, 73 Wis. 646. *Den V. Dimon, 5 Ilalst. (N. J.) 156; Young v. Miller, 6 Gray (]Mass.), 152, 153 ; Partridge ;;. Partridge, 38 Pa. St. 78. * Reeves v. Hayes, 95 Ind. 521 ; Sangster v. Love, 11 Iowa, 580 ; ^Nlulford v. Peterson, 35 N. J. L. I27 ; Southerin v. Menduni, 5 N. H. 420 ; Kuiiyan v. Mersereau, 11 Johns. (X. Y.) 534; Austin v. Burbank, 2 Day (Conn.), 474; Clarkson v. Doddridge, 14 Gratt. (Va.) 42, 44; Paine v. French, 4 Ohio, 318, 320; Williams v. Morancy, 3 La. Ann. 227. SRigney v. Lovejoy, 13 N. H. 247 ; Dudley v. Cad well, 19 Conn. 218. « Andrews r. Powers, 35 Wis. 644 ; Strause v. Josephthal, 77 N. Y. 622. ' Kurtz V. Sponable, 6 Kan. 395. ^Hamilton v. Lubukee, 51 111. 415. 8 Olds V, Cummins, 31 111. 189 ; Pardee v. Lindley, 31 111. 174. * 966 EIGHTS OF PARTIES BEFORE DEFAULT. ment of the mortgage/ And a payment of the debt at or before its maturity divests the mortgagee of his legal estate, and the mortgagor is then revested with his estate without any release and without any proceedings for redemption.^ § 979. After the Assignment the Mortgagee Cannot Release the Mortgage. — The authority of the mortgagee to release the mortgage terminates with the assignment.^- The transferrer of the note has no authority, after its transfer, to re- lease the mortgage executed to secure it.* And if the mort- gagee, after assignment of the debt and mortgage, releases it, he is liable to the assignee for the amount secured by it.^ The assignee may recover the full amount due on the debt.'' And when the mortgagor, at the request of the mortgagee, pays accounts against the mortgagee, the payments to be credited on the mortgage, \^diich had been assigned before the payments by the mortgagor, and without his knowledge, and without any record under the law, the amounts paid should be credited pro tanto on the mortgage debt.^ § 980. The Mortgage Goes with the Debt. — The mort- gage is but an incident to the debt it secures, and the assign- ment of the debt carries the mortgage with it.^ This is the ^Sturtevant v. Jaques, 14 Allen (Mass.), 523; Morris v. Bacon, 123 Mass. 58 ; Batesville Ini^titute v. Kauffman, 18 Wall. (U. S.) 151 ; Carpenter v. Lon- gan, 16 Wall. (U. S.) 271. '^ Holman v. Bailey, 3 Met. (Mass.) 55 ; Barnes v. Boardman, 149 Mass. 100, 114. 3 Harding v. Durand, 36 111. App. 238 ; Reeves v. Hayes, 95 Ind. 521 ; 2 Washli. Real Prop. 129 ; Gottschalk v. Neal, 6 Mo. App. 597 ; Vandercook v. Baker, 48 Iowa, 199. * Hagerman v. Sutton, 91 Mo. 519 ; Lee v. Clark, 89 Mo. 553 ; Ewing v. Shel- ton, 34 Mo. 518 ; Schwatz v. Leist, 13 Ohio St. 420 ; Gordon v. Mulhare, 13 Wis. 22. ^ Perkins v. Matteson, 40 Kan. 165 ; Ferris v. Hendrickson, 1 Edw. (N. Y.) 132 ; Fox 7'. Wray, 56 Ind. 423. « Bange v. Flint, 25 Wis. 544. "> Castle V. Castle, 78 Mich. 298. 8 Fassett v. Muloek, 5 Colo. 466 ; Lane v. Dnchac, 73 Wis. 646 ; Anderson v. Baumgartner, 27 Mo. 87 ; Boatsmen's Sav. Bank v. Crewe, 84 Mo. 477 ; Olds v. Cumming.s, 31 III. 189 ; Towner v. McClelland, 110 111. 542 ; Barrett v. Hinck- ley, 124 111. 32 ; Hargeman v. Sutton, 91 Mo. 519. ASSIGNMENT OF MORTGAGE AND DEBT. 967 equitable doctrine, and the mortgage goes with the notes as- signed, unless the agreement stipulates to the contrary. This rule is general,^ The mortgagor cannot complain that the note and mortgage have been separated. No one but the assignee of the note can complain of this separation.^ A mortgage debt for future ad- vances may be transferred by assigning the account for such advances, without a formal assignment of the mortgage.^ A party with a power of attorney to enforce the payment of a mortgage has an equitable assignment of the mortgage and note, if in his possession, though delivered without indorse- ment or assignment.^ The assignment of a debt secured by a deed of trust is not an assignment of the trust.^ § 981. Assignment of Part op the Notes. — When the holder of the mortgage notes assigns a portion of them without any agreement as to the mortgage security, such assignment car- ries with it, by operation of law, an assignment of a proportionate share of the security.^ But the mortgagee may assign his 1 Keyes v. Wood, 21 Vt. 331 ; Blair v. White, 61 Vt. 110 ; Perkins v. Sterne, 23 Tex. 561 ; Muller v. Wadlington, 5 S. Car. 342 ; Walker v. Kee, 14 S. Car. 142 ; Prout v. Hoge, 57 Ala. 28 ; Bennett v. Solomon, 6 Cal. 134 ; Partridge v. Partridge, 38 Pa. St. 78 ; Watson v. Dundee, etc., Co., 12 Oreg. 474 ; Paine v. French, 4 Ohio, 318 ; Kuhns v. Bankes, 15 Nebr. 92 ; Blake v. Williams, 36 N. H. 39 ; Ferry v. Meckert, 32 N. J. Eq. 38 ; Bayless v. Glenn, 72 Ind. 5 ; Gould V. Marsh, 1 Hun (N. Y.), 566; Hohnes v. McGinty, 44 Miss. 94 ; Belcher v. Costejlo, 122 Mass. 189 ; Miller v. Cappel, 36 La. Ann. 264 ; Martin v. M6- Eeynolds, 6 Mich. 70; Burdett v. Clay, 8 B. Mon. (Ky.) 287; Walker v. Schreiber, 47 Iowa, 529 ; Perkins v. Matteson, 40 Kan. 165 ; Lawrence v. Knap, 1 Root (Conn.), 248 ; Vose v. Handy, 2 Me. 322; Hyman v. Devereux, 63 N. Car. 624; AVoodrufF v. King, 47 Wis. 261; AVinstead r. Bingham, 4 Woods, C. C. 510 ; Roberts v. Mansfield, 32 Ga. 228 ; Batesville Institute v. Kauffman, 18 Wall. (U. S.) 151 ; Myers v. Hazzard, 4 McCrary, C. C. 94, 97. Compare Planter's Bank v. Prater, 64 Ga. 609. 2 INIatthews v. Warner, 112 U. S. 600. 3 Moses V. Hatfield, 27 S. Car. 324. * Cutler V. Haven, 8 Pick. (Mass.) 490. * Charter Oak L. Ins. Co. v. Gisborne, 5 Utah, 319 ; Bell v. Simpson, 75 Mo. 485. 6 Blair v. White, 61 Vt. 110 ; Keyes v. AVood, 21 A^t. 331 ; Patrick's Appeal, 105 Pa. St. 356 ; Sargent v. Howe, 21 111. 148 ; Studebaker Manuf. Co. v. Mc^ 968 RIGHTS OF PARTIES BEFORE DEFAULT. whole interest as a security for a part of the notes transferred at the time of the transaction.^ And the assignee of the mort- gage and part of the notes takes the mortgage in trust for the benefit pro tanto of the party liolding tlie other notes.^ This rule would apply to detached coupon notes in the hands of different parties.^ And the same principle is applicable where the mortgage secures an account and a note. The assign- ment of either carries with it a ijroportionate part of the security.* § 982. Priority of the Secured Notes. — A mortgagee holding two or more notes secured by a mortgage, can transfer one or more and the mortgage, so as to give that note transferred priority in payment out of the mortgaged property.^ And it is clear that the mortgagee has the right by agreement to fix the rights of the holders of the several notes to the mortgage security ; and such agreement may be implied from the cir- cumstances of the transaction.^ An indorsement of a note, with an assignment of the mort- gage is sufficient to give to the assignee priority, in the absence of circumstances showing a contrary intention.'^ However it is held by other authority that the assignment of one note with the mortgage does not necessarily give that note priority, but operates only as an assignment of the mortgage j^ro tanto.^ And again it is held that the assignee of one note, who has also the Cargur, 20 Nebr. 500 ; Harman v. Barhydt, 20 Nebr. 625 ; Cooper v. Ulmann, Walk. (Mich.) 251 ; Donley v. Hays, 17 Serg. & R. (Pa.) 400. 1 Warden v. Adams, 15 Mass. 233 ; Langdon v. Keith, 9 Vt. 299. ^ Norton v. Palmer, 142 Mass. 433 ; Belding v. Manly, 21 Vt. 550 ; Moore v. Ware, 38 Me. 496. 3 See Miller v. Rutland, .etc., Railroad Co., 40 Vt. 399 ; Champion v. Hart- ford Invest. Co., 45 Kan. 103. * Adger v. Pringle, 11 S. Car, 527 ; Magloughlin v. Clark, 35 111. App. 251. 6 Noyes v. White, 9 Kan. 640 : Goar v. McCanless, 60 Miss. 244 ; McLean's Appeal, 103 Pa. St. 255 ; Anglo-Am. Land Co. v. Bush (Iowa), 50 N. W. Rep. 1063 ; Walker v. Demont, 42 111. 272 ; Bank v.Tarleton, 23 Miss. 173. « Grattan v. Wiggins, 23 Cal. 30; Bryant v. Damon, 6 Gray (Mass.), 564; Langdon v. Keith, 9 Vt. 29; Mechanics' Bank v. Bank, 9 Wend. (N. Y.) 410. ' Foley V. Rose, 123 Mass. 557 ; Solberg v, Wright, 33 Minn. 224. ^Ewing V. Arthur, 1 Humph. (Tenn.) 537 ; Stevenson v. Black, Saxt. (N. J.) 338 ; Page v. Pierce, 26 N. H. 317. ASSIGNMENT OF MORTGAGE AND DEBT. 969 assignment of the mortgage, may stand upon another principle of law, that when two or more have equal claims in equity and one has a legal title, the legal title must prevail.' An assignment of one note without the mortgage, implies priority of payment of notes retained by the mortgagee, which subsequently assigned would not take priority over the first note transferred ; ^ but this rule is not without exceptions.^ An assignment of part of the amount secured out of the first moneys to become due and payable, gives the assignee priority of payment over the balance secured by the mortgage.* When part of the notes are assigned, and part retained, it is entirely a matter of contract between the assignor and assignee how far and for whose benefit the mortgage shall be held.^ § 983. No Intention or Circumstances to Control. — As a general rule, an assignment of one of several notes secured by a mortgage operates as an assignment jpro tanto of the mortgage.^ This is on the principle that an assignment of a portion of the debt is an assignment of the mortgage made to secure it pro tanto ; ^ and the holders of the sejDarate notes are regarded as separate and distinct mortgagees.^ But the assignee of the mortgage may foreclose in his own name, and then he will hold the proceeds as a trustee for the persons entitled to share.^ 1 Eastman v. Foster, 8 Met. (Mass.) 19. '' Eicbard.son v. McKim, 20 Kan. 346 ; Foley v. Rose, 123 Mass. 557. ' Hendei-son v. Herrod, 10 Sm. & M. (Miss.) 631 ; Abney v. Walmsley, 33 La. Ann. 589 ; Knight v. Ray, 75 Ala. 383. * Thayer's Appeal, 9 At. Rep. 498. * Langdon v. Keith, 9 Vt. 300. « Walker v. Schreiber, 47 loAA'a, 529; Patrick's Appeal, 103 Pa. St. 255; Lynch v. Hancock, 14 S. Car. 66, 84 ; Gratton r. Wiggins, 23 Cal. 1<> ; Foley v. Rose, 123 Mass. 557 ; Moore v. Ware, 38 Me. 496 ; Anderson v. Baumgartner, 27 310. 80 ; Stockton r. Johnson, 6 B. Mon. (Ky.) 408 ; Terry v. Woods, 6 Sm. & :M. (Miss.) 1.39 ; Johnson v. BroAvn, 31 N. H. 405 ; Noyes v. White, 9 Kan. 640 ; Collerd >: Huson, 34 N. J. Eq. 38 ; Swartz v. Leist, 13 Ohio St. 419 ; Langdon v. Keith, 9 Vt. 299 ; Herring v. Woodhull, 29 111. 92 ; Smith v. Stevens, 49 Conn. 181. ^ Grapengether v. Fejervary, 9 Iowa, 163. * Rankin v. Major, 9 Iowa, 297. »Solbergv. Wright, 33 Minn. 224. See EngUsh v. Carney, 25 Mich. 178; 970 RIGHTS OF PARTIES BEFORE DEFAULT. Several notes in the hands of different parties have an equal claim to be paid ratably out of the land/ When a party assigns a mortgage and a forged note to one party, and the real note to another, the lien of the first assignee is paramount.^ In West Virginia, eight notes for the purchase-money of land were secured by a deed of trust. By assignment and for value they came into the hands of one person. He assigned four of them to a sub-assignee, who, in turn, assigned these four notes to another party " without recourse." It was held that these four notes so assigned were entitled to be first paid out of the proceeds of the land when the same was sold.^ § 984. Remedy when the Assignee Does Not Have the ]\IoRTGAGE. — When one party holds the note and another the mortgage, the assignee of the note may proceed in equity to have the mortgage assigned to him,* or the holder may be charged as trustee for the holder of the note.* In New Hampshire the assignee of the note may maintain an action on the mortgage in his own name without any other evidence of the transfer." It is the general rule and the tendency of the decisions that, when the mortgage has not been assigned, the mortgagee holds the legal title in trust for the purchaser of the debt, and that the latter may obtain a conveyance by a bill in equity.^ Bryant v. Damon, 6 Gray (Mass.), 564 ; Foley v. Rose, 123 Mass. 557 ; Norton V. Stone, 8 Paige (N. Y.), 222; Rolston v. Brockway, 23 Wis. 407; Belding v. Manly, 21 Vt.'soO ; Keyes v. Wood, 21 Vt. 331. ' Jennings v. Moore, 83 Mich. 231. See, also, Abele r. McGuigan, 78 Mich. 415 ; First Nat. Bank v. Hoveyman, 6 Dak. 275 ; Laplace v. Laplace, 43 La. Ann. 284. "^ Kernohan v. Durham, 48 Ohio St. 1, See, also, Mellick v. Mellick, 47 N. J. Eq. 86. 3 Jenkins v. Hawkins, 34 W. Va. 799. * Morris v. Bacon, 123 Mass. 58. ^ Steward v. Welch (Me.), 24 At. Rep. 860 ; Wolcott v. Winchester, 15 Gray (Mass.), 461 ; Jordan v. Cheney, 74 Me. 359; Crane v. March, 4 Pick. (Mass.) 131. ® Southerin v. Mendum, 5 N. H. 420. ' Wolcott V. Winchester, 15 Gray (Mass.), 461, 464 ; Young v. Miller, 6 Gray (Mass.), 152 ; Barnes v. Boardman, 149 Mass. 106. assignment of mortgage and debt. 971 Article 6. Validity in Equity and at Law. I 985. Transfer Without Covenants of § 991. Fraudulent Representations. Warranty. ^ 992. Usury. § 986. Transfer With Warranty. I 993. Assignment not Completed. I 987. Warranty in General. ^ 994. Lex Loci Contractus — Law of 1 988. Assignment of Mortgage as Place. Collateral Security. | 995. Measure of Damages. § 989. Mortgagee in Pos.«ession. ^ 996. Pleadings, i 990. Fraudulent Mortgages. § 997. Burden of Proof. § 985. Transfer Without Covenants of Warranty. — An assignment of a mortgage, as a general rule, passes nothing but the mortgagee's interest. And a deed of assignment of a mortgage, without covenants of warranty, does not estop the assignor, nor those claiming under him, to set up the after- acquired title.^ The title conveyed is but a title in mortgage. The words of grant in the assignment cannot operate by way of covenant or estoppel beyond the description of the thing granted and assigned.^ The assignment does not cover a title which the mortgagee holds absolutely.^ An assignment does not convey or extinguish the right of entry. Thus, it does not extin- guish the right of entr}^ for a breach of a condition subsequent, as for the payment of j^rior mortgages upon the mortgaged es- tate,* though an absolute sale in fee would extinguish the right.^ Where the assignment indorsed on the mortgage contains no warranty, and fraud or deceit is not alleged, evidence that, at the time of the execution of the assignment, the assignor ver- bally warranted the mortgage to be a good lien on the jDrop- erty, is inadmissible.® ' Weed Sewing-Mach. Co. v. Emerson, 115 Mass. 554. '^Blanchard v. Brooks, 12 Pick. (Mass.) 66, 67; Miller v. Ewing, 6 Cush. (IMass.) 34,- Hoxie v. Finney, 16 Gray (Mass.), 332 ; Van Rensselaer v. Kearney, II How. (U. S.) 325, 326. ^Durgin v. Bushfield, 114 Mass. 492; Barnstable Sav. Bank v. Barrett, 122 Mass. 172. * Hancock v. Carlton, 6 Gray (Mass.), 39 ; Richardson v. Cambridge, 2 AUen (Mass.), 118. *Rice V. Boston, etc.. Railroad Co., 12 Allen (Mass.), 141 ; Co. Litt. 214 a. *Nally V. Long, 71 Md. 585. 972 RIGHTS OF PARTIES BEFORE DEFAULT. § 986. Transfer with Warranty. — When the mortgage con- tains covenants of warranty and it is assigned, and the mort- gagor acquires another title to the same premises, such title inures instantly to the benefit of the assignee of the mortgage/ Because this after-acquired title by the mortgagor inures to the benefit of the mortgagee and his assigns by virtue of the cove- nants in the mortgage, and is subject to foreclosure.^ Expenses or taxes on the mortgaged land cannot be paid by the assignee which accrued before the assignment and then added to the amount due on the loan.^ §987. Warranty in General. — A court of equity cannot relieve a person who purchases a mortgage upon real estate, to which the title is defective, unless the seller has made some statement respecting the title upon which the purchaser was justified in relying.^ The purchaser is not excused from an examination of the title, unless he is fraudulently induced to forbear inquiry, which he would otherwise have made.^ When the validity of the mortgage is warranted, it is also a warranty of the bond or note.^ And an unreasonable delay by the assignee in the collection of the mortgage discharges the guarantor from the depreciation of the property in the mean- time.^ Generally, it is held that by the assignment of a note and mortgage the assignor impliedly warrants their validity.^ But there is no implied covenant in an assignment that the assignor will not receive the payment of the debt.^ Neither 1 Gardiner v. Gerrish, 23 Me. 46. "^ Pratt V. Pratt, 96 111. 184 ; Bush v. Marshall, 6 How. (U. S.) 284 ; Flynt v. Hubbard, 57 ]\liss. 471 ; Wells v. Somers, 4 111. App. 297 ; Wright v. Shumway, 1 Biss. C. C. 23. 3 Macomb v. Prentis, 78 Mich. 255. * Vincent v. Berry, 46 Iowa, 571. ^Gordon v. Parmelee, 2 Allen (Mass.), 212 ; Brown v. Castles, 11 Gush. (Mass.) 348. «Ros9 V. Terry, 63 N. Y. 613. 'Griffith V. Robertson, 15 Hun (N. Y.), 344. 8 Ross V. Terry, 63 N. Y. 613. See Fant v. Fant, 17 Gratt. (Va.) 11 ; Littauer V. Goldman, 72 N. Y. 506. 9 Hortsman v. Gerker, 49 Pa. St. 282. ASSIGNMENT OF MORTGAGE AND DEBT. 973 does the assignment of a mortgage carry with it a separate contract of guaranty of the pa3anent of the mortgage debt, when made to the mortgagee, " his executors and administra- tors," as this is a personal contract.^ If the guaranty be upon the mortgage, which is assigned, the guarantor may plead in defense to a suit by the assignee upon the guaranty, want of consideration for the guaranty.^ In general, the assignment of a mortgage is an assignment of all the securities which the assignor has for the debt, and not merely the claim against the mortgagor.^ Thus, it trans- fers any judgments that may have been obtained against in- dorsers of the notes, or a mortgage given as collateral security to the mortgage debt which it assigned.* There is no implied warranty of the solvenc}^ of the mort- gagor, but that the mortgage debt has not been satisfied.^ The debtor is bound to respect the rights of the assignee of the debt, and cannot defeat them. Thus, after he knows of the insolvency of the mortgagee after assignment of the mort- gage debt, he cannot purchase desperate claims against him to satisfy the mortgage debt, even if the mortgage has been trans- ferred only as collateral security.*' § 988. Assignment of Mortgage as Collateral Security. — The mortgage note may be re-issued to a third and innocent holder for full value before maturity, without impairing the security of the mortgage, provided it is only a collateral se- curity.^ And the assignment of a mortgage may be by deed absolute in form and yet be only a 9ollateral security for a loan, and parol evidence is admissible, in equity, to prove that it was only an assignment as collateral security.* 1 Smith V. Starr, 4 Hun (N. Y.), 123. ^Brigijs V. Latham, 36 Kan. 205. ' Phihps V. Bank, 18 Pa. St. 394. *Phihp9 V. Bank, 18 Pa. St. 394. * French v. Turner, 15 Ind. 59. 8 Phihps V. Bank, 18 Pa. St. 394. ' Morris v. Cain, 39 La. Ann. 712. spond?;. Eddy, 113 Mass. 149; Wormuth v. Tracy, 15 Hun (N. Y.), 180; Briggs V. Rice, 130 Mass. 50. 974 BIGHTS OF PARTIES BEFORE DEFAULT. The mortgagee does not lose his interest in the mortgage by assigning it to his creditors as collateral security for his own debt, though he stipulates in the assignment to forfeit all interest in the mortgage if he fails to pay his debt by a specified time, and fails to pay it. The agreement for forfeiture amounts to nothing in a court of equity/ The assignor can redeem by paying the amount he owes, in whosoever hands it may be.^ A second assignee of a note secured by mortgage, who has taken it before due for full value, may enforce for the whole amount, though his assignor took it for a small part of the amount secured.^ But if the debt be a bond or other non-negotiable instrument, the assignee would in such case acquire only the right of the first assignee.* Where a mortgage has been taken as collateral security, the assignee does not guarantee the sufficiency of it, but undertakes to use due diligence in its collection.^ An indemnit}'' mortgage may be assigned as collateral security.'' An indorsee of a mortgage note, who has lawful possession of the mortgaged property, and also of the mortgage itself, cannot be dispossessed until the mortgage debt is paid, since he is the equitable assignee of the mortgage.'^ The possession of an equitable assignee, when peaceably acquired, is as lawful as that of the mortgagee himself, or his tenant.^ § 989. Mortgagee in Possession. — An assignment of a mortgage as security for a debt by a mortgagee in possession is evidence that the mortgage is redeemable.^ And such an as- 1 Hughes? r. Johnson, 38 Ark. 285. ^ Sweet V. Van Wyck, 3 Barb. Ch. (N. Y.) 647. ^ Briggs V. Rice, 130 Mass. 50. * Bush V. Lathrop, 22 N. Y. 535. 5 Hammond v. Lewis, 1 How. (U. S.) 14. « Murray v. Porter, 26 Nebr. 288. ^ Brown v. Bookstaver (111.), 31 N. E. Rep. 17. 8 Kilgour V. Gockley, 83 111. 109. 9 Smart v. Hunt, 4 Ves. 478, note a ; Hardy v. Reeves, 4 Ves. 466,478 ; Borst V. Boyd, 3 Sandf. Ch. (N. Y.) 501. I ASSIGNMENT OF MORTGAGE AND DEBT. 975 signment to a third person of the mortgage is evidence that the mortgagee in possession acknowledges the rights of the mortgagor.^ And when the assignee takes the mortgage, he is not accountable to the mortgagor for rents and profits before the assignment.'"^ § 990. Fraudulent Mortgages, — When a mortgage and note are fraudulently made, the assignee, with notice, stands in no better situation than the parties to the 'original transaction, and the law will not aid him to avail himself of the security.^ So when the assignee of the mortgage, fraudulent in its incep- tion, and void as against creditors, purchases with knowledge of the fraud, he is not a bona fide purchaser, and the fact that he paid full consideration for the assignment, will not aid him.* Of course the burden is upon the party asserting fraud. ^ But such fraudulent mortgage becomes valid in the hands of an assignee who has purchased without notice, and this is so both as to the subsequent purchasers and creditors.^ § 991. Fraudulent Representations. — Representations by the vendor of a mortgage given by a third person upon lands at a distance, as to the responsibility of the mortgagor, and the value of the securities, which representations are false in fact, though honestly made in the belief that they were true, if they are relied upon and mislead the purchaser, are tantamount, in legal effect, to fraud ; ^ and the assignee can avoid the assign- ment ; but the transaction must be fraud in fact or in legal effect.^ And where a person obtains an assignment of a bond and mortgage from the owner thereof by false pretenses and 1 Smart v. Hunt, 4 Ves. 478. 2 Hall V. We.stc-ott (R. I.), 23 At. Rep. 25. 3 Nellis V. Clark, 20 Wend. (N. Y.) 24; 4 Hill (X. Y.), 424; Chamberlain v. Morgan, 2G Barb. (N. Y.) 160. *Danbury v. Robinson, 1 McCarter (N. J. Eq.), 213. 5 Farmers' Bank v. Douglas, 11 Sm. & M. (Miss.) 469 ; Langdon v. Keith, 9 Vt. 299. «Danbury v. Robinson, 1 McCarter (X. J. Eq.), 213; Tantum v. Green, 21 N. J. Eq. 364. ' Webster v. Bailey, 31 Mich. 36. 8 Peabody v. Fenton, 3 Barb. Ch. (N. Y.) 451. 976 EIGHTS OF PARTIES BEFORE DEFAULT. gross fraud, and then transfers the same to a third person for less than their full value, and under circumstances calculated to i^ut the latter upon inquiry, it was held that no title vested in the purchaser under the assignment to him, and that the owner of the bond and mortgage was entitled to a decree de- claring the assignment fraudulent and void.^ Representations as to the value of property cannot ordinarily be made the basis of the recovery of damages for fraud and deceit ; ^ but when the manager of an investment comj)any makes representations to a purchaser of notes and mortgage which he knows are untrue, and the purchaser relies on such statements, having faith in the honesty of the company, the question of fraud shoUld be left to the jury to pass upon.^ § 992. Usury. — The hj'^pothecation of an obligation valid in its inception as security for a usurious loan will not render it void or discharge the debtor from liability thereon. Upon payment of the amount of the loan, the obligation will be free from all taint of usury.* But a party who is the direct assignee in trust of a mortgage may impeach the mortgage for usury. Such assignee stands in the place of the mortgagor and has his rights. If the security is good in its inception it cannot be impeached on account of circumstances in a usurious transfer between the original mortgagee and assignee of the mortgage.^ Neither can the assignee of the equity of redemption allege usury in the loan to the mortgagor, to defeat the foreclosure by the mortgagee.^ And in general if the mortgage is valid in its inception, it is unaffected by the usury and illegality to a contract upon which it is assigned.^ § 993. Assignment not Completed. — An assignment may be revoked before completed and the rights of the mortgagee 1 Peabody v. Fenton, 3 Barb. Ch. (N. Y.) 451. '^ Bell V. Byerson, 11 Iowa, 233 ; Dawson v. Graham, 48 Iowa, 378 ; Hoffman V. Wilhelm, 68 Iowa, 510. ^King r. Sioux City L. and Invest. Co., 76 Iowa, 11. * Warner v. Gouverneur, 1 Barb. 36, 40. ^Pearpall v. Kingsland, 3 Edw. Ch. (N. Y.) 195, 198. « De Wolf V. Johnson, 10 AVheat. (U. S.) 367. 'Wells V. Chapman, 13 Barb. (N. Y.) 561. I ASSIGNMENT OF MORTGAGE AND DEBT. 977 unaffected. Thus, a mortgagee who has assigned the mort- gage and indorsed the note may, upon the indorsement of the note back to him, and the cancellation of the assignment before it has been recorded, maintain a writ of entry to foreclose the mortgage/ Or, after the cancellation of the unrecorded deed of assignment, he could have made an assignment to another party in good faith and for value.^ § 994. Lex Loci Contractus — Law of Place. — The law of the place must govern in determining the validity of the assignment, although the purchase was made in another juris- diction, in the absence of proof that the law was different in such other jurisdiction.^ The law of the place where an assignment is made governs it whether the instrument transferred be negotiable or not. A deed for the conveyance of real estate can only take effect by virtue of the law of the State where the land is situated. A mortgage comes within this rule, but the rule does not embrace equitable transfer of such mortgage under an indorsement of a negotiable note to which it is an incident.* The general rule is that the assignment of negotiable paper must be made in conformity with the law of the place where the assignment is made, and if invalid by the law of that place it will also be held to be invalid in another State or country, notwithstanding that it would have been a valid assignment if made at the latter placc.^ But in Mississippi an exception to this rule has been made, and it is held that where the assignee of the note seeks to enforce a mortgage of real estate, situated in that State, that he has acquired a right to do so, in conformity to the laws of that State, and is entitled to his remedy.^ ^Howe V. Wilder, 11 Gray (Mass.), 267. 2 Trull V. Pkinner, 17 Pick. (Mass.) 213; Lawrence v. Stratton, 6 Cush. (Mass.) lfi.3. ^ Kennedy v. Chapin. 67 IMd. 454. *Dundas v. Bowler, 3 iMcLean, C. C. 307. ^Mnrrell v. Jones, 40 Miss. 565, 583 ; Trimbey r. Yignier, 1 Bing. N. Caa. 151 ; 27 Eng. C. L. 336. «Murrell v. Jones, 40 Miss. 565, 583 ; Bank v. Tarleton, 23 Miss. 173. 62 978 RIGHTS OF PARTIES BEFORE DEFAULT. When the law of the place of assignment is different from that of the place where the land lies, and the mortgage is sought to be enforced, the lex rei sitse will govern unless the foreign law is proved.^ In Michigan, where the assignment of a mortgage, executed in another State, is acknowledged before an officer, but contains no certificate of a clerk of a court of record, or of the Secretary of State, that the person taking the acknowledgment was such an officer as therein represented to be, as required by statute,' it is not entitled to record and if recorded cannot support a foreclosure by advertisement, since under the statute allowing such mode of foreclosure the assignment and mortgage must be entitled to record as well as recorded.^ § 995. Measure of Damages. — The right to recover the debt and to subject the mortgaged property is the measure of the assignee's redress, unless there appears something in the agree- ment to assign, indicating also the right to proceed against third persons for injury to the mortgaged property.* In an action to recover, by the assignee on a covenant in an assignment of a mortgage that there had been nothing paid thereon, when the evidence showed that the mortgage debt had been paid at the date of the assignment, the assignee can only recover the value of the note and mortgage, and the burden of proof is upon him to establish their value.^ § 996. Pleadings. — In an action by the assignee on the note and mortgage to recover judgment on the note and to foreclose the mortgage, it is not necessary to set up in the com- plaint or petition a copy of the assignment,^ as the assignment is not the foundation of the action.'' The assignee of a satisfied mortgage on real estate takes it ^ Kennedy v. Chapin, 67 Md. 454. =* How. Stat., sect. 5660. ^Dohrn V. Hapkin, 88 Mich. 144. * Gabbert v. Wallace, 66 Miss. 618, ^ Eaton V. Knowles, 61 Mich. 625. « Stanford v. Broadway Sav. and L. Assc, 122 Ind. 422. 'Keith V. Champer, 69 Ind. 477. ASSIGNMENT OF MORTGAGE AND DEBT. 979 subject to the defense that it is satisfied, though the satisfaction does not appear of record/ In an action to foreclose a mortgage securing a non-negoti- able note or contract for the payment of money, an allegation that the assignee paid the mortgagee the whole amount due thereon, for and in consideration of which the mortgagee then and there sold, assigned, and delivered the said mortgage and all his right and title and interest in and to said contract of mortgage and amount due thereon, sufficiently avers the trans- fer of the security to the assignee, and shows his ownership thereof and his right to maintain an action.^ When the as- signee claims to be the owner of one of four mortgage notes, he should account for the remaining notes ; but if their pay- ment is shown on the hearing, the defect is one of pleading and may be disregarded.^ § 997. Burden op Proof. — The burden of proof is upon the assignee in a foreclosure suit to establish the fact that he is a bona fide purchaser, where it is conceded that it would be fraudulent for the assignor to make any claim to the mortgage note which he should have delivered uj) to the maker.* So when the assignee of a second mortgage is not made a party to foreclosure of the first mortgage in order to sustain his claim to the surplus, the assignee must show that he is a bona fide assignee for the amount claimed, and that he purchased the interest in good faith for value, and without any notice of the invalidity of the mortgage.^ The assignee can recover the value of the note and mortgage, and the burden of proof is upon him to establish their value.^ He must allege and prove innocence and good faith in establish- ing his rights in cases of conflicting equities ; in the absence of such pleading and proof, the mortgage will be postponed.'^ ^ Redin v. Branhan, 43 Minn. 283. * Morris v. Peck, 73 Wis. 482. ^Cooper V. Smith, 75 Mich. 247. * Cooi^er V. Smith, 75 Mich. 247. ^ Kent V. Melius, 69 Mich. 71. « Eaton V. Knowles, 61 Mich. 625. ' Seymour v. McKinstry, 106 N. Y. 230. 980 rights of parties before default. Article 7. Negotiable and Non-Negotiable Instruments. 1 998. Equities. ? 1002. Contrary Doctrine. § 999. Taking a Mortgage Without 1 1003. Non-Negotiable and Overdue the Note. Instruments. 1 1000. Bona Fide Assignee— Consid- ? 1004. Bonds. eration. § 1005. Equities as to Third Parties, g 1001. Receiving Note Without In- 1 1006. New York Rule. dorsement. § 998. Equities. — It is the general rule that the assignee of a negotiable note and mortgage before maturity takes them free from equities between the original parties to the transaction.^ But if the note be past due, then he takes it with the equities that existed. Thus, the assignee of a mortgage securing several notes, one of which is overdue, takes the assignment subject to the equities that may exist between the mortgagee and the mortgagor as to the note due, as the notes and mort- gage are one transaction between the same parties.^ So the assignee of a trust deed, who has purchased the note it secures, after maturity, takes such trust deed subject to any equitable defense available against his assignor.^ A transfer of note and mortgage, made by a separate instru- ment such as a negotiable bond of a corporation, in which the recitals are that the note and mortgage are transferred as security for the bond, and transferable only in connection with it, is, in Wisconsin, equivalent to an indorsement of the note, and the assignee takes it before maturity free from all equities.* ^Billgery v. Ferguson, 30 La. Ann. 84; Duncan v. Louisville, 13 Bush (Ky.), 378; Updegraft v. Edwards, 45 Iowa, 513; Taylor v. Page, 6 Allen (Mass.), 86; Spraguer. Graham, 29 Me. 160; Abele v. McGuigan, 78 Mich. 415 ; Bloomer v. Henderson, 8 Mich. 395 ; Helmer v. Krolick, 36 Mich. 371 ; Webb V. Hoselton, 4 Nebr. 308 ; Burhans v Hutcheson, 25 Kan. 625 ; Kelley V. Whitney, 45 Wis. 110 ; Paige v. Chapman, 58 N. H. 333 ; Gould v. Marsh, 1 Him (N. Y.), -566; Swett v. Stack, 31 Fed. Rep. 858 ; Hayden i). Snow, 9 Biss. C. C. 511 ; Myers v. Hazzard, 4 McCrary, C. C. 94 ; Carpenter v. Longan, 16 Wall. (U. S.) 271. 2 Abele v. McGuigan, 78 Mich. 415. 3 Scott V. Magloughlin, 133 111. 33. * Murphy v. Dunning, 30 Wis. 296 ; Crosby v. Roub, 16 Wis. 616. Compare Franklin v. Twogood, 18 Iowa, 515 ; 25 Iowa, 520. ASSIGNMENT OF MORTGAGE AND DEBT. 981 However, if the terms of the assignment are made subject to the rights of the mortgagor, then the assignee takes no greater rights than the mortgagee had ; ^ and a parol trust may be attached to a mortgage at the time of its execution, that the mortgagee shall hold it in part for his own benefit and in part for the benefit of another. Thus, it may be agreed that when the mortgagee is paid, the mortgage may be transferred to another creditor to secure him for a debt, and such assignee may foreclose the mortgage.^ § 999. Taking a Mortgage Without the Note. — Generally speaking, every assignee of a mortgage, without the accompa- nying note, takes it subject to existing equities, and no pur- chaser can safely rely on inquiry made of his assignor alone, but if inquiry becomes necessary, resort may usually be had to the debtor also.^ Such assignment is but a naked trust, and the purchaser takes with existing equities.* So if a mortgage be delivered to an assignee purporting to secure a note, but the note is not de- livered, the assignee takes it subject to all existing equities.^ The assignee of a mortgage takes it as he would any other chose in action, subject to all the equities which exist ag-ainst it while in the hands of the mortgagee.^ Judge Gofer says that this doctrine had its origin at a time when the practice of giving mortgages as collateral security for negotiable paper was unknown ; that this was the rule in an action at law on the bond then in general use.^ A purchaser of such non-negotiable instrument is bound to make inquiries of the maker,** and he takes it with existing equities.® 1 Fisher v. Otis, 3 Chand. (Wis.) S3 ; Bassett v. Daniels, 136 Mass. 547. Com- pare Dearman r. Trimmier, 26 S. Car. 506. ^ Hubbell V. Blakeslee, 71 N. Y. 63, reversing 8 Hun (N. Y.), 603. ^Cooper V. Smith, 75 Mich. 247. *Pope V. .Jacobus, 10 Iowa, 262 ; Wilson v. Carpenter, 17 Wis. 512. * Burbank r. Warwick, 52 Iowa, 493. ^ Longan v. Carpenter, 1 Colo. 205 ; Carpenter v. Longan, 16 Wall. (U. S.) 271. 'Duncan v. Louisville, 13 Bush (Ky.), 378. ^Morgan's Appeal, 126 Pa. St. 500. 3 Matthews v. Wallwyn, 4 Ves. 118 ; Williams v. Sorrell, 4 Yes. 389 ; Cham- 982 RIGHTS OF PARTIES BEFORE DEFAULT. § 1000. Bona Fide Assignee — Consideration. — On fore- closure the assignee is not bound to show that he is an assignee for a valuable consideration ; but when the assignment has been made after the debt became due, he is only entitled to such relief as the mortgagee would have been entitled to had he brought the action.^ And the assignee takes a negotiable note before maturity, if in good faith, free from all equities. He is a bona fide pur- chaser, though the note was given for the price of intoxicating liquors sold in violation of law ; " or the mortgage was given in the first place without consideration.^ Such assignee may enforce his mortgage by foreclosure, although the mortgage was fraudulent as to the mortgagor's creditors when executed and delivered to the mortgagee, and such transfer had been declared void by decree.* A statutory foreclosure by advertisement and sale is not adapted to cases where there are conflicting claims. Hence, under such circumstances the assignee must go into chancery to foreclose.^ And when a party purchases the mortgage and notes for the mortgagor, he cannot have them assigned to him at a discount and then charge the mortgagor full amount of the debt. Because one who undertakes to settle a debt for another cannot purchase it on his own account." An assignee may take a new note and then have the mort- gage first given, assigned to him ; and if the assignor cove- nants that the premises are free from all incumbrance, but had forgotten that a portion of the land had been released, the covenant was broken the instant it was made, and the bers V. Goldwin, 9 Ves. 254 ; Clute v. Robison, 2 Johns. (N. Y.) 595 ; Cumber- land, etc.. Coal Co. v. Parish, 42 Md. 598; Coote on Mort. 315-320; 1 Hill, on Mort. 571-582. 1 Whitney v. Traynor, 74 Wis. 289. * Taylor v. Page, 6 Allen (Mass.), 86. 3 Carpenter v. Lonpan, 16 Wall. (U. S.) 271 ; Sprague v. Graham, 29 Me. 160; Pierce v. Faunce, 47 Me. 507 ; Gould v. Marsh, 1 Hun (N. Y.), 566. ^ Smart v. Bement, 4 Abb. App. Cas. (N. Y.) 253. 5 Olcott V. Crittenden, 68 Mich. 230 ; In re Gilbert, 104 N. Y. 200. «Albertson v. Fellows, 45 N. J. Eq. 306; Button v. Willner, 52 N. Y. 313. ASSIGNMENT OF MORTGAGE AND DEBT. 983 second mortgagee or assignee could recover only nominal damages.^ An}'' defense open to the maker in a suit on a note may be made use of in an action on a mortgage.^ In an action on a mortgage by an assignee, who receives it with the note secured by it for value before due as collateral security, in good faith and without notice of defect or defense, the mortgaiior cannot make the defense of want of considera- tion.^ An agent of an investment company to whom a mortgagor applies for money to pay off first mortgage, may purchase the first mortgage in order to protect the second mortgagee's inter- ests when the money was not applied to the payment of the mortgage.* An assignee who takes a mortgage for the pajanent of a pre- existing debt is held by many courts not to be a bona fide pur- chaser.^ Where a mortgagor makes payment negligently to the mort- gagee after the assignment of the note without the mortgage and then sells the land, the assignee of the note is entitled to recover the full amount of the notes notwithstanding the part payments.'' And the mortgagor cannot set up a counter claim in forclosure suit by assignee of a note of the mortgagee purchased subsequent to the assignment.^ The mortgagee cannot impeach the validity of an assign- ment.^ The record of an assignment of a part of a mortgage is not such notice to the mortgagor as will render him liable to the assignee for subsequent payments to the assignor.^ 1 People's Sav. Bank v. Hill, 81 Me. 71. ^Northy v. Northy, 45 N. H. 141. ^ Pai.se V. Chapman, 58 N. H. 333. * Hollenbeck v. Stearns, 73 Iowa, 570. MVaterbury v. Andrews, 67 Mich. 281 ; Glidden v. Hunt, 24 Pick. (Mass.) 221 ; Clark t). Flint, 22 Pick. (Mass.) 231 ; Ashton's Appeal, 73 Pa. St. 153. *Brayley v. Ellis, 71 Iowa, 155. ' Blakely v. Twining, 69 AVis. 238. * Johnson v. Beard (Ala.), 9 South Rep. 535. 3 Foster v. Carson (Pa.), 23 Atl. Rep. 342. 984 RIGHTS OF PARTIES BEFORE DEFAULT. § 1001. Receiving Note Without Indorsement. — As a general rule, if the note be assigned without indorsement, then the assignee must enforce it in the name of the payee or as- signor, and hence the assignee is not protected against existing equities in favor of the mortgagor.^ If, however, the note be indorsed before maturity but the mortgage is not assigned with it, then the assignee may enforce the mortgage, and the mortgagee will be considered as holding it for his benefit.^ In case the note is assigned the mortgagor cannot set up a counter claim against the mortgagee, which he received since the assignment ; ^ even when the note is not in- dorsed and the mortgage is not formally assigned to the as- signee.* The holder of an unindorsed note, without the mortgage, must postpone his rights to the assignee of the mortgage in good faith with duplicate note. The assignee of the mortgage is protected by the record and need not inquire further.' However, the rule would be different if the note had been in- dorsed before maturity.® In New Jersey, the mortgagor can set off claims and make all other defenses that he could against the mortgagee, when foreclosure suit is brought by the assignee.'^ If the note is indorsed and delivered before maturity, and the note assigned, the general rule is that the assignee acquires interest in the mortgage which he may enforce.^ § 1002. Contrary Doctrine. — Exceptions exist to the gen- eral rule. It is held by several courts that a mortgage of real 1 Blunt V. Norris, 123 Mass. 55. ^ Morris v. Bacon, 123 Mass. 58 ; Myers v. Hazzard, 4 McCrary, C. C. 94 ; Young V. Miller, 6 Gray (Mass.), 152; Green v. Hart, 1 Johns. (N. Y.) 589. 3 Blakely v. Twining, 69 Wis. 238. *Breen v. Seward, 11 Gray (Mass.), 118. * Blunt V. Norris, 123 Mass. 55. « Morris v. Bacon, 123 Mass. 58. See Strong v. Jackson, 123 Mass. 60. ' Rev. Stat. 1877, p. 708, sect. 31 ; Woodruff v. Morristown Inst., 34 N. J. Eq. 174, 179. 8 Reeves v. Scully, Walk. (Mich.) 248 ; Carpenter v. Longan, 16 Wall. (U. S.) 271 ; Button v. Ives, 5 Mich. 515 ; Fisher v. Otis, 3 Chand. (Wis.) 83 ; Croft V. Bunster, 9 Wis. 503 ; Martineau v. McCollum, 4 Chand. (Wis.) 153. ASSIGNMENT OF MORTGAGE AND DEBT. 985 estate, given to secure a negotiable note, is not for that reason invested with any of the privileges or immunities of negotiable paper ; it is a chose in action' and subject to all the disabilities incident to that species of property, qualified by the operation of the registry acts so far as practicable ; that the mortgagor has all the rights of defense against the assignee which he had against the mortgagee.^ So as between the mortgagor and a subsequent assignee, the mortgage is taken subject to the state of accounts between the mortgagor and the mortgagee at the time of the assignment.^ So whether standing alone or taken to secure negotiable or non-negotiable paper, mortgages are only available for what was honestly due from the mortgagor to the mortgagee. If they are assigned either expressly or by legal implication, the assignee takes only the interest which his assignor had in the instrument — acquires but an equity upon the long-estab- lished doctrine in courts of equity, and is bound to submit to the assertion of prior equitable rights of third parties.^ The mortgage is not a negotiable instrument ; and unlike the notes which it secures, when assigned, is subject to all equities be- tween the original parties.* Under this doctrine the mortgage follows the notes only in equity, and a bona fide purchaser of the note before maturity takes the mortgage subject to the equities existing between the original parties.^ Because he who buys that which is not as- signable takes it subject to all equities then existing.'^ A real estate mortgage is not a negotiable instrument.' And an assignee of a mortgage takes it subject to equities between mortgagor and mortgagee.^ But the assignee takes subject ^Johnson v. Carpenter, 7 Minn. 176. ^ Hostetter v. Alexander, 22 ]\Iinn. 559. ^Baily v. Smith, 1-1 Ohio St. .•]96, 413. *Bouhgny v. Fortier, 17 La. Ann. 121. 6 Corbett V.Woodward, 5 Saw. C. C. 403; Miller r. Larned, 103 111. 562; Jenkins v. Bawr, 8 111. App. 634. « Medley v. Elliott, 62 111. 532 ; Ellis v. Sisson, 96 111. 105 ; Darst v. Gale, 83 111. 136, 1.37 ; Grapsly r. Reinback, 4 111. App. 341. ' Mellendy v. Keen, 89 111. 395. ^Mclntire v. Gates, 101 111. 491. 986 RIGHTS OF PARTIES BEFORE DEFAULT. only to equities of mortgagor against mortgagee, and not sub- ject to equities in favor of third persons, of which he had no notice/ And if the mortgagee holding conveyance absolute on its face conveys to purchaser without notice, such purchaser will take, discharged of lien.^ § 1003. Non-Negotiable and Overdue Instruments. — A non-negotiable note secured by mortgage in the hands of an assignee for value before it is due is subject to the equities ex- isting between the maker and payee.^ So the same rule ap- plies to overdue notes. Thus, payment may be pleaded to a suit at the instance of the assignee upon a note transferred after due and secured by mortgage.^ And the assignee of a non-negotiable note holds it subject to all legal rights of third persons acquired against the maker on account of in- debtedness before notice of the assignment.^ The purchaser of a non-negotiable instrument is bound to make inquiry of the maker before purchasing, and is charge- able with notice of any defense by way of payment or growing out of the equities of the parties to the instrument which in- quiry would have brought to his notice.*' But the fact that the note is indorsed without recourse, and that interest is overdue do not affect the rights of a purchaser in good faith.'^ The assignee of an indemnity mortgage takes it subject to all the equities between the original parties.^ The only defense which an assignee is to guard against in re- ceiving an overdue note is that which has arisen since the execu- tion of the note, and which is not collateral, but relates to the note itself ; and that which is inherent in the note, and would 1 Silverman v. Bullock, 98 111. 11. '^ Jenkins r^. Rosenberg, 105 111. 157. 3 Reddish v. Ritchie, 17 Fla. 867 ; Eversole v. Maull, 50 Md. 95. * Howard v. Gresham, 27 Ga. 347. ^Sharts v. Await, 73 Ind. 304; Fish v. French, 15 Gray (Mass.), 520; Mc- Kenna v. Kirkwood, 50 Mich. 544. « Morgan's Appeal, 126 Pa. St. 500. "> Kelley v. Whitney, 45 Wis. 110. ^Corbett V. Woodward, 5 Saw. C. C. 403. ASSIGNMENT OF MORTGAGE AND DEBT. 987 show it to have been void ah initio, such as fraud, mistake, or absence of consideration.' The assignee is not affected by equities arising after assignment, and which had not existence at the time of the assignment, and were simply possibihties.^ § 1004. Bonds. — In some States bonds, instead of negotiable notes, are given and secured by mortgage. Tliese bonds are not negotiable instruments, and, therefore, when assigned, are subject to all the equities existing between the original parties.^ And where a bond and mortgage are given, although the mortgage may be assigned so as to allow the assignee to sue in his own name, yet the mortgage is subject to the same equities and rules that govern other non-negotiable instruments and claims.* But the rule is different in most jurisdictions when the mortgage secures a negotiable note.^ In such case the transfer of the bond and mortgage does not in any way affect the mortgagor's rights.^ In Pennsylvania the obligor can defend against a suit by the assignee of the bond and mortgage for want of consideration, and can set up matters affecting the existence of the debt. The assignee is not affected by a secret equity, or by an agree- ment with the obligee merely collateral, or an agreement incon- sistent with the purport or legal effect of the instrument.'^ 1 Renwick v. Williams, 2 Md. 356 ; Eversole v. Maull, 50 Md. 95, 103. 2 (Cornish v. Bryan, 2 Stockt. (N. J.) 146 ; Caster v. Griswold, 4 Edw. Ch. (N. Y.) 374 ; Murray v. Lylburn, 2 Johns. Ch. (N. Y.) 442 ; 2 Leading Cas. in Eq. pt. 2, 238 ; Bush v. Cushman, 27 N. J. Eq. 131 ; Colehour v. State Sav. Inst., 90 111. 152 ; Elliott v. Deason, 64 Ga. 63. ' Crane v. March, 4 Pick. (Mass.) 131 ; Union College v. Wheeler, 61 N. Y. 88. * Horstman v. Gerker, 49 Pa. St. 282 ; Pryor v. Wood, 31 Pa. St. 142 ; Twitchell V. McMurtrie, 77 Pa. St. 383 ; Morgan's Appeal, 126 Pa. St. 500 ; Earnest v. Hoskins, 100 Pa. St. 551 ; Theyken v. Howe Machine Co., 109 Pa. St. 95. ^Moffatt V. Hardin, 22 S. Car. 9 ; Nichols v. Lee, 10 Mich. 526 ; Talwr v. Foy, 56 Iowa, 539 ; Richardson v. Woodruff, 20 Nebr. 132 ; Cornish ;•. Bryan, 10 X. J. Eq. 146; Yredenburgh v. Burnet, 31 N. J. Eq. 229; Goulding v. Bunster, 9 Wis. 513; Reeves v. Scully, AValk. (Mich.) 248. « Briggs V. Langford, 107 N. Y. 680 ; Bush v. Lathrop, 22 N. Y. 535 ; Cum- berland Coal and Iron Co. v. Parish, 42 Md. 598 ; Davies v. Austen, 1 Ves. Jr. 247 ; Godeffroy v. Caldwell, 2 Cal. 489. ' Davis V. Barr, 9 Serg. & R. (Pa.) 137, 141 ; Pryor v. Wood, 31 Pa. St. 142 ; McMasters v. Wilhehn, 85 Pa. St. 218 ; Jeffers v. Gill, 91 Pa. St. 290. 988 RIGHTS OP PARTIES BEFORE DEFAULT. § 1005. Equities as to Third Parties. — The general rule is that the assignee takes a mortgage subject to the equities of the mortgagor against the mortgagee, and not subject to the equities in favor of third persons, of which he had no notice.^ So an assignee of a mortgage takes it subject to all the de- fenses which the mortgagor, or those who have succeeded to his rights, may urge against it, but free from secret equities created by the mortgagee in favor of third persons.^ Between the parties the assignee of equities stands in the place of his assignor, with no better rights ; but as to the claims of third parties, the purchaser of equities stands un- affected by frauds, of which he had no knowledge, express or constructive.* The assignee takes the mortgage free from latent equities existing in favor of third persons.* He takes it subject to the equities in favor of the mortgagor, of which he had notice when he bought the notes.^ But when a curator gives a mortgage on his ward's land, to secure his individual debt, the rule that the assignee, without notice, of a negotiable note secured by a trust deed, takes the benefit of the mortgage, free from equities between the origi- nal parties, does not apply.® § 1006. New York Rule. — In New York the equities ex- isting between the assignor and the assignee of choses in ^Silverman v. Bullock, 98 111. 11; Redfearn v. Ferrier, 1 Dow. 50; Starr V. Haskins, 2() N. J. Eq. 415 ; Putnam v. Clark, 29 N. J. Eq. 412 ; De Witt v. Van Sickle, 29 N. J. Eq. 209 ; Mott r. Clark, 9 Pa. St. 399 ; Blair v. Mathiott, 46 Pa. St. 262 ; Downey v. Tharp, 63 Pa. St. 322 ; Porter v. King, 1 Fed. Rep. 755 ; Reineman v. Robb, 98 Pa. St. 474. ^ Vredenburgh v. Burnet, 31 N. J. Eq. 229 ; Losey r. Simpson, 3 Stockt. (N. J.) 246, 254; Woodruff v. Depue, 1 McCart. (N. J.) 168, 175 ; Starr v. Haskins, 26 N. J. Eq. 414. 3 Starr r. Hawkins, 26 N. J. Eq. 414; Putnam v. Clark, 29 N. J. Eq. 412. * De Witt V. Van Sickle, 29 N. J. Eq. 209 ; Mott v. Clark, 9 Pa. St. 399 ; Prior v. Wood, 31 Pa. St. 142 ; Blair v. Mathiott, 46 Pa. St. 262 ; Downey v. Tharp, 63 Pa. St. 322 ; Reineman v. Robb, 98 Pa. St. 474 ; Porter v. King, 1 Fed. Rep. 755; Losey r. Simpson, 3 Stockt. (N. J.) 246, 254; Woodruffs. Depue, 1 Mc- Cart. (N.i.) 168, 175 ; Bloomer v. Henderson, 8 Mich. 395; Grocers' Bank v. Neet, 29 N. J. Eq. 449. s Mullanphy Bank v. Schott, 135 111. 655. "Patterson 'v. Booth, 103 Mo. 402. i ASSIGNMENT OF MORTGAGE AND DEBT. 989 action, not negotiable, attend the title transferred to a subse- quent assignee for value and without notice ; the latter takes the exact j^osition of his assignor. The doctrine of latent equities is repudiated.^ The assignee takes subject to the equities between the original parties, and he must abide the case of the person from whom he takes.^ The assignee of a non-negotiable instrument takes it, not only subject to all the equities existing between the parties to the instrument, but to the equities which third persons could enforce against the assignor.^ The rule of Bush v. Lathrop ^ is received as a just exposition of the law as held in New York,^ and the assignee stands in respect to the security in the place of the assignor.^ 1 Bush V. Lathrop, 22 N. Y. 535 ; Briggs v. Langford, 107 N. Y. 680. Com- pare Moore v. Bank, 55 N. Y. 41 ; James v. Morey, 2 Cow. (N. Y.) 246. ^ Union College v. Wheeler, 61 N. Y. 88, 104, citing Davies v. Austen, 1 Ves. Jr. 247. ' Greene v. Warnock, 64 N. Y. 220, reversing 4 Hun (N. Y.), 703 ; Viele v. Judson, 82 N. Y. 32 ; Bank v. Frank, 45 N. Y. Superior Ct. 404. *22N. Y. 535. *Schafer v. Reilly, 50 N. Y. 61, opinion by Denio, J. 6Brigg3 V. Langford, 107 N. Y. 680. CHAPTER XXIV. transfer of the mortgaged property. Article 1. Purchase Without Assuming Payment of Mortgage. § 1007. Liability of Vendee. I 1010. Collateral Security. I 1008. Without Covenants of War- I 1011. Two or More Purchasers. ranty. ^ 1012. Taking by Paramount Title. ^ 1009. Grantee's Right of Assign- ment of Mortgage. § 1007. Liability of Vendee. — The vendee may take the land with no personal liability, subject only to the mortgage.^ The covenants of the grantor must show the condition of the transfer as to the assumption of payment of the premises mortgaged.^ The vendee of land, subject to a mortgage, is entitled, on paying the mortgage note, to possession of the note.^ The purchaser of such mortgaged land must, at his peril, ascertain who then owns the notes accompanying the mortgage, and whether the same have been actually paid.* And it is pre- sumed, in the absence of a contract, that the amount paid by the vendee is the price of the property, less the amount of the mortgage debt, and that the vendee is to pay the amount of the debt ; ^ and he holds for the purpose of the mortgage sub- ject to so much of the price as he paid, unless his right to the land antedates the mortgage.^ And when there is no agree- iStrohauer v. Voltz, 42 Mich. 444 ; Woodbury v. Swan, 58 N. H. 380; Mc- Conihe v. Fales, 107 N. Y. 404. '' Garnsey v. Rogers, 47 N. Y. 233 ; Ritter v. Phillips, 53 N. Y. 586. ^ Stiger V. Bent, 111 111. 328. *Leet;. Clark, 89 Mo. 553. 5 Gayle v. Wilson, 30 Gratt. (Va.) 166 ; Guernsey v. Kendall, 55 Vt. 201 ; Scheippelmann v. Feurth, 87 Mo. 351 ; Dickason v. Williams, 129 Mass. 182 ; G^rdine v. Menage, 41 Minn. 417. « Gordon r. Collett, 102 N. Car. 532. 990 TRANSFER OF THE MORTGAGED PROPERTY. 991 ment or understanding that the vendee is to pay the mortgage as a part of the consideration, lie is not liable to the mortgagor, who has been compelled to pay the mortgage debt/ And if he negotiates an extension of the time with the holder of the note, but expressly stipulates that he is not thereby to become per- sonally responsible for the debt, he does not become responsible for the debt, though the property so depreciates in value as to become insufficient security for the debt.^ A vendee of a parcel of land, subject with others to a mort- gage, succeeds to the rights only of the parcel purchased, and cannot redeem unalienated parcels from the mortgagee at a foreclosure.^ So the vendee who assumes the mortgage stands in the position of the mortgagor in possession, and on fore- closure sale, the crops planted by him while in possession pass to the purchaser as accessories to the land.* A purchaser in good faith will be protected.^ In Louisiana a purchaser of property, subject to a mortgage containing the j)act non alien- ando, stands with regard to the mortgagee, in so far as relates to the mortgage, in the position of the mortgagor, and can make no objection to a seizure and sale, on the ground of non- acceptance of the mortgage, which the mortgagor could not make.^ Where a conveyance of the entire estate is made, subject to a mortgage, in the absence of specifications therein or of proof aliunde to the contrary, the grantee takes simply the equity of redemption.^ And where the incumbrance is not made a part of the consideration, and not deducted from it, and where it is not assumed by the grantee, the recital in a deed that the con- 1 Comstock ^^ Hitt, 37 111. 542; Fowler v. Fay, 62 111. 375; Middaugh v. Bachelder, 33 Fed. Rep. 706. "^ Duncan v. Finn, 79 Iowa, 658. ■''Pine Bluff, etc., Kailroad Co. v. James, -54 Ark. . Towle, 59 N. H. 28. TRANSFER OF THE MORTGAGED PROPERTY. 1005 the amount, the purchaser must return the property or refund the money so paid/ § 1021. Implied Promise. — A promise to pay the mortgage debt by the vendee may be implied. Thus, a stipulation that the conveyance is made "subject to the payment" of an out- standing mortgage, or words equivalent, which clearly imply an obligation intentionally created by the grantor and assumed by the grantee, will constitute an assumption of payment.^ But an assumption of payment cannot be implied from the stipulation that the conveyance is subject to the mortgage, the amount of which " forms part of the consideration, and is deducted therefrom." ^ However, the word " assumes " means the same as " assumes to pay."* " Subject, however, to a mortgage . . . of $7,000, which is part of the above-named consideration," is not sufficient to imply assumption of payment ; ^ and " the above described property is alone to be holden for the payment of both of the above debts," does not imply a promise to pay the mortgage debt.« " Subject, nevertheless, to a certain mortgage which the party hereto of the first part assumes and agrees to pay as part of the consideration hereinbefore expressed," is a promise to assume payment, and the word " first " will be construed to read and mean " second." ^ The burden of proof is upon the purchaser who has as- sumed a mortgage and claims to have performed his part of the contract, to show that he has thus discharged his obliga- tion.* ' Thichenor v. Dodd, 3 Green Ch. (N. J.) 454 ; Mount r. Van Ness, 33 N. J. Eq. 262, 265. "^ Stebbins v. Hall, 29 Barb. (N. Y.) 524 ; Carley v. Fox, 38 Mich. 387. ' Equitable Life Asso. v. Bostwick, 100 N. Y. 628. * Schley v. Fryer, 100 N. Y. 71 ; Vreeland v. Van Blarcom, 35 N. J. Eq. 530. See, also, Moore's Appeal, 88 Pa. St. 450 ; Taylor v. Mayer, 93 Pa. St. 42. * Fiske V. Tolman, 124 Mass. 254. « Hubbard i>. Ensign, 46 Conn. 576. ' Fairchild v. Lynch, 42 N. Y. Superior Ct. 265. ^ Jewett V. Draper, 6 Allen (Mass.), 434. 1006 RIGHTS OF PARTIES BEFORE DEFAULT. § 1022. Statutory Provisions. — In Pennsylvania it is pro- vided by statute that a grantee of real estate which is subject to ground-rent, or bound by mortgage or other incumbrance, shall not be personally liable for the payment of such ground- rent, mortgage, or other incumbrance unless he shall expressly assume a personal liability therefor, or there shall he express words in the deed of conveyance stating that the grant is made on condition of the grantee assuming such personal liability ; provided, that the use of the words " under and subject to the payment of such ground-rent, mortgage, or other incum- brance " shall not alone be so construed as to make such graTitee personally liable as aforesaid. The right to enforce such personal liability shall not inure to any person other than the person with whom such an agreement is made, nor shall such personal liability continue after the said grantee has bona fide parted with the incumbered propert}^, unless he shall have expressly assumed such continuing liability.^ § 1023. Verbal Agreement. — The assumption of a mort- gage may be made by verbal agreement, and in a case against the grantee, the grantor is not estopped from proving the in- cumbrance and the agreement to discharge it, as the agreement was considered to be collateral.^ So when a party buys a por- tion of a lot and agrees to assume the incumbrance on the lot, a purchaser of the remainder who has to pay the incum- brance to protect himself, can hold the first purchaser liable.^ His oral assumption was sufficient to make him liable.^ But in South Carolina this rule is not accepted. It is held that a parol agreement cannot be shown when a deed is abso- lute without any condition. These words " except as regards the two notes given for the purchase-money," did not raise any 1 Purdon's Ann. Dig., 1877, p. 2160, sects. 5, 6. 2 Bolles V. Beach, 2 Zab. (N. J.) 080 ; Wilson r. King, 23 N. J. Eq. 150 ; Mer- riman v. Moore, 90 Pa. St. 78 ; Lamb v. Tucker, 42 Iowa, 118 ; Putney v. Farn- ham, 27 Wis. 187. 3 Wright V. Briggs, 99 Ind. 563. * Pom. Eq. Jour., sect. 1206, note 2; Bowen ?>. Kurtz, 37 Iowa, 239. See, also, Drury v. Tremont Imp. Co., 13 Allen (Mass.), 168. TRANSFER OF THE MORTGAGED PROPERTY. 1007 ambiguity, and parol evidence was inadmissible to show any condition.^ But the general rule is that such an agreement may be shown, and is not merged in the deed, nor is it affected by the statute of frauds.^ § 1024. Collateral Written Agreement. — A written agreement between the grantor and grantee outside of the conveyance, by which for value received, the latter promises to pay the note and mortgage, or a certain amount thereof, is competent evidence against the grantee.^ And the liability of the grantee is not affected because the deed is made to his wife by his request.'* The effect of an absolute assumption of a mortgage in a deed may be modified by a contemporaneous agreement of the parties.^ § 1025. Acceptance op the Deed. — The grantee in a deed by accepting it becomes liable on the covenants therein pur- porting to be made by him, just as if he had signed and sealed the instrument.^ And an express acceptance is not required, as an acceptance may be implied from the circumstances." And such an acceptance is a sufficient consideration for the promise to assume payment of the mortgage.* An acceptance by an 1 Boozer v. Teague, 27 S. Oar. 348 ; MowTy v. Stogmer, 3 S. Car. 251. ^ Remington v. Palmer, 62 N. Y. 3i ; Murdoek v. Gilchrist, 52 N. Y. 242 ; Canfield v. Shear, 49 Mich. 313 ; Taintor v. Hemmingway, 18 Hun (N.Y.),458 ; Barker v. Bradley, 42 N. Y. 31 6. * Schmucker v. Sibert, 18 Kan. 104. See, also, Colgin v. Henley, 6 Leigh (Va.), 85. * Pike V. Seiter, 15 Hun (N. Y.), 402. ^Gaffney r. Hicks, 124 Mass. 301. ® Sparkman ;■. Gove, 44 N. J. L. 252 ; Furnas r. Durgin, 119 Mass. 500 ; Finley V. Simpson, 2 Zab. (N. J.) 311 ; Spaulding r. Hallenbeck, 35 N. Y. 20(3 ; Halsey V. Reed, 9 Paige (N. Y.), 44(); Thompson v. Dearborn, 107 111. 87 ; Urquhart v. Brayton, 12 R. I. 169 ; Bishop v. Douglass, 25 AVis. 696 ; Klein r. Isaacs, 8 Mo. App. 568 ; linger v. Smith, 44 Mich. 22 ; Dickason v. Williams, 129 Mass. 182 ; State V. Davis, 96 Ind. 539. Compare Plinsdale v. Humphrey, 15 Conn. 432; Burnett v. Lynch, 5 Barn. & Cress. 589 ; Maule v. Weaver, 7 Pa. St. 329. ' Bundy r. Iron Co., 38 Ohio St. 300. «Bay r. Williams, 112 111. 91 ; Atlantic Dock Co. v. I^eavitt, 54 N. Y. 35; Locke V. Homer, 131 Mass. 93, 102 ; Bowen v. Beck, 94 N. Y. 86. 1008 EIGHTS OF PARTIES BEFORE DEFAULT. agent is sufficient.^ But there must be an acceptance concurred in by the purchaser to make him Uable ; without acceptance he is not hable.^ If a deed is made to a person without his consent or knowledge, and is repudiated by him, it is not an acceptance and does not bind him.^ The recording of a deed which stipulates that the grantee shall assume the payment of a mortgage is not prima facie evidence of its delivery and acceptance.* § 1026. Assumption by Married Woman. — In those States where a married woman can deal with her property as if sole, she can assume the payment of a mortgage, and it will be a valid contract. And it is generally held under the various married woman's acts, that the fact that the purchaser is a married woman, does not relieve her of her covenants.^ But she is not liable on such covenants in her husband's deed.^ And circumstances may show that she has accepted such a deed with covenants of assumption.^ 1 Fairchild v. Lynch, 42 N. Y. Superior Ct. 265 ; Schley v. Fryer, 100 N. Y. 71. ^ Culver V. Badger, 29 N. J. Eq. 74 ; Cordts v. Hargrave, 29 N. J. Eq. 446. ^ Parker r. Jenks, 36 N. J. Eq. 398 ; Albany City Saving Inst. v. Burdick, 87 N. Y. 40 ; Stevens Institute r. Sheridan, 30 N. J. Eq. 23. * Thompson v. Dearborn, 107 111. 87. » Frecking v. Rolland, 53 N. Y. 422, 425 ; Ballin v. Dillaye, 37 N. Y. 35 ; Maxon v. Scott, 55 N. Y. 347 ; A^'rooman v. Turner, 69 N. Y. 280 ; Cashman v. Henry, 75 N. Y. 103 ; Huyler v. Atwood, 26 N. J. Eq. 604. 6 Kitchell V. Mudgett, 37 Mich. 81. ' Coolidge V. Smith, 129 Mass. 554. transfer of the mortgaged property. 1009 Article 4. Right of Mortgagee to Bring Action Against Vendee. \ 1027. Right of Mortgagee. I 1034. Conflict of Laws. § 1028. Doctrine Held in Many States. § 1035. Cannot Maintain an Action § 1029. The Promise Must Be ]\Iade in Mortgagor's Name. Upon a Valid Consideration. § 1036. Absolute Conveyance. § 1030. The Mortgagee Must Have an § 1037. Covenants in Mortgagor's Interest in the Land or Some Deed — Second Mortgage. Relation to It. § 1038. General Covenants in Grant- § 1031. Actions at Law — Assumpsit. or's Deed. § 1032. Statutory Provisions. § 1039. Release by Mortgagor, i 1033. The Equitable Doctrine. g 1040. Release by Vendee. § 1027. Right of Mortgagee. — In equity, as at law, the contract of the purchaser to pay the mortgage being made with the mortgagor and for his benefit only, creates no direct obligation of the purchaser to the mortgagee.* The promise of the purchaser is to the mortgagor and not to the mortgagee, and hence there is no privity of contract between the vendee and mortgagee. The only object of the promise to pay the mortgage is to benefit the mortgagor, and not to benefit the mortgagee or other incumbrancers ; and they do not know or assent to the promise at the time it is made, nor afterward do or omit any act on the faith of it. It is clear, therefore, that the mortgagor alone can maintain an action at law upon that promise.^ Where a debt already exists from one person to another, a promise by a third person to pay such debt being primarily for the benefit of the original debtor, and to relieve him from lia- bility to pay it, there being no novation, he has the right of action against the promisor for his own indemnity ; and if the original creditor can also sue, the promisor would be liable to two separate actions, and, therefore, the rule is that the original creditor cannot sue. His case is not an ^ Parsons v. Freeman, 2 P. AVms. 664, note ; Ambler, 115 ; Oxford v. Rod- ney, 14 Ves. 417, 424 ; In re Empress Engineering Co., 16 Ch. Div. 125 ; Gandy v. Gandy, 30 Ch. Div. 57, 67. « Keller v. Ashford, 133 U. S. 610, 622. 64 ll 1010 RIGHTS OF PARTIES BEFORE DEFAULT exception from the general rule that privity of contract is required.^ But the mortgagee has no greater right than the mortgagor has against the grantee, and, therefore, cannot object to the striking out by a court of equity or to the release by the mort- gagor of an agreement to assume payment, when inserted in the deed by mistake.^ § 1028. Doctrine Held in Many States. — It is held in many State courts, in accordance with the suggestion of Lord Hardwicke,^ that in a court of equity the mortgagee may avail himself of tlie right of the mortgagor against the purchaser. This result has been obtained by a development and appli- cation of the ancient doctrine in equity that a creditor shall have the benefit of any obligation or security given by the principal to the surety for the payment of the debt.* Justice Gray says : ^ "In short, if one person agrees with another to be primarily liable for a debt due from that other to a third person, so that as between the parties to the agree- ment the first is the principal and the second the surety, the creditor of such surety is entitled, in equity, to be substituted in his place for the purpose of compelling such principal to pay the debt. " It is in accordance with the doctrine, thus understood, that the Court of Chancery of New York, the Court of Chancery and the Court of Errors of New Jersey, and the Supreme Court of Michigan have held a mortgagee to be entitled to avail himself of an agreement in a deed of conveyance from the mort- gagor by which the grantee promises to pay the mortgage." ^ 1 National Bank r. Grand Lodge, 98 U. S. 123, 124 ; Cragin v. Lovell, 109 TJ. S. 194. 2 Elliott V. Sackett, 108 U. S. 102 ; Drury v. Hayden, 111 U. S. 223. ^ Parsons v. Freeman, Ambler, 115, 116. *Maure v. Harrison, 1 Eq. Cas. Ab. 93, pi. 5 ; Wright v. Morley, 11 Ves. 12, 22; Phillips v. Thompson, 2 Johns. Ch. (N. Y.) 418; Curtis v. Tyler, 9 Paige (N. Y.), 432, 435 ; New Bedford v. Fairhaven, 9 Allen (Mass.), 175 ; Hampton V. Phipps, 108 V. S. 260, 263. 6 Keller v. Ashford, 133 U. S. 610, 623. « Citing Halsey v. Reed, 9 Paige (N. Y.), 446, 452; King v. Whitely, 10 TRANSFER OF THE MORTGAGED PROPERTY. 1011 The grounds and limits of this doctrine have been well stated by Justice Depue : * *' In equity, a creditor may have the bene- fit of all the collateral obligations for the payment of the debt, which a person standing in the situation of a surety for others holds for his indemnity. It is in the application of this prin- ciple that decrees for deficiency in foreclosure suits have been made against subsequent purchasers, who have assumed the payment of the mortgage debt, and thereby become i)rincipal and debtors as between themselves and their grantors." But such a mortgagee has no greater right than the mortgagor has against the grantee.^ Although the mortgagor may properly be made a party to an action of the mortgagee against the grantee, yet if no objec- tion is made on that ground at the hearing, and the omission to make him a party cannot prejudice any interest of his, or Paige (N. Y.), 465 ; BIyer v. Monholland, 2 Sand. Ch. (N. Y.) 478 ; Klapworth V. Dressier, 2 Beas. (N. J.) 62 ; 78 Am. Dec. 69 ; Hoy v. Bramhall, 19 N. J. Eq. 74, 563 ; Crowell v. Currier, 27 N. J. Eq. 152 ; 27 N. J. Eq. 650 ; Arnaiid v. Grigg, 29 N. J. Eq. 482 ; Youngs v. Trustees, 31 N. J. Eq. 290 ; Crawford v. Edwards, 33 Mich. 354, 360 ; Miller v. Thompson, 34 Mich. 10 ; Pligman v. Stewart, 38 Mich. 513, 523 ; Hicks v. McGarry, 38 Mich. 667 ; Booth v. Con- necticut Ins. Co., 43 Mich. 299. See, also, Pardee v. Treat, 82 N. Y. 385, 387 ; Coffin V. Adams, 131 Mass. 133, 137 ; Biddel v. Brizzolara, 64 Cal. 354 ; George V. Andrews, 60 Md. 26 ; Osborne r. Cabell, 77 Va. 462. Besides these cases see, also. Trotter v. Hughes, 12 N. Y. 74 ; 72 Am. Dec. 137 ; Spaulding v. Hallenbeck, 35 N. Y. 204 ; Belmont v. Coman, 22 N. Y. 438 ; 78 Am. Dec. 213 ; Locke v. Homer, 131 Mass. 93 ; Pike v. Brown, 7 Cush. (Mass.) 133 ; Urquhart r. Bray- ton, 12 R. I. 169 ; Huyler v. Atwood, 26 N. J. Eq. 504 ; Bishop v. Donglas.s, 25 Wis. 696; Ricard •?;. Sanderson, 41 N. Y. 179; Garnsey r. Rogers, 47 N. Y. 233 ; Lawrence v. Fox, 20 N. Y. 268 ; Burr r. Beers, 24 N. Y. 178 ; 80 Am Dec. 327; Thorp 7J. Keokuk Coal Co., 48 N. Y. 253; Atlantic Dock Co. r. Leavitt, 54 N. Y. 35; Vrooman v. Turner, 69 N. Y. 280 ; Hoff's Appeal, 24 Pa. St. 200; Moore's Appeal, 88 Pa. St. 450 ; Merriman r. Moore, 90 Pa. St. 78 ; Townsend V. Long, 77 Pa. St. 143 ; Justice v. Tallman, 86 Pa. St. 147 ; Strohauer >: Voltz, 42 Mich. 444; Norwood?'. De Hart, 30 N. J. Eq. 412; Thompson v. Bertram, 14 Iowa, 476; Corbett v. Waterman, 11 Iowa, 86 ; Lamb v. Tucker, 42 Iowa, 118 ; Bowen v. Kurtz, 37 Iowa, 239 ; Schmucker v. Sibert, 18 Kan. 104 ; Rogers i). Herron, 92 111. 583 ; (iautzert v. Hoge, 73 111. 30; Miller ;•. Bil- lingsly, 41 Ind. 489 ; Fitzgerald v. Barker, 70 Mo. 685 ; 26 Am. Rep. 660, and note where some of these cases are discussed. 1 Crowell V. Hospital, 27 N. J. Fx]. 650. ^ ElUott V. Sackett, 108 U. S. 132 ; Drury v. Hayden, 111 U, S. 223. 1012 RIGHTS OF PARTIES BEFORE DEFAULT. any right of either party to the suit, it affords no ground for refusing relief/ § 1029. The Promise Must Be Made Upon a Valid Con- sideration. — The mortgagee may adopt the act of the grantor for his own benefit. It is sufficient if tlie promise to assume payment be made upon a valid consideration passing to the grantee ; the mortgagee adopting the act of the mortgagor brings himself into privity with the promisor, and therefore may enforce the promise as if made directly to him.^ In order to avail himself of this promise the grantor must himself be personally liable for the payment of the mortgage debt.^ Plowever, Illinois and Pennsylvania courts hold a different doctrine. In these States it is held that the purchaser is liable upon his assumption to pay the mortgage, although the agree- ment to assume be in a deed from the grantor who was not personally liable to pay the mortgage. Because a vendor may direct how the purchase-money shall be paid, and if the vendee agrees to pay it according to such directions, he cannot set up as a defense that his vendor was under no duty to apply it in such manner.* § 1030. The Mortgagee Must Have an Interest in the Land or Some Relation to It. — Under this doctrine it is essential that the party holding the mortgage shall have some relation to or interest in the lands at the time the purchaser ^Whiting V. Bank, 13 Pet. (U. S.) 6 ; Miller v. Thompson, 34 Mich. 10; Me- chanics' Bank v. Seton, 1 Pet. (U. S.) 299. * Ayres v. Randall, 108 Ind. 595 ; Follansbee v. Johnson, 28 Minn. 311 ; Bay V. Williams, 112 111. 91 ; Thompson v. Dearborn, 107 111. 87 ; Dean v. Walker, 107 111. 540 ; 47 Am. Rep. 467 ; Daub v. Englebach, 109 111. 267 ; Carnahan v. Tousey, 93 Ind. 561 ; Ross v. Kennison, 38 Iowa, 396 ; Todd v. Weber, 95 N. Y. 181 ; Lamb v. Tucker, 42 Iowa, 118 ; Center v. McQuesten, 24 Kan, 480 ; Heim v. Vogel, 69 Mo. 529 ; Cooper r. Foss, 15 Nebr. 515 ; Bassett v. Hughes, 43 Wis. 319 ; McDowell v. Laev, 35 Wis. 171 ; Fitzgerald v. Barker, 13 Mo. App. 192 ; 70 Mo. 685. ^Crowell V. Hospital, 27 N. J. Eq. 050 ; Vrooman v. Turner, 69 N. Y. 280 ; Keller v. Ash ford, 183 U. S. 610, 625. * INIerriman v. Moore, 90 Pa. St. 78, 81 ; Dean v. Walker, 107 111. 541 ; 47 Am. Rep. 467. TRANSFER OF THE MORTGAGED PROPERTY. 1013 assumes the payment of the mortgage. After this purchase and agreement to assume payment, if a party acquires an interest in the premises, he cannot have it inure to his benefit.^ It is generally stated, to entitle a third person to claim a benefit of the agreement of the parties, there must be either a new consideration or some prior right or claim against one of the contracting parties, by which he has a legal interest in the performance of the agreement.^ A subsec|uent assignee of the mortgage has the same right of action against the purchaser that the mortgagee has.^ If a second or third or other succeeding vendee agrees only to save his grantor harmless, the mortgagee has no right of action against such vendee.* § 1031, Actions at Law — Assumpsit. — In many of the States the mortgagee can maintain a suit at law to recover from the purchaser, and need not resort to equity. Thus, when the payment of an outstanding incumbrance, created by the grantor of the equity of redemption, constitutes a part of the purchase-money, the law implies an undertaking by the pur- chaser to pay the debt, and the mortgagee may recover in as- sumpsit.^ Taking the deed subject to an outstanding mortgage creates no personal liability of the grantee to pay off the mort- gage, unless he has especially agreed to do so, or the amount of the mortgage has been deducted from the purchase price. When the payment of an outstanding mortgage is part of the purchase price of the land, the law will imply an agreement to pay the debt." As Chancellor Kent said : "The leaving of so much money in the hands of the purchaser for the use of the mortgagee would 1 Miller v. Winchell, 70 N. Y. 437. ^ Vrooman v. Turner, 69 N. Y. 280 ; Cashman v. Henry, 75 N. Y. 103 ; 55 How. Pr. (N. Y.) 234. 'Smith V. Ostermeyer, 68 Ind. 432; Fitzgerald r. Barker, 85 Mo. 13; Hay- den V. Snow, 9 Bipp. C. C. 511. * First Nat. Bank r. Pchussler (Ky.), 2 S. W. Rep. 145. ^Tvvitchell v. Mears, 8 Biss. C. C. 211; 6 Reporter, 40. ^ Comstock V. Hitt, 37 111. 542. 1014 RIGHTS OF PARTIES BEFORE DEFAULT. seem to be sufficient ground for a suit at law by the mort- gagee." ^ Or, as Justice Maxwell says, that the mortgagee, after the debt becomes due, may bring an action against the purchaser and recover the amount due thereon ; that this right is based on the fact that a contract has been made between the original debtor and a third party, whereby such third party, for a suffi- cient consideration, takes the property mortgaged and assumes the burden thereon. This contract the mortgagee may avail himself of, and bring an action directly against the purchaser thus assuming the debt.^ It is held that the legal effect of the transaction is to leave the portion of the purchase-money represented by the incum- brance in the hands of the purchaser for the purpose of paying the incumbrance ; the promise being made for the benefit of the holder of the incumbrance, he may maintain an action at law to enforce it.^ This is in accord with the weight of authority. Many of the most recent cases support the right of the mortgagee to maintain the action at law.* ^Cumberland v. Codrington, 3 Johns. Ch. (N. Y.) 229, and cases cited. 2 Keedle v. Flack, 27 Nebr. 836 ; Shamp v. Meyer, 20 Nebr. 223 ; Bond v. Dolby, 17 Nebr. 491 ; Morgan v. Mining Co., 37 Cal. 5.34 ; Helmes v. Kearns, 40 Ind. 124 ; Johnson v. Knapp, 36 Iowa, 616 ; Anthony v. Herman, 14 Kan. 494 ; McDowell v. Laev, 35 AVis. 171 ; Sanders v. Clason, 13 Minn. 379 ; Bay v. Williams, 112 111. 91 ; Follansbee v. Johnson, 28 Minn. 311 ; Thompson v. Thompson, 4 Ohio St. 333 ; Lawrence v. Fox, 20 N. Y. 268 ; Farley v. Cleve- land, 4 Cow. (N. Y.) 432 ; 9 Cow. (N. Y.) 639 ; Merriman v. Moore, 90 Pa. St. 80 ; Putney v. Farnham, 27 Wis. 187. 3 Burr V. Beers, 24 N. Y. 178 ; Garnsey v. Rogers, 47 N. Y. 234 ; Thompson V. Thompson, 4 Ohio St. 333 ; Parkinson r. Sherman, 74 N. Y. 88. * Joslin V. New Jersey Car Spring Co., 36 N. J. L. 141 ; Bassett v. Hughes, 43 Wis. 319 ; Lamb v. Tucker, 42 Iowa, 118 ; Putney v. Farnham, 27 Wis 187; Bay v. Williams, 112 111. 91; Bohanan v. Pope, 42 Me. 93 Vrooman v. Turner, 8 Hun (N. Y.), 78 ; Brown v. Ins. Co., 5 R. I. 394 Motley r. Ins. Co., 29 Me. 337 ; Carnegie v. Morrison, 2 Met. (Mass.) 381 Brewer v. Dyer, 7 Cush. (Mass.) 337 ; Follansbee v. Johnson, 28 Minn. 311 Morgan r. Overman Silver Min. Co., 37 Cal. 534 ; Snell r. Ives, 85 111. 279 Helmes r. Kearns, 40 Ind. 124 ; Johnson v. Knapp, 36 Iowa, 616 ; Anthony V. Herman, 14 Kan. 494 ; Hind v. Holdship, 2 Watts (Pa.), 104 ; McDowell v. Laev, 35 Wis. 171 ; Townsend v. Long, 77 Pa. St. 143 ; Campbell v. Smith, I TRANSFER OF THE MORTGAGED PROPERTY. 1015 Judge Potter says : "It is, so far as the vendee is concerned, the same as if the holder of the mortgage had discharged it at the time of sale, and he had himself given a new note or bond and mortgage for the same sum to the holder of the old one 5> 1 § 1032. Statutory Provisions. — In Connecticut it is pro- vided that whenever any real estate incumbered by mortgage or lien shall be conveyed, subject to such mortgage or lien, and in such conveyance there shall be a provision that the grantee shall assume and pay such incumbrance, the holder of such mortgage or lien, may, upon the non-payment of the same, maintain an action in his own name upon such promise with- out obtaining an assignment thereof from the grantor of said premises.^ § 1033. The Equitable Doctrine. — In New York the mort- gagee is entitled to maintain a suit, either in equity or at law, against the grantee of the mortgagor to enforce the payment of the assumed debt.^ It is held in some States that an agreement of the grantee, in a deed signed and sealed by the grantor only, is in the na- ture of a covenant under seal, and consequently a specialty ; * and in others that such an agreement is in the nature of an assumpsit or implied contract, arising from the acceptance of the deed, and consequently a simple contract.* 71 N. Y. 26 ; Keedle v. Flack, 27 Nebr. 836 ; Justice v. Tallman, 86 Pa. St. 147. 1 Barrows v. Nat. Rubber Co., 12 R. I. 173. See, also, Pardee v. Treat, 82 N. Y. 385 ; Hand v. Kennedy, 83 N. Y. 149 ; Bowen v. Beck, 94 N. Y. 86 ; Patten v. Adkins, 42 Ark. 197. "^ Acts 1881, ch. 97. ^Halsey v. Reed, 9 Paige (N. Y.), 446 ; King r. Whitely, 10 Paise (N. Y.), 465; Blyer r. Monholland, 2 Sandf. Ch. (N. Y.) 478; Trotter r. Hughes, 12 N. Y. 74 ; Burr v. Beers, 24 N. Y. 178 ; Campbell v. Smith, 71 N. Y. 26 ; Par- dee V. Treat, 82 N. Y. 385 ; Hand v. Kennedy, 83 N. Y. 149 ; Bowen v. Beck, 94 N. Y. 86. *Finley v. Simpson, 2 Zab. (N. J.) 311 ; Crowell v. Hospital, 27 N. J. Eq. 650, 652 ; Atlantic Dock Co. v. Leavitt, 54 N. Y. 35 ; Bowen v. Beck, 94 N. Y. 86. ^ Locke V. Homer, 131 Mass. 93, 102 ; Foster v. At water, 42 Conn. 244 ; John- son V. Muzzy, 45 Vt. 419 ; Maule v. Weaver, 7 Pa. St. 329 ; Hocking County 1016 RIGHTS OF PARTIES BEFORE DEFAULT. But in some States whether the agreement of the grantee is or is not considered under seal, it is an agreement made with the grantor only, and creates no direct obligation to the mort- gagee upon which the latter can sue at law. If the agree- ment of the grantee is considered as under seal, by reason of the deed being sealed by the grantor, it falls within the settled rule of the common law that no one can maintain an action at law on a contract under seal to which he is not a party.^ If the agreement of the grantee is considered as in the nature of assumpsit, implied from his acceptance of the deed, still, being made with the grantor only and for his benefit, upon a consideration moving from him alone, there being no privity of contract between the grantee and the mortgagee, and the latter not having known of or assented to the agree- ment at the time it was made, nor having since done or omitted any act on the faith of it, it follows that, by the law as declared by the United States Supreme Court, the mortgagee cannot maintain an action at law against the grantee.^ The payments made by the grantee, and accepted by the mortgagee, on account of the mortgage debt are made pursuant to the grantee's contract with the mortgagor, and do not create, or warrant to be inferred, a new contract between the grantee and the mortgagee. Such agreement can, therefore, be enforced in equity only, by the mortgagee.^ And where the jurisdiction of equity is distinct from the jurisdiction of law, equitable relief cannot be granted in an action of law.'' Trustees v. Spencer, 7 Ohio, pt. 2, 149; Society v. Haines, 47 Ohio St. 423. 1 Hendrick v. Lindsay, 93 U. S. 143, 149 ; Southampton v. Brown, Barn. & Cress. 718 ; Chesterfield v. Hawkins, 3 Hurl. & C. G77 ; Northampton v. Elwell, 4 Gray (Mass.), 81 ; Crowell v. Hospital, 27 N. J. Eq. 650, 653. * Keller v. Ashford, 133 U. S. 610, 620, 622 ; National Bank v. Grand Lodge, 98 U. S. 123. See, also, Cragin v. Lovell, 109 U. S. 194. nVillard v. Wood, 135 U. S. 309, affirming 4 Mackey (Dist. Col.) 538. *Fenn r. Holme, 21 How. (U. S.) 481 ; Willard v. Wood, 135 U. S. 309, 314. See, also, Mellen ?'. Whipple, 1 Gray (Mass.), 317; Crowell v. Currier, 27 N.J. Eq. 152; Cro\vell v. Hospital, 27 N. J. Eq. 650 j Unger v. Smith, 44 Mich. 22; Stuart V. Worden, 42 Mich. 154. ! TRANSFER OF THE MORTGAGED PROPERTY 1017 § 1034. Conflict of Laws — Lex Fori. — The right to en- force such an agreement against the purchaser of the mort- gagor, the form of the mortgagee's remedy, whether it must be in covenant or assumpsit, at law or in equity, is governed by the lex fori, the law of the place where the action is brought.^ Thus, in the District of Columbia, a mortgagee can enforce an agreement of the grantee of the mortgagor, contained in a deed to him, to pay the mortgage debt, by bill in equity only, although by the law of the place where the land is. New York, and where the mortgage and the subsequent deed were made, he might sue the grantee at law.^ § 1035. Cannot Maintain an Action in Mortgagor's Name. — The only cases in which a third person has the ex- clusive right to control an action at law are where he has acquired the whole interest of the nominal plaintiff either by voluntary act,^ or by operation of law.* Under this principle a mortgagee has no right without or against the consent of the mortgagor to bring and control an action at law in the name of the grantor or mortgagor.^ A court of law cannot, where both the mortgagor and the mort- gagee are both interested in a case of action, upon summary motion, and without regular issue, determine the equities between them, and take the control of a case out of the hands of the plaintiff of record.® As between the mortgagor or a stranger and the mortgagee, the sale of the mortgaged premises covers the growing crops, and the mortgagee cannot recover them.^ 1 Dixon V. Ramsay, 3 Cranch (U. S.), 319, 324; United States Bank r. Don- nally, 8 Pet. (U. S.)"361 ; Wilcox v. Hunt, 13 Pet. (U. S.) 378 ; Leroy v. Beard, 8 How. (IT. S.) 451 ; Pritcliard v. Norton, 106 U. S. 124, 130, 133. *Willard v. Wood, 135 U. S. 309, 313, affirming 4 Mackey (Dist. Col.), 538. ^Foss V. Bank, 111 Mass. 285. *Hart V. Railroad Co., 13 Met. (Mass.) 99. s Coffin r. Adams, 131 Mass. 133. ^Corbett ?■. Waterman, 11 Iowa, 89; In re Empress Engineering Co., 16 Ch. Div. 125, 129. ^Wallace v. Cherry, 32 Mo. App. 436. 1018 RIGHTS OF PARTIES BEFORE DEFAULT. § lOoG. Absolute Conveyance. — "Where the grantee in an absolute conveyance of land assumes and agrees to pay a mort- gage thereon given by his grantor, an absolute and irrevocable obligation is thereby created in favor of the mortgagee which cannot be released or affected by any act or agreement of the mortgagor, to which the grantee does not assent/ The grantee is also liable to the mortgagee to the extent of the purchase-money yet unpaid when he receives actual notice of the mortgage, though the unpaid purchase-mone}^ was by agreement with the grantor to be discharged by the payment of certain debts owing to third parties by the latter.^ The release of the grantee by the grantor, in accordance with or to the extent of the equities between them, would bind the mortgagee.^ However, when the mortgagee has adoj^ted such agreement of assumption, his rights cannot be displaced.* § 1037. Covenants in Mortgagor's Deed — Second Mort- gage. — Under a bond to save the grantee of land subject to a mortgage harmless from a second mortgage, and to cause it to be assigned to him within six months, a failure to cause such an assignment to be made within six months will entitle the grantee, even after foreclosure of the first mortgage, to main- tain an action, and if the estate is not worth more than the sum of the two mortgages, to recover the difference between its value and the amount due on the first mortgage.^ And when the grantee agrees to pay two mortgages on the land, he under- takes not only to relieve the grantor from personal liability under the mortgage, but to discharge the lien of the mortgages, and the grantor is interested in having the lien of the first mortgage discharged, for the improvement of the security of the second.*^ ^ Douglass V. Wells, 18 Hun (N. Y.), 88, overruling Stephens v. Casbacker, 8 Hun (N. Y.), 116. See, also, Bay v. Williams, 112 111. 91 ; 54 Am. Eep. 209. '^ Watkins v. Vrooman, 51 Hun (N. Y.), 175. 3 Judson V. Dada, 79 N. Y. 373. * Bassett v. Hughes, 43 Wis. 319 ; Hayden v. Drury, 3 Fed. Eep. 782, 789 ; Bassett v. Bradley, 48 Conn. 224. * Coombs V. Jenkins, 10 Gray (Mass.), 153. sEice V. Sanders, 152 Mass. io8. TRANSFER OF THE MORTGAGED PROPERTY. 1019 § 1038. General Covenants in Grantor's Deed. — The general covenants in a grantor's deed bind him to pay off the mortgage, unless the mortgage is excepted.^ If the consideration is simply the value of the equit}^ of re- demption, yet if it was a part of the real consideration that the grantee should assume and pay the debt secured by the mort- gage, it will be his duty, as between him and his grantor, to do so.^ One who has sold mortgaged land with warranty, and has covenanted to pay oflP the mortgage, cannot make title to him- self as against his grantee by allowing foreclosure and redeem- ing the land.^ The covenantee on breach of such covenant, can recover the full amount of the mortgage and interest, even though he shows no special damages to himself from the breach of the covenant.^ And a covenant in a deed by which the grantee assumes and agrees to pay a mortgage upon the premises conveyed, after it has come to the knowledge of the owner of the mortgage who has assented to and adopted it as a security for his own benefit, is not revocable.^ When the mortgagee seeks to recover for a deficiency against an intermediate grantee who assumed the mortgage,it shows that the mortgagee has adopted and relies on the covenants of such assumption." And tlie grantee cannot after such adoption re- pudiate his promise on the ground that, by reason of mistake in the description, the mortgage does not cover the land.^ ^Drury v. Treniont Improvement Co., 13 Allen (Mass.), 168. ^ Drury v. Tremont Improvement Co., 13 Allen (Mass.), 168. 3 Huxley v. Rice, 40 Mich. 73. ''Lethbridge v. Mytton, 2 Barn. & Ad. 772; Loosemore v. Radford, Mees. & W. 657 ; Hodjjson v. Wood, 2 Hurl. & C. 649 ; Carr v. Roberts, 5 Barn. & Ad. 78 ; Post v. Jackson, 17 Johns. (N. Y.) 238 ; Mann v. Eckford, 15 Wend. (N. Y.) 502 ; Wicker r. Iloppock, 6 Wall. (U. 8.) 99 ; Church r. Higgins, 48 N. Y. 532 ; Furnas v. Durgin, 119 Mass. 500 ; Hall v. Nash, 10 Mich. 303 ; Booth V. Starr, 1 Conn. 249 ; Lathrop r. Atwood, 21 Conn. 123 ; Hogan r. Cal- vert, 21 Ala. 199 ; Wilcox v. Musche, 39 Mich. 101. s Gifford V. Michael, 117 N. Y. 257 ; Watkins v. Reynolds, 123 N. Y. 211. «New York Life Ins. Co. v. Aitkins, 125 N. Y. 660, reversing 58 K Y. Superior Ct. 586. ^ Kellums v. Hawkins, 36 111. App. 161. 1020 RIGHTS OF PARTIES BEFORE DEFAULT. § 1039. Release by Mortgagor. — By agreement the mort- gage may be released by the mortgagor. Thus, an agreement that the mortgagor may sell the property and credit the pro- ceeds to the mortgagee gives him a right to sell and transfer ; but it gives him no right to convey the land in exchange for a conveyance to him of other land.^ So where an agreement was made between the mortgagor and the mortgagee, for a good consideration, releasing the mortgagor from personal liability of the debt, a grantee of the mortgagor who purchases subject to the mortgage cannot complain of such release ; nor can the payment in consideration of the release be regarded as a satisfaction as to him.^ § 1040. Release by Vendee. — When the immediate grantee of land subject to a mortgage assumes and agrees to pay it, having released the grantor's executor from lia- bility therefor, yet the mortgagee can recover judgment against the latter. And where mortgaged property is sold to one who assumes the mortgage after the adoption by the grantee of the covenants of such assumption, the grantee cannot be released from this obligation of his grantor and previous covenan- tor.^ Article 5, Right of Mortgagor or Grantor to Enforce the Contract. I 1041. Action By Grantor. ^ 1044. Enforcing Promise Before § 1042. In Case of Death of Grantor. Payment of the Debt. § 1043. Action at Law. § 1041. Action by Grantor. — When the purchaser has accepted the benefit of a conveyance, he cannot repudiate the burden imposed upon him by the express agreement therein, nVoodward ?■. Jewell, 140 U. S. 247, reversing 25 Fed. Rep. 689. ^ Osborn v. Williams, 82 Iowa, 456. See, also, Chilton v. Brooks, 72 Md. 554; Blake v. Moore, 57 Hun (N. Y.), 591. 3 New York Life Ins. Co. v. Aitkin, 125 N. Y. 660, reversing 58 N. Y. Supe- rior Ct. 586. TRANSFER OF THE MORTGAGED PROPERTY. 1021 and he is liable to his grantor for any breach of that agree- ment/ The assumption of the mortgage is a contract by the grantee, not merely to indemnify the grantor, but to pay the debt off, if it be the debt of the grantor.^ If the purchaser fails to fulfill his contract with the grantor, the mortgagor may take an assignment of the mortgage and enforce it,^ recovering the amount paid by him.* And when the mortgagor pays the debt, he thereby becomes the equitable assignee of the mortgage, and is subrogated to the benefit of the security.^ The purchaser is personall}^ liable, both to the grantor and the mortgagee, when he assumes the mortgage debt.^ § 1042. In Case op Death of Grantor. — The grantee is bound by his covenant to assume the mortgage debt ; if the grantor die before the breach of the covenant to assume, the land descends to the grantor's heirs, who are the parties to bring the suit for such breach. Hence the administrator or executor cannot maintain the action. The heirs of the grantor are the parties injured by the failure of the grantee to pay off the mortgage according to agreement.'' § 1043. Action at Law. — The grantor may proceed against the grantee, after paying the debt, at law to recover the amount, which he has paid, from the grantee.^ And evidence is admis- sible that, at the time the mortgage was executed, the grantor held the premises in trust for the grantee and others, and that 1 Blyer v. Monholland, 2 Sandf. Ch. (N. Y.) 478 ; Coolidge v. Smith, 129 Mass. 554; Locke v. Homer, 131 Mass. 93 ; Muhlig v. Fiske, 131 Mass. 110. ^Furnas v. Durgin, 119 Mass. 500. =* Sparkman v. Gove, 44 N. J. L. 252 ; Crowell v. Hospital, 27 N. J. Eq. 650, 655; Braman r. Dowse, 12 Cush. (Mass.) 227; Strohauer v. Voltz, 42 Mich. 444 ; Jewett 7'. Draper, a Allen (Mass.), 434 ; BoUes v. Beach, 22 N. J. L. 680. * Mills V. Watson, 1 Sweeny (N. Y.), 374. 5 Risk V. Hoflnian, 69 Ind. 137 ; Ayers v. Dixon, 78 N. Y. 318; Kinnear v. Lowell, 34 Me. 299 ; Baker r. Terrell, 8 Minn. 195. 6 Jones V. Parks, 78 Ind. 537. ^ Ayers v. Dixon, 78 N. Y. 318. 8 Wood V. Smith, 51 Iowa, 156. 1022 RIGHTS OF PARTIES BEFORE DEFAULT. the mortgage was given to take up the grantee's share of the prior mortgage.^ The grantor, upon breach of the contract, may proceed against the grantee upon his covenant, before paying the debt ; " or he may proceed in equity to compel the grantee to fulfill his contract.^ § 1044. Enforcing Promise Before Payment op the Debt. — The promise to pay a debt due from the promisee, even where it has not been paid by him, is one upon which an ac- tion may be maintained and damages recovered ; this is held by many authorities ; * and in such case it is not necessary that the promisee should show that he had sustained damages before he can recover on such promise.^ In common understanding and legal effect, to " assume " a debt is an undertaking to pay it as the proper debt of the party who enters into the undertaking.^ When the grantee promises to pay a certain debt due from the grantor to a third person, the effect of this promise is not restricted, either as to the form of pleading, the rules of evi- dence, or the measure of damages, by the fact that the grantee, by his agreement, further promises to indemnify the grantor and save him harmless.'^ Therefore, a promise to pay a debt due from the promisee ^Lappen v. Gill, 129 Mass. 349. ^ Bowen v. Kurtz, 37 Iowa, 239 ; Eubens v. Prindle, 44 Barb. (N. Y.) 336. ■■'Cuhberly v. Yager, 42 N. J. Eq. 289 ; Marshall v. Davies, 78 N. Y. 414; Marsh v. Pike, 10 Paige (N. Y.), 595 ; Fenton v. Lord, 128 Mass. 466. * Holmes v. Rhodes, 1 Bos. & P. 638 ; Cutler v. Southern, 1 Sand. 116, note ; Toussaint v. Martinnant, 2 Term R. 100 ; Loosemore v. Eadford, 9 Mees. & W. 657 ; Little v. Little, 13 Pick. (Mass.) 426. 5 Snyder v. Summers, 1 Lea (Tenn.), 534, 540 ; Brewer v. Worthington, 10 Allen (Mass.), 329 ; Furnas v. Durgin, 119 Mass. 500. " Locke V. Homer, 131 Mass. 91 ; Stout v. Folger, 34 Iowa, 71 ; Braman v. Dowse, 12 Cush. (INIass.) 227. ' Gage V. Lewis, 68 111. 604 ; Thomas v. Allen, 1 Hill (X. Y.), 145 ; Belloni v. Freeborn, 63 N. Y. 383 ; Stout v. Folger, 34 Iowa, 71 ; Hodgson v. Bell, 7 Term Rep. 93 ; Carr v. Roberts, 2 Nev. & M. 42 ; 5 Barn. & Ad. 78 ; Hodgson v. Wood, 2 Hurl. & C. 649 ; Penny v. Foy, 8 Barn. & C. 11 ; Lathrop v. Atwood, 21 Conn. 117 ; Smith v. Pond, 11 Gray (Mass.), 234; Farnsworth i'. Boardman, 131 Mass. 115 ; Reed v. Paul, 131 Mass. 129 ; Wicker i'. Hoppock, 6 Wall. (U. S.) 94. Compare Burbank v. Gould, 15 Me. 118. TRANSFER OP THE MORTGAGED PROPERTY. 1023 even where it has not been paid by him, is one on which an action may be maintained, and damages recovered to the amount of such debt.' . But in equity, when the grantor enforces this agreement by ths grantee, to assume and pay the debt, the grantor must first pay the debt, or if a decree is made without such payment, it will be for so much as is necessary to pay the debt of the mortgagee, and paid directly to him.^ The grantee must pay the debt when due.* If he pays after due, and before final judgment, the grantor can recover only nominal damages.* Article 6. Defense of Purchaser. § 1045. Right to Refuse Payment. ^ 1049. Purchaser at Execution Sale. ^ 1046. Mistake in the Agreement to ^ 1050. Void Promise to Pay a Mort- Assume. gage. ^ 1047. Power Conferred by Mort- § 1051. No Agreement to Pay the gagor. Debt. ^ 1048. Cannot Set Up Usury. . § 1052. Measure of Damages. § 1045. Right to Refuse Payment. — When real property has been conveyed subject to a mortgage, with conditions in the deed requiring the grantee to assume the payment of such mortgage, it is held that such grantee by the acceptance of the deed impliedly covenants to pay the mortgage debt, and thus becomes personally liable to the mortgagee for such payment. In such case the grantee is precluded from disputing the validity of the mortgage, not on account of any recognition of its validity or because he is estopped in any way from so doing, but simply because, so far as the interest of the mortgagee in the land is concerned, the right thereto has l)een withheld from him by his grantor ; ^ the grantee having undertaken to ^Furnas r. Durgin, 119 Mass. 500; Locke v. Homer, 131 Mass. 93; 41 Am. Rep. 199, and note. ""Waters v. Bossel, 58 Miss. 602. Compare Furnas r. Durgin, 119 ]\Iass. 500. 'Furnas v. Durgin, 119 Mass. 500. * Hood V. Adams, 124 Mass. 481 ; Muhhg v. Fieke, 131 Mass. 110. ^ Green v. Kemp, 13 Mass. 515; Shufelt v. Shufelt, 9 Paige (N. Y.), 145; Bennett v. Bates, 94 N. Y. 354. 1024 EIGHTS OF PARTIES BEFORE DEFAULT. pay the debt, which was deducted, and has so agreed, is pre- cluded from assaiUng the validity of the mortgage/ Such grantee is estopped to question the validity of the mortgage for any cause.^ It is not a matter that concerns the purchaser whether the mortgage is void, the debt fictitious or not. To permit the vendee to hold the land and repudiate the mortgage would be to give him the land without exacting the purchase price. If nothing is really due upon the mortgage, that fact will inure to the benefit of the mortgagor's creditors.^ In no way can the grantee contest the validity of the mort- gage.* But there is authority to the contrary, which holds that a purchaser who had assumed a mortgage for a certain sum was not estopped to show that the incumbrance had no existence in fact, the mortgage having been fully executed except the signing of the maker,^ § 1046. Mistake in the Agreement to Assume. — If a grantee is made to assume a mortgage by a mistake, and the grantee is ignorant of this fact, he may have the deed reformed according to contract.^ But if he has made payments upon the mortgage without complaining of the assumption clause, he cannot thereafter de- ^ Crawford v. Edwards, 33 Mich. 354 ; Bond v. Dolby, 17 Nebr. 491 ; Clapp V. Halliday, 48 Ark. 258 ; Flanders v. Doyle, 16 111. App. 508 ; Dean v. Walker, 107 111. 540 ; 47 Am. Rep. 467 ; Hancock v. Fleming, 103 Ind. 533 ; Forgy r. Merryman, 14 Nebr. 513 ; Pidgeon v. Trustees, 44 111. 501 ; Miller v. Thomp- son, 34 Mich. 10. ■' Millington v. Hill, 47 Ark. 301. ^ Freeman v. Auld, 44 N. Y. 50 ; Cramer v. Lepper, 26 Ohio St. 59 ; Hough v. Horsey, 36 Md. 181 ; Pickett r. Bank, 32 Ark. 346. * Kennedy v. Brown, 61 Ala. 296 ; Green v. Houston, 22 Kan. 35 ; Fitzgerald V. Barker, 85 Mo. 13 ; Sidwell v. Wheaton, 114 111. 267 ; Scarry v. Eldridge, 63 Ind. 44 ; Ritter v. Phillips, 53 N. Y. 586 ; Ferris v. Crawford, 2 Denio (N. Y.), 595; Klein v. Isaacs, 8 Mo. App. 568; Figart v. Halderman, 75 Ind. 564; Pidgeon r. Trustees, 44 111. 501 ; Greither v. Alexander, 15 Iowa, 470 ; Cox v. Hoxie, 115 Mass. 120. s Goodman v. Randall, 44 Conn. 321. 6 O'Neill V. Clark, 33 N. J. Eq. 444 ; Bull v. Titsworth, 29 N. J. Eq. 73. TEANSFER OF THE MORTGAGED PROPERTY. 1025 fend upon the ground that this clause was fraudulently in- serted.' But when the mortgage is to be reformed, the burden of proof is upon the grantee to show that a mistake was made.^ He may be released by agreement of the parties interested.^ If the purchaser has assumed the mortgage and entered into possession, and alleges no eviction and makes no offer to sur- render, he cannot set up an invalid title.* If he obtains pos- session of the land by virtue of the deed, which contains a mistake in the description of the land, which can be corrected, then he cannot avoid his liability.^ If the contract of assumption is invalidated by a mistake of fact, the vendee can set that up and avoid his liability ; "^ he can also set up fraud of his grantor who had no title.''' § 1047. Power Conferred by Mortgagor. — It seems that where a conveyance of land is made subject to the payment of a mortgage thereon, but without any express covenant on the part of the grantee to pay it, the disability thus imposed upon him, which prevents him from disputing the validity of the mortgage, may be removed by the grantor by conferring upon the former the right to question the mortgage which the origi- nal conveyance withheld.* It is unquestionable that the owner of real property, appar- ently incumbered by an invalid mortgage, may convey it in such a manner as to enable his grantee to avail himself of such defenses to the enforcement of the mortgage as exist in favor of the owner. By receiving the absolute title and interest, the grantee becomes the privy in estate with the grantor, and takes the property, subject to the same conditions, and en- ^ Miller v. Thompson, 34 Mich. 10 ; Smith v. Graham, 34 Mich. 302. »Moran v. Pellifant, 28 111. App. 278. 3 O'Neill V. Clark, 33 N.J. Eq. 444. * Parkinson v. Sherman, 74 N. Y. 88. * Crawford v. Edwards, 33 Mich. 354 ; Comstock v. Smith, 26 Mich. 306. « Crowe I'. Lewin, 95 N. Y. 423. ' Benedict v. Hunt, 32 Iowa, 27. 8 Bennett v. Bates, 94 N. Y. 354. 65 1026 EIGHTS OF PARTIES BEFORE DEFAULT. titled to the same rights as pertain to it in the hands of his grantor.' Hence, when a grantor conveys a Hmited right in his prop- erty while possessing the power of conveying a greater interest, he can subsequently convey the remaining interest, discharged of the obligation to pay invalid incumbrances.^ § 1048. Cannot Set Up Usury. — Where a purchaser has assumed the mortgage, he cannot resist the mortgage debt, be- cause it is usurious.^ But the mortgagor may confer upon him the right to defend the mortgage on the ground of usury.* If the purchaser is not liable to the payment of the debt, nor agreed that it should be paid out of the land, then he may set up usury in the mortgage.^ And the same rule applies to an assignee of the mortgagor for the payment of his debts.^ The mortgagee may make the purchaser a party to a fore- closure proceeding, or he may be sued on his personal liability without foreclosure.^ § 1049. Purchaser at Execution Sale. — When the mort- gage debt is deducted from the consideration, the purchaser's title is subordinate to the mortgage, and he is estopped from denying its validity ; a purchaser at an execution sale of land iPost V. Dart, 8 Paige (N. Y.), 640; Cole v. Savapje, 10 Paige (N. Y.), 583; Dix V. Van Wyck, 2 Hill (N. Y.), 522 ; Merchants' Bank v. Warehouse Co., 49 N. Y. 635 ; Mason v. Lord, 40 N. Y. 476. 2 Cope V. Wheeler, 41 N. Y. 311 ; Berdan v. Sedgwick, 44 N. Y. 626. 3 Millington v. Hill, 47 Ark. 301 ; Looniis v. Eaton, 32 Conn. 550 ; De Wolf v. Johnson, 10 Wheat. (U. S.) 367, 392 ; Jones v. Ins. Co., 40 Ohio St. 583 ; Bas- kina v. Calhoun, 45 Ala. 582 ; Cleaver v. Burcky, 17 111. App. 92 ; Frost v. Shaw, 10 Iowa, 491 ; Bearce v. Barstow, 9 Mass. 45 ; Mahoney v. Mackubin, 54 Md. 268 ; Spaulding v. Davis, 51 Vt. 77 ; Hartley v. Harrison, 24 N. Y. 170 ; Cope v. Wheeler, 41 N. Y. 303 ; Berdan v. Sedgwick, 44 N. Y. 626 ; Stu- dabaker v. Marquardt, 55 Ind. .341. * Mason v. Lord, 40 N. Y. 470 ; Newnaan v. Kershaw, 10 Wis. 333 ; Luding- ton V. Harris, 21 Wis. 239. 5 Maher v. Lanfrom, 86 111. 513 ; Smith v. Cross, 16 Hun (N. Y.), 487 ; Stevens V. Sheridan, 30 N. J. Eq. 23. «Pearsall v. Kingsland, 3 Edw. (X. Y.) 195. ' Cleveland v. Southard, 25 Wis. 479. TRANSFER OF THE MORTGAGED PROPERTY. 1027 against the vendee merely succeeds to his rights, and is bound by the estoppel/ A purchaser of land upon an execution " subject to whatever sum might be due upon the property by virtue of a certain mortgage," cannot dispute the validity of the mortgage.^ When there are several mortgages on the purchase, the ven- dee on execution sale can defend against any that are fraudu- lent and void, or fully paid, and redeem from the valid mort- gages.^ When only incumbered land can be sold on execution ac- cording to statute, an execution in other cases being levied upon the land, a vendee of an. equity of redemption on execu- tion is estopped to deny the existence and validity of the mortgage, because he purchased only an equity of redemption, and if there be no such mortgage, there can be no such equity.* § 1050. Void Promise to Pay a Mortgage. — If fraud enters into the agreement between the grantor and grantee, or want of consideration, or failure of consideration, then the mortgagee cannot enforce the promise ; or if the grantee has been evicted by title paramount, the mortgagee has no remedy against the vendee.^ § 1051. No Agreement to Pay' the Debt. — When the grantee has not agreed to pay the mortgage debt, he is not af- fected by any agreement to do so made by his grantor.*' And when he holds the equity of redemption by covenants of war- ranty, he may prove payment by the mortgagor.'^ And a war- ranty that the property is free, except a mortgage, does not estop the vendee from disputing the validity of the mortgage, because he is not charged with the payment of the debt.^ So, 1 Kennedy v. Brown, 61 Ala. 29G ; Bunkley v. Lynch, 47 Ala. 211 ; Corn- stock ('. Smith, 20 Mich. 306 ; Freeman v. Auld, 44 N. Y. 50. 2 Conklin v. Secor Sewing-Machine Co., 55 How. Pr. (N. Y.) 269. ^Stebbins v. Miller, 12 Allen (Mass.), 591. *Stebbins v. Miller, 12 Allen (Mass.), ^^l- 5 Dunning v. Lcavitt, 85 N. Y. 30 ; 39 Am. Rep. 617. «Torrey v. Bank, 9 Paige (N. Y.), 649. nVilliams v. Thurlow, 31 Me. 392. *Weed Sewing-Machine Co. v. Emerson, 115 Mass. 554. i 1028 RIGHTS OF PARTIES BEFORE DEFAULT. when the grantor conceals the incumbrance, and the grantee buys without actual notice, he should be permitted to set up any defense there may be to the validity of the mortgage, and he may interpose the defense of usur3\ Having purchased the land without any deduction from the purchase-money on ac- count of the incumbrance upon it, the vendee can interpose the same defense that the mortgagor could.* If he has never become indebted to the mortgagee by as- suming the mortgage, he is not liable for the mortgage debt.^ A purchaser with notice of the mortgagor's rights must be subject to them,^ and a judgment may be rendered against the purchaser, who has assumed, and his grantor jointly, for a deficiency.'' And where several lots are subject to the same mortgage, the owner of one of them, in a suit to determine the amount necessary to redeem from foreclosure, can compel contribution from the other lot-owners of their proportionate share of the amount necessary for such redemption.^ § 1052. Measure of Damages. — The measure of damages in an action by the grantor against the grantee upon his promise to pay the mortgage debt, is the whole amount of the debt which has not been paid.'' If the grantor has paid the debt before bringing the action, the measure of damages is the amount he paid in satisfaction of the debt.^ The grantor is entitled to the amount of the debt. His damages are the value of the security which should have been paid, but not exceeding the amount of the debt secured.^ 1 Maher v. Lanfrom, 86 111. 513 ; Flanders v. Doyle, 16 111. App. 508. 2 Brown r. Stillman, 43 Minn. 126 ; Searing v. Benton, 41 Kan. 800 ; Nelson V. Rogers (Minn.), 49 N. W. Rep. 526. 3 Marston v. Williams, 45 Minn. 110. See, also, Keedle v. Flack, 27 Nebr. 836. * Rockwell V. Blair Sav. Bank, 31 Nebr. 128, following Cooper v. Foss, 15 Nebr. 515. 5 Coffin V. Parker, 127 N. Y. 117. 6 In re Negus, 7 Wend. (N. Y.) 499; Lathop v. Atwood, 21 Conn. 117; Red- field V. Haight, 27 Conn. 31 ; ,Gage v. Lewis, 68 111. 604. 'Town ?;. Wood, 37 111. 512. ^Lethbridge v. Mytton 2 Barn. & Adol. 772; Brown v. Howard, 2 Brod. & TRANSFER OF THE MORTGAGED PROPERTY. 1029 If the grantee pay the debt according to agreement, then there is no breach. If he makes payment before final judg- ment against him, after due, only nominal damages can be recovered.^ If he pays before final judgment after suit against him, only nominal damages should be allowed to the grantor.^ Of course the amount equals the debt secured and any interest remaining due, which is the measure of damages which the grantor can claim when the debt is unpaid accord- ing to stipulation.^ B. 73 ; Howell v. Young, 5 Barn. & C. 259 ; Loosemore v. Radford, 9 Mees. & W. 657 ; Post v. Jackson, 17 Johns. (N. Y.) 2.39 ; Crofoot v. Moore, 4 Vt. 204 ; Wilson V. Stilwell, 9 Ohio St. 467 ; Stout v. Folger, 34 Iowa, 71 ; Ham v. Hill, 29 Mo. 275 ; Rice v. Sanders, 152 Mass. 108. 1 Locke V. Homer, 131 Mass. 93 ; Muhlig v. Fiske, 131 Mass. 110 ; Hood v. Adams, 124 Mass. 481. ^ Furnas v. Durgin, 119 Mass. 500 ; Elmer v. Welch, 47 Conn. 56 ; Hall v. Way, 47 Conn. 467, 473. 5 Gage V. Lewis, 68 111. 604 ; Post v. Jackson, 17 Johns. (N. Y.) 239 ; Crofoot v. Moore, 4 Vt. 204 ; Wilson v. Stilwell, 9 Ohio St. 467 ; Ham v. Hill, 29 Mo. 275 ; In re Negus, 7 Wend. (N. Y.) 499 ; Redfield v. Haight, 27 Conn. 31 ; Stout v. Folger, 34 Iowa, 71. CHAPTER XXV. MERGER. Article 1. At Law and In Equity. g 1053. Principles that Govern. ^ 105-4. Intent of Parties Governs in Equity. § 1053. Principles that Govern. — Merger is not favored in equity, and is never allowed unless for special reasons and to promote the intention of the party. The intention is con- sidered in merger at law ; but it is not the governing principle of the rule, as it is in equity ; and the rule sometimes takes place without regard to intention.^ At law the doctrine of merger will operate, even though one of thfe estates is held in trust and the other beneficially by the same person ; or both estates be held by the same person on the same or different trusts. But the court of equity will in- terpose and support the interest of the cestui que trust, and not allow trusts to merge in the legal estate if the justice of the case requires it. The rule in law is inflexible ; but in equity it depends upon circumstances and is governed by the inten- tion, either expressed or implied, if it be a fair and just inten- tion, whether the equitable estate shall merge or be kept in existence.^ In England, under the operation of a statute,^ no merger takes place by operation of law only, of any estate the beneficial in- terest in which would not be deemed to be merged in equity. Where the legal and the equitable interests descend through 1 Co. Litt. 54, 6 ; 3 Preston on Conv. 43-49. 2 Gardner v. Astor, 3 Johns. Ch. (N. Y.) 53 ; Starr v. Ellis, 6 Johns. Ch. (N. Y.) 393 ; Gibson v. Crehore, 3 Pick. (Mass.) 475 ; Campbell v. Carter, 14 111. 286 ; Knowles v. Lawton, 18 Ga. 476 ; Eeed v. Latson, 15 Barb. (N. Y.) 9 ; Forbes v. Moffatt, 18 Ves. 384. ' Sup. Ct. of Judicature, Act of 1874, ch. 83, sect. 2 ; Act of 1873, ch. 66, BBCt. 25. 1030 MERGER. 1031 different channels, and unite in the same person, and were equal and co- extensive, it has been held that the equitable es- tate merges in the legal, in equity, as well as at law.^ At law the rule is that a merger always takes place, when the greater estate and the less coincide and meet in one and the same person, in one and the same right, without any inter- mediate estate.^ § 1054. Intent of Parties Governs in Equity. — A court of equity will consider a conveyance in fee simple of the mort- gaged premises from the mortgagor to the mortgagee to be or not to be a merger, according to the intent and interest of the parties and the demands of substantial justice and equity.^ And this intention is a question of fact, and is to be deter- mined as other issues are ; a party's intention is generally de- termined by his interest, considered with the surrounding cir- cumstances.'* And tliis rule is not affected by the fact that the mortgage includes other estates, of which the mortgagee is not the owner of the equity of redemption.^ ^ Donisthorpe v. Porter, 2 Eden, 162 ; Goodright v. Wells, Doug. 771 ; Wade V. Paget, 1 Bro. C. C. 363 ; Selby v. Alston, 3 Ves. 339. ^ Flanigan v. Sable, 44 Minn. 417. ^Flanigan v. Sable, 44 Minn. 417; Edgerton v. Young, 43 111. 464; Lyon v. Mcllvaine, 24 Iowa, 9 ; Stanton v. Thompson, 49 N. H. 272 ; Mallory v. Hitch- cock, 29 Conn. 127. See Walker v. Baxter, 26 Vt. 710, where it is held that the doctrine of the text is the rule at law as well as in equity. *Dircks r. Logsdon, 59 Md. 173 ; Little v. Bowen, 76 Va. 724 ; Watson v. Dun- dee, etc., Co., 12 Oreg. 474 ; Insurance Co. v. Murphy, 111 U. S. 738, 744 ; Loverin v. Humboldt Safe Co., 113 Pa. St. 6; Gresham r. Ware, 79 Ala. 192; Silliman v. Gammage, 55 Tex. 365 ; Duffy v. McGuiness, 13 R. I. 595 ; Bacon V. Goodnow, 59 N. H. 415 ; Duncan v. Smith, 31 N. J. L. 325 ; Thebaud r. Hol- lister, 37 N. J. Eq. 402 ; Fasaett v. Mulock, 5 Col. 466 ; Scrivner v. Diotz, 84 Cal. 295; Carpentier r. Brenham, 40 Cal. 221; Smith v. Roberts, 91 N. Y. 470; James v. Johnson, 6 Johns. Ch. (N. Y.) 417 ; Given v. IMarr, 27 Me. 212 ; Hart r. Chase, 46 Conn. 207 ; Richardson v. Hockenhull, 85 111. 124 ; Davis v. Pierce, 10 Minn. 376 ; Ann Arbor Sav. Bank v. Webb, 56 ]\Iich. 377 ; Spurgin r. Adam- son, 62 Iowa, 661 ; Carter v. Taylor, 3 Head (Tenn.), 30 ; Grellet r. Ileilshorn, 4 Nev. 526; Loud v. Lane, 8 Met. (Mass.) 517; Grover ?•. Thatcher, 4 Gray (Mass.), 526; Wilson v. Murphy, 1 Phila. (Pa.) 203; Carpenter v. Gleason, 58 Vt. 244 ; Belknap v. Dennison, 61 Yt. 520. Compare Agnew v. Railroad Co., 24 S. Car. 18 ; 58 Am. Rep. 237. * Knowles v. Carpenter, 8 R. I. 548. 1032 EIGHTS OF PARTIES BEFORE DEFAULT. When the legal and the equitable estate both become vested in the same person, there will be no merger of the two estates in any case if it be for the interest of the owner to keep them distinct/ And, on the other hand, equity will not prevent a merger where, to prevent it, would work injustice.^ Article 2. Whe7i It Takes Effect. I 1055. Merger— General Rule. I 1065. ? 1056. Intervening Equities or In- ^ 1066. cumbrances. I 1067. I 1057. Judgments. \ 1058. Mortgagee Taking the Equity ^ 1068. of Redemption. § 1069. § 1059. Evidence of Intention. | 1070. I 1060. In Aid of Fraud or Wrong. § 1071. § 10()1. Assignment of the Mortgage. I 1072. ? 1062. Dower Rights. I 1073. I 1063. Assignment to Wife. § 106-4. Feme Sole Mortgagee — Mar- ? 1074. riage with Mortgagor. Heirs Taking Assignment. Estoppel. Express Intention Will Con- trol. Deed of Quit Claim. Rents and Profits. Bequest to Mortgagor. Assuming to Pay Mortgage. Right of Dower. Assigning Mortgage as Col- lateral Security, The Record Does Not Show Merger. § 1055. Merger — General Rule. — It is generally held that when the legal title becomes united with the equitable title, so that the owner has the whole title, the mortgage is merged by the unity of possession. Thus, where the mortgagee, not having assigned his mortgage, takes a release of the equity of redemption, the whole estate is vested in him, and the mort- gage is extinguished unless the express or implied intent of the parties, or intent in the mortgagee, intervenes to prevent merger.^ But where the mortgagee refuses to accept a deed of conveyance of the mortgaged premises, executed to him by the mortgagor, and retains the mortgage, there is no merger or extinguishment of the mortgage.* Merger is always a question of intention, when the question 1 Mallory v. Hitchcock, 29 Conn. 127 ; Polk v. Reynolds, 31 Md. 106 ; Spen- cer V. Ayrault, 10 N. Y. 202; Snyder v. Snyder, 6 Mich. 470. ''Boos r. Morgan (Ind.), 30 N. E. Rep. 141. ^ Wilhehni v. Leonard, 13 Iowa, 330. * Brendenberg v. Landrum, 32 S. Car. 215. MERGER. 1033 is as to whether the mortgage hen is merged in the fee. Equity will keep the legal title and the mortgagee's interest separate, although held by the same person, whenever neces- sary for the full protection of his just rights.' A merger may readily be prevented, in taking a new security, by reciting in the latter that there is no merger, only additional security.^ § IO06. Intervening Equities or Incumbrances. — If there be an intervening mortgage, attachment, or other lien, the acquirement of title by a prior mortgagee will not operate as a merger ; and this i"ule will apply with still greater force where the prior mortgage was held by the mortgagee in trust for one person, and the title acquired by him in trust for another.^ If there is an outstanding intervening title, the foundation for the merger does not exist, and, as a matter of law, it is so declared.* Of course, the incumbrance must be one which the owner has not assumed, and one against which he is not estopped from defending ; such an intervening equity will pre- vent a merger.^ So, where a mortgagee purchases at a fore- closure sale under a mechanic's lien filed before execution of the mortgage, the mortgage is not merged in the fee, but at- taches to the surplus arising on the sale under the mechanic's lien."^ And in the absence of special agreement to that effect the taking of a new mortgage from the same party and on the ^ Scrivner v. Dietz, 84 Cal. 295 ; Carpentier v. Brenham, 40 Cal. 221 ; Crane V. Aultman-Taylor Co., 61 Wis. 110; ]Montgomery v. Yickery, 110 Ind. 211 ; ^tna L. Ins. Co. v. Corn, 89 111. 170 ; Dircks r. Logsdon, 59 Md. 173 ; Warren V. Warren, 30 Vt. 530 ; Evans v. Kimball, 1 Allen (Mass.), 240. Compare By- ington V. Fountain, 61 Iowa, 512. *Ex parte Whitbread, 2 Mont. D. & DeG. 415; Twopenny r. Young, 3 Bam. & C. 208. 3 Scrivner v. Dietz, 84 Cal. 295 ; Brooks r. Rice, 56 Cal. 428 ; Rumpp v. Ger- kens, 59 Cal. 496. *Stantons v. Thompson, 49 N. H. 272. 5 Bunch V. Grave, 111 Ind. 351 ; Hooper v. Henry, 31 Minn. 264 ; Bell v. Woodward, 34 N. H. 90 : Dutton v. Ives, 5 Mich. 515 ; Denzler v. O'Keefe, 34 N. J. Eq. 361 ; Grover r. Thatcher, 4 Gray (Mass.), 526; New England Jew- elry Co. V. Merriam, 2 Allen (Mass.), 390. eCrombie v. Rosentock, 19 Abb. N. C. (N. Y.) 312. 1034 RIGHTS OF PARTIES BEFORE DEFAULT. same property will not merge or extinguish a prior mort- gage/ A party holding a trust deed and the accompanying note has no legal estate in the land, and, hence, if he acquires the equity of redemption in the land there is no merger.^ In order to protect the mortgagee against an intervening title, the law will uphold the mortgage, even when the parties have undertaken to discharge it, unless injustice would be done thereby.^ And where a mechanic's lien is barred by limita- tion as to the property against which it is sought to be enforced, it is also barred as to the owner of the equity and his grantees who have paid off the mortgage.* Where the amount of the incumbrance considerably exceeds the value of the property, an intermediate lienor, who pur- chases the equity of redemption, may, as against junior lienors, protect his title by acquiring outstanding senior incumbrances, and causing sales to be made thereunder ; and equity, if neces- sary, will prevent the title which he acquires by purchase under such sales from merging in the title acquired by the purchase of the equity of redemption.* § 1057. Judgments. — A judgment in personam against the maker of a promissory note, in which there is a recognition of the mortgage, and a decree for its enforcement, merge the note but not the mortgage, which thereafter retains the same force, effect, and rank as before decree.® The debt is not merged so as to affect the security by ob- taining a judgment upon it, unless it is satisfied in whole or in part, when the debt is extinguished to the extent of the payment.'^ ^ Christian v. Newberry, 61 Mo. 446 ; Tenison v. Sweeny, 1 Jones & L. 710 ; Drury v. Briscoe, 42 Md. 154. '^ Hospes V. Almstedt, 13 Mo. App. 270. ^Stantons v. Thompson, 49 N. H.272. * Watson V. Gardner, 119 111. 312. 5 Myers v. O'Neal (Ind.), 30 N. E. Rep. 510. * Lalane v. Payne, 42 La. Ann. 152. ' Ex parte Higgins, 3 De G. & J. 33 ; Bell v. Banks, Man. & G. 258 ; 3 Scott N. R. 497. MERGER. 1035 And where the purchaser of mortgaged premises, sold on a junior mortgage, subsequently purchased the judgment and decree of sale made on a prior mortgage foreclosure, this judgment does not thereby become merged in his title to the premises under the first foreclosure, nor prevent him from buying at the sale, either in his own name or by another/ And an assignment of a second mortgage and judgment or foreclosure thereon, to a purchaser at a previous foreclosure sale under a first mortgage, does not merge such judgment in the fee.^ § 1058. Mortgagee Taking the Equity of Redemption. — As a general rule if the holder of a mortgage takes the ecjuity of redemption and vests it in himself, a merger takes place, the estate being discharged from the incumbrance and the mortgage debt satisfied.* And when he holds a mortgage on real estate worth more than the mortgage indebtedness, and purchases the equity of redemption at judicial sale, equity will not permit him to hold the land and also to collect the mort- gage debt from the mortgagor.* Taking the equity of redemption does not merge his legal estate as mortgagee so as to prevent his setting up his mort- gage to defeat an intermediate title, unless such was the inten- tion.^ A mortgagee taking a conveyance of the equity of redemp- tion is entitled to be regarded as a purchaser for value within 1 Rawiszer v. Hamilton, 51 How. Pr. (N. Y.) 297. ^ Clark V. Simmons, 55 Hun (N. Y.), 175. ^McClain v. Weise, 22 111. App. 272; Lyman v. Gedney, 114 111. 388. nVeiner ?'. Heintz, 17 111. 259; Robins v. Swain, 68 111. 197. 5 McClai-key r. O'Brien, 16 W. Ya. 791, 793 ; Fouche v. Swain, 80 Ala. 151 ; Ann Arbor Sav. Bank v. Webb, 56 Mich. 377 ; Rogers v. Herron, 92 111. 583; elements v. Griswold, 46 Hun (N. Y.), 377; Fithian v. Corwin, 17 Ohio St. 118 ; Carpenter v. Gleason, 58 Yt. 244 ; New Jersey Ins. Co. v. Meeker, 40 N. J. L. 18 ; Andrus v. Vreeland, 29 N. J. Eq. 394 ; Knowles v. Lawton, 18 Ga. 476 ; Linscott v. Lamart, 46 Iowa, 312 ; Goodwin v. Keney, 47 Conn. 486 ; Thomas v. Simmons, 103 Ind. 538 ; Poulson v. Simmons, 126 Ind. 227 ; Free- man V. Paul, 3 Me. 260 ; Brooks v. Rice, 56 Cal, 428 ; Hospes v. Almstedt, 83 Mo. 473. 1036 EIGHTS OF PARTIES BEFORE DEFAULT. the meaning of the statute relating to the docketing of judg- ments.^ In South CaroHna a purchase of the mortgaged premises by the mortgagee otherwise than under process of foreclosure operates, in the absence of satisfactory proof that the parties to the transfer intended a covenant at the time it was made to keep the mortgage open, to extinguish it by the doctrine of merger, and to let in a subsequent judgment duly entered of record." This is the settled law of that State, that a mortgagee who buys the estate under mortgage, not under process of fore- closure, extinguishes the debt or claim with the lien on the prop- erty.^ In general, the union of the equity of redemption with the legal estate produces a merger of the mortgage unless it be declared to be kept on foot for some beneficial purpose.* § 1059. Evidence of Intention. — Intention is a question of fact,^ and circumstances may indicate what the intention is. Thus, if the mortgagee takes to himself a conveyance of the premises, it is a question of intention on his part whether a merger is wrought ; if his intention is expressed, that will con- trol. If it is not expressed, then a court of equity will presume his intention to be according to his best interest.^ If the con- veyance states that the premises are subject to a mortgage, then it will be held that there is no merger." Or if the mortgage remains uncancelled of record there is evidence of no merger.^ The assignment of the mortgage is evidence that the interests are to be kept separate.* >McClaskey v. O'Brien, 16 W. Va. 791. ''Bleckley v. Branyan, 28 S. Car. 445 ; 26 S. Car. 424. ' Ex parte Sheriff, 1 McCord, 399 ; McClure v. Mounce, 2 McCord, 423 ; Schnell v. Schroder, Bail. Eq. 338 ; McLure v. Wheeler, 6 Rich. Eq. 343 ; Al- len V. Richardson, 9 Rich. Eq. 53; Trimmier «. Vise, 17 S. Car. 503 ; Devereux V. Taft, 20 S. Car. 555. * Lockard v. Joines (N. J.), 23 At. Rep. 1075 ; Starr v. Ellis, 6 Johns. Ch. ( N. Y.) 395 ; Hoppock v. Ramsey, 28 N. J. Eq. 413. ^ Ann Arbor Sav. Bank v. AVebb, 56 Mich. 377. « Belknap v. Dennison, 61 Vt. 520 ; Carpenter v. Gleason, 58 Yt. 244. T^tna L. Ins. Co. v. Corn, 89 111. 170 ; First Nat. Bank v. Essex, 84 Ind. 144 ; Shelden v. Edwards, 35 N. Y. 279. 8 Hoppock V. Ramsey, 28 N. J. Eq. 413. ® Goodwin v. Keney, 47 Conn. 486 ; Campbell v. Vedder, 1 Abb. App. Dec. MERGER. 1037 But where the grantees of the fee are the holders of a mort- gage on the land, and having no interest in preserving the lien, and there is no intention to keep it on foot, the mortgage is merged.^ The fact that the mortgagor has occupied the premises for many years and paid interest, warrants the finding that the mortgage has not been foreclosed." § 1060. In Aid of Fraud or Wrong. — A mortgage may be kept alive when it is in the advancement of justice, but never when for the purpose of perpetrating fraud.^ And one standing in a fiduciary caf)acity to the owner of the equity of redemption will not be allowed to merge the equities for his own personal benefit.'* When the decree is made that the mortgage upon payment or redemption be assigned, it must be so drawn as not to work injury to any other liens he may have.^ But, in New York, it is held that an assigmnent may be enforced when the mort- gage is paid by a person not primarily liable to pay it.^ Generally, however, an assignment will not be enforced, as it is only the mortgagee's duty to discharge the mortgage upon payment of the debt.^ Fraud will not be allowed to merge the mortgage.^ § 1061. Assignment of the Mortgage. — A mortgage as- signed to the owner of the premises, subject to a life interest reserved to the assignor, is not merged in the fee.^ An assign- ment of a mortgage to one of two tenants in common of the (N. Y.) 295 ; Kellogg v. Ames, 41 N. Y. 259, reversing 41 Barb. 218 ; White v. Hampton, 13 Iowa, 259. 1 Lynch v. Pfeiflfer, 110 N. Y. 33. 2 Trow V. Berry, 113 Mass. 139. ^ Worthington v. Morgan, 16 Sim. 547 ; McGiven v. Wheelock, 7 Barb. (N.Y.) 22; First Nat. Bank v. Essex, 84 Ind. 144. * Knolls V. Barnhart, 71 N. Y. 474. ^Cilley ('. Huse, 40 N. H. 358. « Johnson r. Zink, 52 Barb. (N. Y.) .396. 'Gatwood r. Gatwood, 75 Ya. 407; Chedel v. Millard, 13 R. I. 461. 8 Crosby v. Taylor, 15 Gray (Mass.), 64; Ryer v. Gass, 130 ]Mass. 227; Franklyn v. Hay ward, 61 How. Pr. (N. Y.) 43; Wade v. Howard, 11 Pick. (Mass.) 289 ; 6 Pick. (Mass.) 492. 9 Cox V. Ledward, 124 Pa. St. 435. 1038 RIGHTS OF PARTIES BEFORE DEFAULT. equity of redemption does not merge it/ Where one has pur- chased part of the premises subject to a mortgage which he takes as assignee, it will not be merged as to the part which he did not take.^ And when the owner of the equity of redemption pays the mortgage debt and takes an assignment, in New York, with the provision that it shall not merge, but remain alive as a muniment of his title, on his death, the mortgage will not be regarded as an existing lien on the premises and an asset in the hands of his administrators.^ The acquisition by a mortgagee, after his assignment or transfer of the mortgage, of the absolute title, does not merge the mortgage.* § 1062. Dower Rights. — The assignment of a mortgage to the mortgagor does not affect a merger with her inchoate right of dower, where it is the intention of the parties that the wife shall hold the mortgage as a lien on the land.^ A widow is entitled to be endowed of an equity of redemption ; and an assignment of dower will be valid and effectual against all persons excepting the mortgagee and those claiming under him.^ Where by the terms of an antenuptial contract, the wife takes an estate in fee in part of her husband's lands, in lieu of dower, and after marriage, he satisfies the mortgage u]Don his land, which was not in existence at the date of the antenuptial contract, with money raised by a new mortgage, the wife's estate is discharged from the first mortgage and is superior to the second.^ § 1063. Assignment to Wife. — By the common law a feme covert who owns land in fee can transfer it only by deed exe- ' Barker v. Flood, 103 Mass. 47-1 ; Sahler v. Signer, 44 Barb. (N. Y.) 606 ; Clark V. Clark, 56 N. H. 105. 2 Wilhelmi v. Leonard, 13 Iowa, 330. See, also, Drury v. Holden, 121 111. 130. 3 Browne v. Ferris, 23 Abb. N. C. (N. Y.) 226. * White V. Hampton, 13 Iowa, 259 ; Purdy v. Huntington, 42 N. Y. 334 ; 1 Am. Rep. 532. 5 Newton v. Manwaring, 10 N. Y. Sup. 347. 6 Campbell v. Knight, 24 Me. 332 ; Wilkins v. French, 20 Me. 111. 'Anglade v. St. Avit, 67 Mo. 434. MERGER. 1039 cuted by herself and husband, and where both are parties to the effective and operative parts of the instrument.^ And an' assignment of the husband's mortgage to his wife would dis- charge it ; but this rule has been changed by statute. Thus, where a husband gives a mortgage which is assigned to his wife, and the husband then quit claims to her, and she there- upon conveys to a third person by deed of warranty therein, referring to the mortgage " as having been cancelled by assign- ment," the mortgage will not thereby become merged, but will be upheld.^ So a mortgage is not extinguished by being assigned to the wife of the mortgagor, after he has conveyed to a third jDcrson all his interest in the estate.^ But a wife cannot hold the mortgage as against a second mortgagee when she does it with fraudulent intent.* So, also, the husband may hold as purchaser a mortgage given by his wife ; it is not merged by an assignment to him.^ § 1064. Feme Sole Mortgagee — Marriage with Mort- gagor. — The marriage of a single woman who is the mort- gagee to the mortgagor does not extinguish her right of action upon the mortgage. AVhere such mortgagee unites with her husband in a junior mortgage on the same land, the act affects only her inchoate right of dower, but does not, in the absence of words for that purpose, impair her right to priority of lien.^ The mere circumstance of a wife uniting with her husband in a second mortgage, it being done in ignorance of the fact that it was intended to give such mortgage a preference over ^ Lithgow V. Kavanagh, 9 Mass. 161, 172 ; Bruce v. "Wood, 1 ]Met. (Mass.) 542, 543. ^ Bean v. Boothby, 57 Me. 295 ; Simonton v. Gray, 34 Me. 50 ; Bemis v. Call, 10 Allen (Mass.), 512. ^ Model House Lodging Asso. v. Boston, 114 Mass. 133 ; Bemis v. Call, 10 Allen (Mass.), 512. * Wright V. Patterson, 45 Mich. 261. 5 Butler V. Ives, 139 Mass. 202 ; Faulks r. Dimock, 27 N. J. Eq.65 ; Martin v. Martin, 146 Mass. 517. See, also, Butler v. Ives, 139 Mass. 202, « Power V. Lester, 23 N. Y. 527. 1040 RIGHTS OF PARTIES BEFORE DEFAULT. the one held by her, is not sufRcient in equity for postponing her mortgage or rendering it subordinate to the second mort- gage, the intent of the instrument being to cut off her dower.' § 1065. Heirs Taking Assignment. — A mortgage becomes merged and extinguished when the mortgagee being an heir of the mortgagor, acquires the interest of the other heirs in the premises.^ And an heir who takes an assignment of a mort- gage of his ancestor, cannot by virtue of the mortgage title, by foreclosure defeat the estate of dower previously assigned to the widow in the mortgaged premises with his assent.^ Where one takes the equity of redemption and has the mortgage assigned to him with the provision that it shall not merge but remain alive as a muniment of his title, his heirs on his death cannot avail themselves of the lien, as the mort- gage will not be considered as an estate in the hands of his administrator ; at his death the mortgage will not be regarded as an existing lien on the premises.* § 1066. Estoppel. — The owner of land who recognizes a mortgage upon the same, which has been assigned to him as a valid instrument and transfers it as such, is estopped from insisting, as against the assignee or any one claiming under him, that in his hands it had merged and disappeared in the conveyance.^ So where a party takes a deed with constructive notice of the existence of a mortgage on the land, he is estopped from denying its validity." So where a party sells mortgaged estate, free from incum- brances, he is estopped as against the purchaser to hold that there was no merger.' 1 Gillig V. Maass, 28 N. Y. 191 ; Power v. Lester, 23 N. Y. 527 ; 17 How. Pr. (N. Y.) 413. ^ Clark V. Clark, 76 Wis. 306. 3 King V. King, 100 Mass. 224. * Browne v. Perris, 23 Abb. N. C. (X. Y.) 226. 5 Powell V. Smith, 30 Mich. 451 ; Skeel v. Spraker, 8 Paige (N. Y.), 182. ^ Kellogg V. Ames, 41 N. Y. 259, reversing 41 Barb. (N. Y.) 218. T Bulkeley v. Hope, 1 Kay & J. 482. See, also, Webb v. Meloy, 32 Wis. 319. MERGER. 1041 § 1067. Express Intention Will Control. — Express inten- tion will control. The law will not enforce a merger where it is against the interest of the owner, and there is no express intention.^ Thus, where one who has the first mortgage takes for further security a deed for the land and gives back a bond to reconvey upon the payment of the named sum, the mort- gage does not, in the absence of intention to that effect, merge in the legal title, so as to let in a second mortgage as a first lien on the land.^ Merger may be prevented by a recital in a deed of release from the owner of the equity of redemption to the holder of the mortgage.^ A father held a first mortgage on his son's land. Afterward he purchased the land for a given sum, paying in cash the difference between that sum and the amount of the mortg-affe. The father did not know at the time of any junior liens on the land, but he did not give up the notes and mortgage, and the latter was not cancelled of record. It was held that there was no merger of the mortgage in the legal title, but that it remained the first lien in his hands, and those of his assignees.* The mortgage is not merged in the deed where it is intended by the mortgagee to hold the lien separate for his own interests.^ § 1068. Deed of Quit Claim. — A convej-ance of a fee in land by a quit claim to the beineficiary in a deed of trust on the land will not cause a merger of the equitable and legal estates in the grantee, where there is an outstanding second deed'of trust at the time of the conveyance.^ So a deed of quit claim to a third person, who pays the debt at the request of the mortgagor, is an assignment, and not a ' Smith V. Swan, 69 Iowa, 412 ; Patterson i'. Mills, 69 Iowa, 755. "McElhaney r. Shoemaker, 76 Iowa, 416. 3 Bailey r. Richardson, 9 Hare, 734 ; Spencer v. Ayrault, 10 N. Y. 202 ; Hood V. Phillips, .3 Beav. 513 ; Parry >: Wrieht, 1 Sim. & St. 369 ; Hatch v. Skilton, 20 Beav. 453 ; Denzler r. O'Keefe, 34 N. .J. Eq. 361. * Gray v. Nelson, 77 Iowa, 63. ^Vannice v. Bergen, 16 Iowa, 555; "Woodward v. Davis, 53 Iowa, 694. « Collins V. Stocking, 98 Mo. 290. 66 1042 RIGHTS OF PARTIES BEFORE DEFAULT. merger.^ However, a quit-claim deed by the mortgagee or his assigns, to the owner of the equity of redemption, operates as an extinguishment of the mortgage, there being no inter- vening equities/ So where a holder of a mortgage conveys to the purchaser of the equity of redemption all his " right, title, interest, claim, and demand, both at law and in equity, whether by deed, mort- gage, or otherwise, and as well in possession as in expectancy," this operates as a discharge.^ § 1069. Rents and Profits. — Where a mortgagee buys the legal title to the mortgaged land, although his mortgage is not merged therein in favor of a junior lien-holder, he is not re- quired, in adjustment of the liens, to account to them for rents and profits of the land for the time he has enjoyed it under his deed.* But it is true that a senior mortgagee who takes possession of the mortgaged premises under a sale in foreclosure, will, on redemption by a junior mortgagee, who was not a party to the foreclosure proceeding, be required to account for the rents and profits during the time of possession so held.'^ § 1070. Bequest to Mortgagor. — A bequest to a mort- gagor in trust to pay the income of the mortgage to the mort- gagee's widow during her life, and afterward the principal to the mortgagor is not a merger, and the widow may foreclose during her life.^ But where the mortgagee conveys direct to the mortgagor as a trustee for the separate use of a party dur- ing life, with remainder over to her children, and the mort- gagor covenants to accept the trust and carries it into effect, the conveyance unites in the trustee the entire estate of mort- gagor and mortgagee, and, upon the party's death, the trust 1 Hinds V. Ballou, 44 N. H. 619; Freeman v. M'Gaw, 15 Pick. (Mass.) 82 ; Wolcott V. Winchester, 15 Gray (Mass.), 461. Compare Johnson v. Lewis, 13 Minn. 364. '^ Jerome v. Seymour, Harr. (Mich.) 357. 'Bassett v. Hathaway, 9 Mich. 28. * Gray v. Nelson, 77 Iowa, 63. *Ten Eyck v. Casad, 15 Iowa, 524 ; Bunce v. West, 62 Iowa, 80. « Hancock y. Hancock, 22 N. Y.'568. MERGEE. 1043 terminates, devolving upon the remaindermen tlie entire legal and equitable estate of the lands.* § 1071. Assuming to Pay Mortgage. — Payments made by a party upon a mortgage debt in pursuance of a duty in the proper performance of which others are interested, must be applied and held as payments, and cannot be used by such party as a part consideration for the assignment and transfer of a mortgage and debt to a third person.^ So if the money is advanced by one whose duty it is, by contract or otherwise, to pay and cancel a mortgage and relieve the mortgaged premises of the lien, a debt in the proper performance of which others have an interest, it should be held a release, and not an assignment, although in form it purports to be an assign- ment.^ But if the purchaser has not assumed the mortgage, after a sul^sequent assignment to him he holds it as a sub- sisting title.* In Pennsylvania a purchaser at execution sale of land sub- ject to a mortgage cannot pay off the mortgage, without ex- tinguishing the debt ; so he cannot take an assignment of the mortgage and enforce it.^ § 1072. Right to Dower. — A woman who released dower, by joining with her husband in a mortgage of land, cannot upon his death maintain a right of dower against the mort- gagee or his assignees in possession.^ However, a court of equity will afford her relief by allowing her to redeem. But if the mortgage is foreclosed all right of dower is thereby 1 Welsh r. Phillips, 5-i Ala. 309. ^ Burham r. Dorr, 72 Me. 198 ; Bier v. Smith, 25 AV. Va. 800 ; Thomp.«on v. Hey wood, 129 Mass. 401; Winans v. Wilkie, 41 Mich. 264; Hill v. Minor, 79 Ind. 48. 'Brown v. Lapham, 3 Cush. (?»Iass.) 551, 554; <5oodyear v. Goodyear, 72 Iowa, 329 ; Frey v. Yanderhoof, 15 Wis. 397 ; Coles v. Appleby, 22 Hun (N. Y.), 72; Putnam v. Collamore, 120 Mass. 454; Lilly v. Palmer, 51 111. 331. * Matzen v. Shaeffer, 05 Cal. 81 ; Campbell r. Kni<:hts, 24 Me. 332 ; Tucker V. Crowley, 127 Mass. 400 ; Hall v. Harrington, 41 ]Mich. 146 ; Strong v. Con- verse, 8 Allen (Mass.), 557 ; Pike v. Goodnow, 12 Allen (Mass.), 472. * Dollar Sa\nngs Bank v. Burns, 87 Pa. St. 49L «Farwell v. Cotting, 8 Allen (Mass.), 211. 1044 RIGHTS OF PARTIES BEFORE DEFAULT. barred.^ She is entitled to dower in an equity of redemption in real estate of the husband against all persons excepting the mortgagee and those claiming under him. But she cannot have dower as against the mortgagee except by payment of the whole mortgage debt." So she cannot maintain a suit against the mortgagee or his assignee, who may be in posses- sion in pursuance of a sale under a second mortgage given by her husband alone ; unless she redeems by paying the amount due upon the mortgage in which she had released her dower.^ A quit-claim deed from the mortgagee, after breach of con- dition of the mortgage to a purchaser of the equity of redemp- tion from the mortgagor's insolvency does not merge the mortgage for the benefit of the mortgagor's widow who joined in the mortgage to release dower.^ But if the grantee in a deed, in which the wife has not joined her husband to release dower, pays off the mortgage according to agreement, thus dis- charging the mortgage, then the widow will be entitled to her dower.^ If the mortgage be j)aid out of the assets of an insolvent estate, and the assignee takes an assignment to himself, there is no merger, and the widow cannot have dower.^ § 1073. Assigning Mortgage as Collateral Security. — When the mortgagee assigns the mortgage as collateral security for his own debt, the foreclosure of the mortgage and purchase at the foreclosure by the assignee, as against the assignor, where the latter is not made a party to the foreclosure, and his ^ Gibson v. Crehore, 5 Pick. (Mass.) 146 ; Eaton v. Simonds, 14 Pick. (Mass.) 98 ; Brown v. Lapliam, 3 Cush. (Mass.) 551. '^ Norris v. Morrison, 45 N. H. 490 ; McCabe v. Bellows, 7 Gray (Mass.), 148 ; Hastings v. Stevens, 29 N. H. 564 ; Cox v. Garst, 105 111. 342. ^ McMahon v. Russell, 17 Fla. 698. See, also, Russell v. Austin, 1 Paige (N. Y.), 192. * Savage v. Hall, 12 Gray (Mass.), 363. See, also, Hunt r. Hunt, 14 Pick. (Mass.) 374 ; Freeman r. IM'Gaw, 15 Pick. (Mass.) 82 ; Atkinson v. Angert, 46 Mo. 515. * McCabe v. Swap, 14 Allen (Mass.), 188. ^Sargeant v. Fuller, 105 Mass. 119. Compare Jones v. Bragg, 33 Mo. 337 ; Atkinson v. Stewart, 46 Mo. 510. See, also, Gibson v. Crehore, 3 Pick. (Mass.) 475 ; 5 Pick. (Mass.) 146. MERGER. 1045 equitable right foreclosed, simply substitutes the land for the mortgage, and the assignee holds it as a security merely, sub- ject to the rights of the assignor to redeem by payment of the debt, and upon such payment, he is entitled to the land. The doctrine of merger does not apply in such case, as in equity merger will never be allowed against the interest of the parties or their intention, or where the two estates are held in different rights.^ Judge Finch says such an assignment is in substance a mortgage or pledge of the transferred security ; that it gives to the assignee merely a defeasible title, which ends upon pay- ment of the debt, leaving the ownership in the assignor pre- cisely as if no transfer had been made ; that such defeasible title cannot be changed or enlarged as against the assignor by any act or dealing of the assignee or his representatives, to which the assignor is not, in some manner, a party ; that if the assignee forecloses the mortgage without also foreclosing the assignor's rights, and becomes the purchaser at the sale, he holds the land as a substitute for the mortgage precisely as he held the latter, and by no other different or stronger title ; and whatever of benefit results from extinguishing the mort- gagor's equity, inheres in the security assigned in its changed form, and goes of necessity to him who resumes his ownership by payment of the debt.^ There is no merger as against the assignor and the pledgee who purchases under the fore- closure sale. So if the mortgagee has assigned some of the notes, not as a pledgor, the mortgage will be kept alive, though the mort- gagee has acquired the equity of redemption ; for then the mortgagee holds the mortgage in trust for the assignee.^ § 1074. The Record Does Not Show Merger. — A sub- sequent purchaser cannot rely upon the record to show merger. The record does not show whether such conveyance ' Slee r. Manhattan Co., 1 Paige (N. Y.), 48; Hoyt v. Martense, 16 N. Y. 231 ; Dalton v. Smith, 86 N. Y. 176. 2 In re Gilbert, 101 N. Y. 208, 211. 3 International Bank v. Wilshire, 108 111. 143, 1046 RIGHTS OF PARTIES BEFORE DEFAULT. operates as a merger of the mortgage interest in the land or otherwise/ Though the record may show ownership in a party, yet it may be that some other party has a vaUd title to the mort- gage.^ The purchaser must go beyond the record and find out whether there has been a merger in fact.^ Article 3. Discharge and Release of Mortgage. ? 1075. Extinguishment of Lien. § 1079. Conveyance "With Warranty. I 1076. Intention at the Time of Pay- I 1080. Payment by Moi-tgagor. ment Governs. § 1081. Payment by a Party to Pro- l 1077. Res Gestae Tending to Show tect His Estate. Intention. 2 1082. Uniting Estates of Mortgagor § 1078. Relation of the Parties Must and Mortgagee. Be Considered. I 1083. Parol Evidence. § 1075. Extinguishment of Lien. — Whenever the lien is extinguished there is no merger. Thus, the effect of a sale of the premises under a prior judgment, and a failure to redeem b}^ the judgment debtor or the subsequent incumbrancer, will transfer the title absolutely to the purchaser and extinguish the lien. The sale being entire and regular the fee of the judg- ment debtor and mortgagor will vest in the purchaser ; and all other subsequent incumbrances by judgment or mortgage will be legally expunged from the record.* After a mortgagee had assigned the mortgage he acquired the title of the mortgagor to the mortgaged premises and con- veyed the same to a third person, but this was not a merger of the equitable and legal titles.^ And so where a person buys a mortgage, and afterward takes another mortgage on the same premises to secure other 1 Worcester Nat. Bank v. Cheeney, 87 111. 602 ; Purdy v. Huntington, 42 N. Y. 334 ; Oregon Trust Co. v. Shaw, 5 Saw. C. C. 336 ; 6 Saw. C. C. 52. 2 Morgan v. Hammett, 34 Wis. 512 ; Aiken v. Milwaukee, etc., Railroad Co., 37 Wis. 469 ; Miller v. Lindsey, 19 Hun (N. Y.), 207. 3 Aiken v. Milwaukee, etc., Railroad Co., 37 Wis. 469. *Hill V. Pixley, 63 Barb. (N. Y.) 200. 6 Lime Rock IS^at. Bank v. Mowry (N. H.), 22 At. Rep. 555. MEEGER. 1047 and different debts than are secured by the prior mortgage, there is no such union of estates as will constitute merger.' Where a company, having mortgaged property to secure its bonds, and having become insolvent, has a trustee appointed to settle its affairs, and the bondholders purchase the property from the trustee subject to the mortgage, they cannot then pro- ceed to collect the bonds from the company, or from the indi- vidual members, for the reason that they have already received payment in the land.^ And a mortgagee, who, after dedication of the land to the public by the mortgagor, accepts from the latter a conveyance thereof in pa3'ment of the debt secured by the mortgage, acquires only the mortgagor's title.^ § 1076. Intention at the Time of Payment Governs. — When a vendee takes an estate subject to a mortgage, and pays it off according to agreement, this discharges the mortgage. The fact that the purchaser obtains a discharge of the mort- gage, and does not take an assignment, leads to the conclusion that he was to pay the mortgage himself, as part of the pur- chase-money, and, of course, there can be no separate interest to be kept alive.* If it be the purchaser's duty, by the terms of the contract, to pay and cancel the mortgage, it will be held to be a release, and not an assignment, when he discharges the debt; and W'hen there is no such duty devolving upon him, the assign- ment will be held to operate as an extinguishment, or not according to the intention and situation of the parties.^ When the purchaser takes no assignment of the mortgage, and his payments are made for the purpose of discharging the debt, and has no intention of keeping alive the mortgage, he iBuzzellr. Still, 63 Vt. 490. "^ Cock V. Bailey, 146 Pa. St. 328. 3 Archer v. Salinas, 93 Cal. 43. * Wedge V. Moore, 6 Cush. (Mass.) 8, 10; Champney v. Coope, 34 Barb. (N. Y.) 539 ; Hunt v. Hunt, 14 Pick. (Mass.) 374, 383 ; Loomer v. Wheelwright, 3 Sandf. Ch. (N. Y.) 135, 157 ; Gardner v. Astor, 3 Johns. Ch. (N. Y.) 53. ^Gayle v. Wilson, 30 Gratt. (Ya.) 166; Gibson v. Crehore, 3 Pick. (Mass.) 475 ; Brown v. Lapham, 3 Cush. (Mass.) 551 ; Lynch v. PfeifFer, 110 N. Y. 33 ; Aiken v. Milwaukee, etc., Eailroad Co., 37 Wis. 469. 1048 RIGHTS OF PARTIES BEFORE DEFAULT. cannot afterward, upon a change of his intention or upon a change in the surrounding circumstances, insist upon the mortgage as a subsisting security to the injury of third persons.' So, where a mortgage was paid without an assignment or discharge of it at that time, a subsequent conveyance by the owner by warranty transferred a vaUd title, and the mortgage cannot be revived by his grantee.^ § 1077. Res Gestae Tending to Show Intention. — Until the party has made a disposition of the property, and until some person acquires an interest, he is at jDcrfect liberty to con- sider the mortgage merged or not as might be most beneficial to him is the general rule in equity ; and this intent does not become fixed and unchangeable until some one acquires an interest, and thereby a right to draw such intent in question.^ Whatever occurs in such interval between the parties inter- ested tending to show that a merger was or was not intended is admissible upon that issue as a part of the res gestas.* In equity the estates will be kept separate where such is the in- tention of the parties, and justice requires it, and that inten- tion will be gathered not only from the acts and declarations of the party, but from the view of the situation as affecting his interest, at least prior to the presence of some third person's right.^ Whether there is a merger of a less estate in a greater de- pends upon the express or implied intention of the person in whom the estates unite." § 1078. Relation of the Parties Must Be Considered. — Whether the release of a mortgage will constitute a discharge 1 Hatch V. Kimball, 16 Me. 146 ; Starr v. Ellis, 6 Johns. Ch. 393 ; Lynch v. Pfeiffer, 110 N. Y. 33. 2 Given v. Marr, 27 Me. 212. 3 James v. Morey, 2 Cow. (N. Y.) 246. * Smith V. Roberts, 91 N. Y. 470. 5 Moffatt V. Hammond, 18 Ves. 385 ; Gardner v. Aster, 3 Johns. Ch. (N. Y.) 53; Starr v. Ellis, 6 Johns. Ch. (N. Y.) 393 ; Champney v. Coope, 32 N. Y. 543 ; Sheldon v. Edwards, 35 N. Y. 279. 6 Bostwick V. Frankfield, 74 N. Y. 207. MERGER. 1049 or an assignment depends not so much upon the form of the instrument as upon the relation of the parties to the estate, and their presumed interest derived from circumstances under which the conveyance is made. If tlie release is to a party whose duty it is to extinguish the mortgage for the benefit of another, it will be held to operate as a discharge.^ A mortgage lien purchased by the owner of the equity of redemption will, in the absence of a contrary intention, be ke]jt alive in equity for the purchaser's protection against intervening incumbrances, and will not merge ; and Chief Justice Durfee says this rule is the same whether the purchaser takes an assignment of the whole mortgage lien or a release or quit claim of the mortgagee's interest in the estate held by the purchaser.^ If the release is to a party whose duty it is to extinguish the mortgage for the benefit of another, it will be held to operate as a discharge.^ When the purchaser agrees, in a deed, by express stipulation that he will assume and pay an existing mortgage debt upon the premises, his payment operates as a discharge of the mort- gage, whether he takes an assignment of the mortgage, an acknowledgement of payment, or a release.* If the money is advanced by one whose duty it is, by con- tract or otherwise, to pay and cancel a mortgage, and relieve the mortgaged premises of the lien, a duty in the proper per- formance of which others have an interest, it shall be held a release, and not an assignment, although in form it purports to be an assignment.^ ^Gibson v. Crehore, 3 Pick. (Mass.) 475; Brown r. Lapham, 3 Cu!?h. (Mass.) 552 ; WadHworth v. Williams, 100 Mass. 126 ; Ryer v. Gass, 130 Mass. 227 ; Duffy V. McGuiness, 13 R. I. 595. ' Duffy V. McGuiness, 13 R. I. 595 ; Knowles v. Carpenter, 8 R. I. 548 ; Stan- tons V. Thompson, 49 N. H. 272, 279 : Grover v. Thatcher, 4 Gray (Mass.), 526 ; Hunt V. Hunt, 14 Pick. (Mass.) 374, 383. ^Wadsworth v. Williams, 100 Mass. 126. Compare Wade r. Beldmeir, 40 Mo. 486 ; Burnham v. Dorr, 72 Me. 198. *Kilborn r. Robbing, 8 Allen (Mass.), 466. Compare Young v. Morgan, 89 111. 199. ^ Brown v. Lapham, :> Cush. (Mass.) 551, 554 ; Burnham v. Dorr, 72 Me. 198. See, also, Lappen v. Gill, 129 Mass. 349 ; Androscoggin Sav. Bank v. McKenney, 78 Me. 442. 1050 EIGHTS OF PARTIES BEFORE DEFAULT. When one is bound to pay a mortgage debt, and pays it, he will not be allowed to hold it as a subsisting incumbrance.^ Hence, a mortgagor cannot, after having obtained a transfer of a first mortgage made by himself, set it up against another mortgage of later date, which he had made ; and this is so where he purchases the first mortgage title at a sale under the power.^ § 1079. Conveyance with Warranty. — After a conveyance with warranty the vendor cannot buy up an outstanding mort- gage and keep it alive. Such mortgage merged in the title he conveyed.^ It is only where the purpose of justice requires that a payment of a mortgage debt shall be regarded as an assignment instead of an extinguishment of the mortgage that it will be held so to operate.* Hence, one who has executed to different persons two mortgages upon the same land with cov- enants of warj-anty cannot, after the titles under the two mort- gages have both become united in one person, and the second mortgage has been foreclosed, be allowed to open the foreclosure by paying the sum secured by the first mortgage." The cov- enants estopped him from setting up the first mortgage as against the parties who were the assignees of the second mort- gage, and to whom he would be responsible for a breach, if the first mortgage was allowed to have effect against the title acquired under the foreclosure of the second.^ When one party grants land with warranty, and afterward acquires a mortgage given by a former owner, he takes such mortgage for the benefit of his grantee and the lien is discharged and acquitted.^ 1 Smith V. Lowry, 113 Ind. 37 ; Burnham v. Dorr, 72 Me. 198. 2 Otter r. Vaux/2 Kay & J. 650 ; 6 De G., M. & G. 638 ; Johnson v. Webs- ter, 4 De G., M. & G. 474. ^Mickles r. Dillaye, 15 Hun (N. Y.), 296. * Brown v. Lapham, 3 Gush. (Mass.) 551 ; Kilborn v. Bobbins, 8 Allen (Mass.), 471. = Butler r. Seward, 10 Allen (Mass.), 467. «Comstock r. Smith, 13 Pick. (Mass.) 119 ; Trull v. Eastman, 3 Met. (Mass.) 124. ' Mickles v. Townsend, 18 N. Y. 575 ; Stoddard v. Rotton, 5 Bosw. (N. Y.) 378 ; Co. Litt. 265 a. See, also. Proctor v. Thrall, 22 Vt. 262 ; Fish v. Gordon, 10 Vt. 288 ; Tyler v. Lake, 4 Sim. 351 ; Collins v. Torry, 7 Johns. (N. Y.) 278. MERGEE. 1051 So if the owner mortgages the estate without noticing the mortgage title held by him, this operates as a merger of his title as mortgagee/ When the owner sells land with warranty, a mortgage held by him upon the land at that time is extinguished, unless it is agreed to be kept in force for his benefit.^ § 1080. Payment by Mortgagor.- — Payment of the mort- gage by the mortgagor is to be regarded as an extinguishment. For the purchaser of land cannot keep on foot his own mort- gage.^ But the rule that payment by the mortgagor is an ex- tinguishment, does not obtain where the payment is of an incumbrance existing before the conveyance to him.'^ Whenever a purchaser pays an incumbrance on the land, which existed before the time of his i)urchase, he can keep it alive as a separate title when it is for his benefit.^ § 1081. Payment by a Party to Protect His Estate. — Where a party is so related to a mortgage that he is not per- sonally liable upon it, but is obliged to pay it to save his estate, and he does pay it, the payment will be presumed to be made for that purpose, and, in such case, no assignment of the mortgage to the person paying it nor proof of an intent on his part to keep it alive is necessary to give him the benefit of it." So where one having the right to redeem, redeems the mortgaged premises by the payment of money, the transaction will be treated as an assignment of the mortgage, if this is manifestly for the interest of the party so redeeming, and is not inconsistent with the justice of the case, where no contrary in- tent is expressed or necessarily implied/ 1 Tyler v. Lake, 4 Sim. 351. 2 Stoddard v Rotton, 5 Bosw. (N. Y.) 378. ^Gilkeson v. Snyder, 8 Watts & S. (Pa.) 200. * Abbott V. Kasson 72 Pa. St. 183. ^Carll V Butman, 7 Me. 102; Skeel v. Spaker, 8 Paige (N. Y.),182; Milla- paugh r. ]McBride, 7 Paige (N. Y.), 509 ; Pool v. Hathaway, 22 Me. 85. 6 Walker v. King, 44 Vt. 601 ; McDanicls v. Flower Brook Manf. Co., 22 Vt. 274, explained ; Wheeler v. Willard, 44 Vt. 640 ; Warran v. Warran, 30 Vt. 530 ; Ryer v. Gass, 130 Mass. 227 ; Mahon v. Russell, 17 Fla. 698. 'Hhids V. Ballou, 44 N. H. 619. 1052 RIGHTS OF PARTIES BEFORE DEFAULT. The subsequent mortgagee must redeem the prior mortgage before he can foreclose his own, even if the prior mortgage has been released of record but without consideration.^ A mere volunteer who pays off the mortgage cannot be treated as an equitable assignee of such mortgage, and cannot therefore keep it on foot as against persons having interven- ing incumbrances upon the land. This is because the payment was not compulsory, in order to protect his estate.^ And when a purchaser is bound to pay the debt, he cannot set up the mortgage against a party whom he is obligated to protect against the lien.^ The assignee of a mortgage having a lien upon two separate parcels of land, having purchased one of them, can collect only the ratable proportion from the other.* A purchase of the mortgaged estate at a tax sale by the mortgagee to protect the mortgage lien, and save the property from being lost to him, does not effect a merger.^ § 1082. Uniting Estates of Mortgagor and Mort- gagee. — Where two titles or interests become united in the same person in the same right and at the same time as that of mortgagor and mortgagee, the less will merge in the greater estate and become extinct, unless interest or intention be to the contrary, or the merger would work an injury to some one.^ Thus, a deed by a mortgagor to a mortgagee as additional se- curity only, and not as a satisfaction of the mortgage, will not merge the mortgage in the greater estate, so as to give priority to another mortgage which is a second lien.^ Generally, when a greater and a lesser estate coincide and 1 Spaulding r. Crane, 46 Vt. 292 ; Young v. Hill, 31 N. J. Eq. 429 ; Miller v. Wack, Saxt. (N. J.) 204. See, also, Manwaring v. Powell, 40 Mich. 371 ; McDaniels v. Flower Brook Manf. Co., 22 Vt. 274. - DoAvner v. Wilson, 33 Vt. 1. 'Manwaring w. Powell, 40 Mich. 371; McDaniels v. Flower Brook Manf. Co., 22 Vt. 274. *Colton V. Colton, 3 Pliila. (Pa.) 24. = Jackson v. Relf, 26 Fla. 465. « Weiner v. Hentz, 17 111. 259. ^ Iluebsch V. Scheel, 81 lU. 281. MERGER. 1053 meet in one and the same person without any intervening es- tate, the lesser estate is merged in the greater.' And where, by a release of the right of redemption, the two estates are united in the mortgagee, the mortgage will be upheld as a sub- sisting source of title whenever it is required by the justice of the case or the intent of the parties.^ The surrender of the notes and mortgage by the mortgagee, and his acceptance of a deed from the mortgagor, giving him an absolute title when there is a mortgage upon the land, are neither a payment of the notes nor an extinguishment of the mortgage.^ And even when the fee has been vested in the mortgagee by conveyance from the mortgagor, and the mortgage has been released, it will still be upheld whenever it is for the interest of the mort- gagee by reason of some intervening title or other cause that it should not be regarded as merged.* So, where a mortgagee, to avoid the expense of foreclosure, takes a conveyance of the mortgaged premises to himself with- out releasing the mortgage, it will be upheld in favor of him and his grantees as against the junior incumbrance, if no merger of the mortgage was intended or effected.^ The law will presume that the intention was in accord with the real interest.*' And generally, when the mortgagee obtains the equity of redemption, the law will presume that he is holding the two titles separate, if it be for his interest.^ And, agreeing to pay off and release a second mortgage, when he takes the equity of redemption, does not render such mortgage superior to his own.^ ' Lock wood V. Sturdevant, 6 Conn. 387. ^ Stantons v. Thompson, 49 N. H. 272. 2 Buchanan v. Balkum, 60 N. H. 406. *Hanlon v. Dolierty, 109 Ind. 37. ^ Lowman v. Lowman, 118 111. 582 ; Shaver v. Williams. 87 111. 469 ; Worcester Nat. Bank v. Cheeney, 87 111. 615 ; Richardson v. HockenhuU, 85 111. 124 ; Hatch V. Kimball, 16 Me. 146; Clift v. White, 12 N. Y. 519; Cohn v. Hoffman, 45 Ark. 376 ; Smith v. Swan, 69 Iowa, 412, 414. ^Silliman v. Gammage, 55 Tex. 365 ; Boardman v. Larrabee, 51 Conn. 39; Lowman v. Lowman, 118 111. 582. Compare Weidner v. Thompson, 69 Iowa, 36. ' Besser v. Hawthorn, 3 Oreg. 129 ; Woodward v. Davis, 53 Iowa, 694 ; Stan- tons V. Thompson, 49 N. H. 272. ^ Woodward v. Davis, 53 Iowa, 694. 1054 RIGHTS OF PARTIES BEFORE DEFAULT. Where the holder of two mortgages on the same land fore- closes the junior mortgage and buys in the land subject to the senior mortgage in part satisfaction of the junior mortgage, and no redemption is made, the senior mortgage will, when the time of redemption expires, merge in the fee, and the debt which it secured will be extinguished, though the mortgagee does not obtain a master's deed.^ And where a residuary legatee, as a purchaser of land of the estate, executes a mort- gage thereon to secure the annual interest payable to a life tenant, his interest in the principal is merged in his fee, and on a judicial sale of the land on a subsequent judgment, his title will pass discharged of the mortgage.^ And where a party purchases swamp land of a county, takes possession, and executes a mortgage to secure school money borrowed thereon of the county to pay the purchase price of the land, a deed subsequently given him by the commissioner does not operate as a merger with satisfaction of the mort- gage.^ § 1083. Parol Evidence. — Parol evidence is not admissible for the purpose of affecting the validity of a particular writing which the party is called upon to meet, but for the purpose of enlarging the sphere of juridical action, so as to embrace the whole transaction to which the writing belonged, and define the rights growing out of the whole case.* So where the grantee in a warranty deed as a part of the consideration for the conveyance, agreed orally with the gran- tor to pay the balance due upon an outstanding mortgage, parol evidence of such agreement is admissible in evidence in a real action, wherein the plaintiff relies upon such mortgage to sup- port his title.^ Parol evidence is admissible to show the consideration upon ' Bellville Sav. Bank v. Reis, 136 111. 242. 2 Estate of Dull, 137 Pa. St. 116. 'Williams v. Brownlee, 101 Mo. 309. * Miller v. Fichthorn, 31 Pa. St. 252. 5 Burnham v. Dorr, 72 Me. 198. See, also, Bartlett v. Parks, 1 Gush. (Mass.) 82 ; Preble v. Baldwin, 6 Gush. (Mass.) 549 ; Goodspeed v. Fuller, 46 Me. 141. MERGER. 1055 which the conveyance was made, and that the purchaser is under obligation to pay the mortgage debt so that an assign- ment to him constituted a merger ; and to sliow the whole transaction where the conveyance is only a part/ But oral evidence cannot be admitted to contradict a writing unless fraud be alleged. Thus, parol evidence that an assign- ment of a mortgage was intended to be a discharge is inad- missible, except for the purpose of proving fraud.' The legal effect of a contract cannot be varied by the intro- duction of parol evidence.^ ^ Fiske V. McGregory, 34 N. H. 414 ; Frey v. Vanderhoof, 15 "Wis. 397. " Howard v. Howard, 3 Met. (Mass.) 548 ; McCabe v. Swap, 14 Allen (Mass.) 188 ; Astley v. Milles, 1 Sim. 298, 345. 3 McCabe v. Swap, 14 Allen (Mass.) 188. CHAPTER XXVI. subrogation. Article 1. Rights of Purchaser and of Party Paying the Debt. § 1084. Bona Fide Purchaser at a De- fective Sale. ? 1085. Equitable Assignment or Sub- rogation. § 1086. A Creature of Equity. I 1087. Equitable Estoppel. I 1088, Party AVith a Partial Interest in the Premises. § 1089. Payment by One Partner. I 1090. A Volunteer. I 1091. Payment by Third Party at the Solicitation of the Mort- gagor. ^ 1092. Conventional Subrogation — Subrogation by Agreement. § 1093. Statutory Provisions. I 1094. Colorable Obligation to Pay the Debt. § 1095. One Entitled to Redeem. ^ 1096. When Mortgagor Purchases His Own Mortgage. §1084. Bona Fidp: Purchaser at a Defective Sale. — Subrogation is not founded upon contract, but is the creation of equity, and is enforced solely for accomplishing the ends of substantial justice. It is a mode which equity adopts to com- pel the ultimate payment of a debt by one who, in justice and good conscience, ought to pay it, and is not dependent upon contract, privity, or strict suretyship. In this way a court, under a great variety of circumstances, may relieve one who has acted under a justifiable or excusable mistake of fact. Thus, a bona fide purchaser, at a mortgage sale which proves defective, is, after paying the purchase-money, subrogated to the rights of the mortgagee. The mortgage is in equity re- garded as assigned to such purchaser, even if the mortgagee's deed to him does not contain language amounting to a legal assignment. Such a purchaser is not a stranger to the estate, but is equitably subrogated to the mortgagee's rights.' So a purchaser at a sheriff's sale on a void foreclosure of a mort- 1 Brewer v. Nash, 16 R, I. 458. 1056 SUBROGATION. 1057 gage is subrogated to the interest of the mortgagee and may himself foreclose/ And so by a mortgage foreclosure against the administrator of the mortgagor, without making his heirs or devisees parties, the purchaser and his grantees will be subrogated to the rights of the mortgagee, as they become the equitable assignees of the mortgage.^ This doctrine of subrogation will hold even in a case of a minor whose guardian inserted in the mortgage invalid powers of sale.^ And so one who loans money on a defective mortgage for the purpose of discharging a prior valid mortgage upon the same property is generally subrogated to the rights of the prior mortgagee/ The general rule is that one who loans his money upon real estate security for the express purpose of taking up and dis- charging liens or incumbrances on the same property has thus paid the debt at the instance, request, and solicitation of the debtor, expecting and believing, in good faith, that his security will, of record, be substituted, in fact, in place of that which he discharges, is neither a volunteer, stranger, nor intermed- dler, nor is the debt, lien, or incumbrance regarded as extin- guished if justice requires that it should be kept alive for the benefit of the person advancing the money, who thereby becomes the creditor.* Subrogation is not founded upon contract, but is the cre- ation of equity, and being administered upon equitable princi- ples, it is only when an applicant has an equity to invoke, and where innocent persons will not be injured, that a court can interfere.* 1 Dutcher v. Hobby, 86 Ga. 198. * Jellison v. Halloran, 44 Minn. 199 ; Muir v. Berkshire, 52 Ind. 149. 3 Barry v. Clarke, 13 R. I. 65 ; Brewer v. Nash, 16 R. 1. 458. *Everston v. Bank, 33 Kan. 352; Hammond v. Barker, 61 N. H. 53; Sid- ener r. Pavey, 77 Ind. 211 ; Byerly v. Humphrey, 95 N. Car. 151. See, also, Milholland v. Tiflany, 64 Md. 455 ; Levy v. Martin, 48 Wis. 198 ; Gilbert v. Gilbert, 39 Iowa, 657, 659. ^ Cobb V. Dyer, 69 Me. 494 ; Gans v. Thieme, 93 N. Y. 225 ; Sidener v. Pavey, 77 Ind. 241 ; 3 Pom. Eq. Jur. 1212; Harris, Subr. 811, 816; Dixon, Subr. 165. ^ Emmert v. Thompson (Minn.), 52 N. "W. Rep. 31 ; Stevens v. Goodenough, 67 1058 RIGHTS OF PARTIES BEFORE DEFAULT. It may be conceded that subrogation is founded on the principles of equity and benevolence ; ^ but to render its appli- cation practical the claim must have substantial equity, grow- ing out of the nature of the transaction itself, and it must not work wrong or injury to another.^ So, where the proceeds of decedent's lands, sold by order of court, were applied to the payment of the mortgage made by him and his widow, wdiich proceedings could not dispose of the widow's dower right, the purchaser W' as subrogated to the rights of the mortgagee as against the widow's claim to dower.^ § 1085. Equitable Assignment or Subrogation. — When any person has a subsequent interest in the mortgaged prem- ises, and who is not the principal debtor primarily and abso- lutely liable for the mortgage debt, and pays off the mortgage, he thereby becomes an equitable assignee thereof, and may keep alive and enforce the lien as far as may be necessary in equity for his own benefit, and is subrogated to the rights of the mortgagee, to the extent necessary for his own equitable pro- tection.* Even a donee of the equity of redemption, conferred in con- sideration of love and affection, has an undoubted right to redeem by paying the mortgage debt ; and the right of equit- able assignment, which is another name for subrogation, is an incident of the right of redemption.^ A fortiori is this true where the grantee of the mortgagor's interest is a purchaser, even though for a nominal consideration. Thus, lands being conveyed by the husband on a nominal consideration besides love and affection, in trust for the wife for life, with remainder in one-half to the heirs or devisees of each of them respectively 26 Vt. 676 ; Harnsberger v. Yancey, 33 Gratt. (Va.) 527 ; Smith v. Foran, 43 Conn. 244. 1 Webster's Appeal, 86 Pa. St. 409. 2 Erb's Appeal, 2 Pen. & W. (Pa.) 296. » House V. Fowle (Oreg.), 29 Pac. Rep. 890, *Hobgood V. Schuler (La.), 10 South Rep. 812; 3 Pom. Eq. Jur., sect. 1212, note 2 ; Everson v. McMullen, 113 N. Y. 293 ; 10 Am. St. Rep. 445 ; Averill v. Taylor, 8 N. Y. 44 ; Ohmer v. Boyer, 89 Ala. 273. 6 Cole V. Malcolm, 66 N. Y. 363 ; Harris on Subro., sect. 718. I I SUBROGATION. 1059 and the lands being at the time subject to an outstanding mortgage executed by the husband, the wife has a right to pay off and discharge the mortgage, for her own benelit and protection, either before or after her husband's death ; and such payment being made by her after his death, by allowing the mortgagee to retain and appropriate the rents, she is entitled, as against the heirs of her husband, or any one claim- ing under him, to be subrogated to the rights of the mortgagee, or to stand as an equitable assignee of the mortgage.' As a general rule all persons having an interest in property subject to an incumbrance by which such interest may be pre- judiced or lost, have a right to pay the debt or charge which creates it, and, if the debt be one for which the ultimate lia- bility rests on another party they will, wpon such payment, be subrogated to the right of the creditor against such property.^ So a party who advances money to the mortgage creditor of his debtor, in the payment of interest accumulated on the mort- gage debt becomes legally subrogated, pro tanto, to the mort- gage creditor's rights.^ § 1086. A Creature of Equity. — Having the right to re- deem a party becomes the equitable assignee of the mortgage on the principle of subrogation, a doctrine which is not de- pendent on contract, but is the creature of equity designed for the promotion of justice. The doctrine is that even without language of assignment, a purchaser wlio has j^aid the purchase- money under a void sale is entitled to be regarded in equity as if he were the assignee of the mortgage.* Or the deed given 1 Olimer v. Boyer, 89 Ala. 273. " Powers V. Lumber Co., 43 Mich. 4fiS ; Pheldon on Subro., p. 13 ; Bigelow v. Cassedy, 26 N. J. Eq. 557 ; Denman v. Nelson, 21 N. J. Eq. 452 ; Parst v. Bates, 95 111. 493 ; White v. Hampton, 13 Iowa, 259 ; Bush v. Wadsworth, 60 Mich 255 ; Begein v. Brehm, 123 Ind. 160 ; Ohmer r. Boyer, 89 Ala. 273. ^Hobgood V. Schuler (La.), 10 SouthTlep. 812. * Brewer v. Nash, 16 R. I. 458 ; Jones v. Mack, 53 ]Mo. 147 ; Honaker v. Shough, 55 Mo. 472 ; Russell v. Whitely, 59 Mo. 196 ; Johnson v. Robertson, 34 Md. 165 ; Robinson v. Ryan, 25 N. Y. 320 ; Muir v. Berkshire, 52 Ind. 149 ; Brobst V. Brock, 10 Wall. (U. S.) 519, 534 ; Johnson v. Sandhoff, 30 Minn. 197 ; Sloan V. Frothingham, 72 Ala. 589, 604 ; Frische v. Kramer, 16 Ohio, 125 ; 1060 RIGHTS OF PARTIES BEFORE DEFAULT. by the mortgagee under such sale may contain language which will amount to a legal as well as an equitable assignment.* When a party bids off the estate in good faith on the invi- tation of the mortgagee to do so, and supposing his bid to be effectual to invest him with the equitable or executory title, he pays the amount of his bid and the same is applied to the mortgage debt ; then he has a most persuasive equity to be subrogated to the rights of the mortgagee who invited his con- fidence, and the purchaser has become the assignee of the mortgage.^ And where the purchaser has entered under the mortgagee's deed and made improvements, this equity is strengthened ; ^ and where he, erroneously supposing he had an interest in an estate, paid off a mortgage thereon, it was held that he was entitled to be treated as an equitable assignee of the mortgage.'* And it makes no difference in equity that a mortgage is discharged on the record, the discharge having been made on the assumption that the title to the estate had vested in the purchaser, and after his equitable right to subro- gation had already accrued to him.* The right of subrogation is not founded upon contract alone, nor upon the absence of contract, but is founded upon the facts and circumstances of the case, and upon principles of natural justice." Stark V. Brown, 12 Wis. 572 ; Kelly v. DufF, 61 N. H. 435 ; Taylor v. Associa- tion, 68 Ala. 229. 1 Brown v. Smith, 116 Mass. 108; Burns t). Thayer, 115 Mass. 89. 2 Brewer v. Nash, 16 R. I. 458. 3 Muir V. Berkshire, 52 Ind. 149. * Kelly V. Duff, 61 N. H. 435. 5 Bacon v. Goodnow, 59 N. H. 415 ; Guckian v. Riley, 135 Mass. 71, 74. ^ Crippen v. Chappel, 35 Kan. 495 ; Tarbell v. Durant, 61 Vt. 516 ; Freeman on Void Jud. Sales, sects. 50, 51 ; Ayres v. Probasco, 14 Kan. 177, 178 ; Johnson V. Moore, 33 Kan. 90 ; Everston v. Bank, 33 Kan. 352 ; Levy v. Martin, 48 Wis. 198 ; IMorgan v. Hannnett, 23 Wis. 30 ; Blodfj;ett v. Hitt, 29 Wis. 170 ; Homoeo- pathic Mut. In.".. Co. V. Mai-shall, 32 N. J. Eq. 104 ; Tradesmen's Building, etc., Asso. V. Thompson, 32 N. J. Eq. 133 ; Tyrell v. Ward, 102 111. 29 ; Scott v. Dunn, 30 Am. Dec. 174, and note ; Gilbert v. Gilbert, 39 Iowa, 657 ; Valle v. riemin,:?. 29 Mo. 152 ; Hines v. Potts, 56 Miss. 347 ; Caldwell v. Palmer, 6 Lea (Tenn.), 652 ; Carter v. Taylor, 3 Head (Tenn.), 30 ; Mosier's Appeal, 56 Pa. St. 76 ; Lockwood v. Marsh, 3 Nev. 138. SUBROGATION. 1061 § 1087. Equitable Estoppel. — So a mortgagee receiving the proceeds of a mortgage sale, knowing them to be such money, and the circumstances wliich invaUdate, or are sup- posed to invalidate that sale and conveyance under it, is es- topped from denying the title of the purchaser.^ But such knowledge is not necessary to create the estoppel ; ^ but if such knowledge was necessary to create an estoppel, if tlie mort- gagee receives the money from the sale and keeps it he is es- toj)ped on that ground, because he cannot repudiate the mortgage sale and at the same time insist upon having the benefit of it.^ § 1088. Party With Partial Interest in the Premises. — Any person having a partial interest in the premises, and whose rights would be prejudiced by a foreclosure of a mort- gage, has a right to redeem the mortgaged premises, by pay- ing the entire debt. This principle includes persons having an estate in land as tenants for life, as dowress, heirs, devisees, grantees, and tenants in common.* And this will embrace a tenant for life, whose estate is devised immediatel}'' from the mortgagor.^ The statute of limitations applies to an equitable assignee, who has paid the debt and seeks to be subrogated to the rights of the mortgagee as against the mortgagor.^ This rule of subrogation applies where an administrator borrows money to pay a mortgage debt of his intestate's estate. So where the administrator borrows the money to pay off a mortgage debt on the estate, from a third person with the agreement and understanding between them that sucli tliird 1 Sloan V. Frothin-liam, 72 Ala. 589, 608 ; Smith r. Warden, 19 Pa. St. 424 Maple V. Kusgart, 53 Pa. St. 348 ; Brewpter r. Baker, 16 Barb. (X. Y.) 613 Breeding r. Stamper, IS B. Mon. (Ky.) 175 ; "Wood v. Seely, 32 N. Y. 105 Pursley v. Hav!?, 17 Iowa, 310 ; Beford i: Mercer, 24 Iowa, 118 ; Flanigan v. Turner, 1 Black (U. S.), 491. 2 Brewer v. Nash, 16 R. 1. 458. » Maple V. Kuspart, 53 Pa. St. 348. ^3 Pom. Eq. Jur., sect. 1220, and note ; Butts v. Broughton, 72 Ala. 294 ; Harris on Subro., sects. 692-697. * Ohmer v. Boyer, 89 Ala. 273. «01imer v. Boyer, 89 Ala. 273. 1062 EIGHTS OF PARTIES BEFORE DEFAULT. person sliall be reimbursed from the assets of the estate, and be secured by a mortgage lien upon the previously mortgaged property of such estate, which is executed by the adminis- trator and is void because of a want of power in the adminis- trator to execute it, but if the money is loaned and paid to the original mortgagee, the second mortgagee becomes subrogated to the rights of the first mortgagee/ But a guardian, on satis- fying his ward's claim for money wrongfully invested in real estate, cannot be subrogated to the latter's equities and enforce the trust arising in favor of the ward, for his own benefit. Nor can his heirs, on satisfying such a claim against his estate.^ § 1089. Payment by One Partner. — Where one of two partners pays a mortgage on the partnership property which it was the duty of his co-partner to discharge on condition that it shall stand as security for such payment, an equity arises in his favor entitling him to indemnity through the mortgage.^ So a mortgagee of firm property to secure an individual debt having paid a firm debt secured by a mortgage on firm property to protect his own interest is entitled to be subrogated to the lien.* A stockholder in a corporation who is shown by the articles of association to have paid in |50,000, being the amount of his paid-up stock, but for whom the corporation has paid out $40,000 under an agreement at the time of its organization, cannot be subrogated to the rights of a creditor of the corpo- ration whose claims have been paid by a foreclosure of a mort- gage given by such stockholder upon his private property for the benefit of the corporation without knowledge of such pri- vate agreement and upon the strength of the showing made by the articles of association.'^ 1 Crippen v. Chappel, o5 Kan. 495 ; Detroit F. & M. Ins. Co. v. Aspinwall, 48 Mich. 238. See, also, Lockwood v. Bassett, 49 Mich. 546. 2 Rowley v. Towsley, 5.3 Mich. 329. ^ Laylin v. Knox, 41 Mich. 40 ; Stebbins v. Willard, 53 Vt. 665. * Reyburn v. Mitchell, 106 Mo. 365. ^Dwight V. Lumber Co., 82 Mich. 624. SUBROGATION. 1063 § 1090. A Volunteer. — If mere strangers, mere volunteers, or mere intermeddlers, without any contract or understanding between themselves and the party whose duty it is to pay the debt, or between themselves and the original mortgagee, pay the debt, they cannot rightfully claim any such thing as subrogation or equitable assignment. Because it always requires something more than a mere payment of the debt in order to entitle the person paying the same to be substituted in the place of the original creditor. Judge Valentine says that it requires an assignment, legal or equitable, from the original creditor, or an agreement or understanding on the part of the party liable to pay the debt, that the person furnishing the money to pay the same shall in effect become the creditor, or the person furnishing the money must furnish the same either because he is liable as surety or liable in some other secondary character, or for some purpose of saving or protecting some right or interest, or supposed right or interest of his own.^ While an ordinary stranger to the estate who voluntarily pays off a mortgage thereon is not entitled to subrogation to the rights of the mortgagee, a purchaser at the mortgagee's sale, even where the sale is void, is not to be regarded as a mere stranger.^ Payment of a note secured by a mortgage by one not bound to pay it to protect his interest will not subrogate him to the rights of the party to whom he paid. He will become an original creditor.^ Where the mortgage is paid by one having an interest sub- ject to the mortgage, but who is under no ol^ligation to dis- charge it, as by a widow of the mortgagor, she will be subrogated to the mortgage lien without proof of a specific intention at the time of payment to keep the mortgage alive.* ^ Crippen v. Chappcl, 35 Kan. 495 ; Smith v. Austin, 9 Mich. 465. * Brewer v. Nash, IG R. I. 458. 'Weil V. Enterprise, etc., Co., 42 La. Ann. 492. See, also, ^Nlallgry v. Dauber, 83 Ky. 239. * Jeflferpon v. Edrington, 53 Ark. 545. See, also, Wadsworth v. Blake, 43 IVIinn. 509 ; Suppiger v. Garrels, 20 111. App. 625 ; Bishop v. O'Conner, 69 111. 1064 RIGHTS OF PARTIES BEFORE DEFAULT. It is the general rule that the doctrine of subrogation will not be exercised in favor of a volunteer or a stranger who officiously intermeddles, such as a person who pays without any obligation so to do, or one who, without any interest to protect, liquidates the debt of another.^ § 1091. Payment by Third Party at the Solicitation of THE Mortgagor. — A third party may pay the debt at the solicitation of the debtor, under an agreement that he shall have a mortgage on the same premises ; and on refusal of the debtor to make such mortgage, he is to be held and regarded as the equitable assignee of the paid mortgage, and as such entitled to be subrogated to the lien of that mortgage for the amount so advanced.^ But one who loans money to the mort- gagor to pay the mortgage is not subrogated to the mortgage security, unless so agreed by the mortgagor.^ § 1092. Conventional Subrogation — Subrogation by Agreement. — If a third party, a volunteer, pays the entire debt in pursuance of an agreement between him and the debtor, upon his doing so, he shall be subrogated to the cred- itor's right.* The civil law is in accord with this doctrine, that one may acquire the privilege of a creditor without sub- stitution, in the same manner as a mortgagee, by agreement 431 ; Beaver r. Blanker, 94 111. 175 ; Acer v. Hotchkiss, 97 N. Y. 395 ; Sandford V. McLean, 3 Paige (N. Y.), 117. ' Emmert v. Thompson (Minn.), 52 N. W. Rep. 81. 2 Baker v. Baker (S. Dak.), 49 N. W. Eep. 1064. See, also, Gatewood v. Gate- wood, 75 Va. 407 ; Citizens' Nat. Bank v. Wert, 26 Fed. Rep. 294 ; Morrow v. United States Mort. Co., 96 Ind. 21 ; Caudle v. Murphy, 89 111. 352 ; Fievel v. Zuber, 67 Tex. 275; Norton v. Highleyman, 88 Mo. 621 ; Yaple v. Stephens, 36 Kan. 680 ; Johnson r. Moore, 33 Kan. 90 ; Gans r. Thieme, 93 N. Y. 225 ; Loewenthal v. McCormick, 101 111. 143. * Smith V. Neilson, 13 Lea (Tenn.), 461 ; Owens v. Johnson, 8 Baxt. (Tenn.) 265 ; Gaskill v. Wales, 36 N. J. Eq. 527 ; Van Winkle v. Williams, 38 N. J. Eq. 105 ; Crippin v. Chappel, 35 Kan. 495. * Fievel v. Zuber, 67 Tex. 275, 280 ; Fuller v. Hollis, 57 Ala. 4.35 ; Owen v. Cook, 3 Tenn. Ch. 78 ; Mitchell v. Butt, 45 Ga. 162; New Jersey Railroad Co. V. Wortendyke, 27 N. J. Eq. 658 ; Morgan v. Hammett, 23 Wis. 30 ; Caudle v. Murphy, 89 111. 352 ; Fears v. Albea, 69 Tex. 437 ; Sheldon on Subro., sects. 247, 248 ; Pom. Eq. Jur. 1212, note 2 ; Shreve v. Hankinson, 34 N. J. Eq. 76. SUBROGATION. 1065 ■with the debtor, that he who shall pay for him, shall have the privilege ; and it makes no difference whether the payment be made to the creditor by him who lends the money or by the debtor with whom the money has been entrusted. The learned author's notes to the text are : " The manner of acquiring the rights of the creditor without substitution is just and equitable in order to facilitate the payment of the debts. It is but just that the debtors themselves should have the power to pay in place of the creditors, those who pay for them, since nobody receives any prejudice thereby, and since it is the interest of the debtor that he should have the power to make his condition easier by changing his creditor." ^ § 1093. Statutory Provisions. — The law in Louisiana is governed by statute, and when a person making the payment has no interest in the payment of the debt to protect, he is not entitled to subrogation unless he can show an agreement, made at the time of the payment, formally executed before a notary public and witnessed.^ § 1094. Colorable Obligation to Pay a Debt. — While a mere stranger is not subrogated to the security by paying the debt, yet a person who has paid a debt, under a colorable obligation to do so, that he may protect his own claim, should be subrogated to the rights of the creditor.^ But the general rule is that he who pa^'s the debt cannot ask subrogation to the rights of the creditor unless he is a surety or has to pay the debt to protect his own interests, or in virtue of legal process, or has a special agreement to be subrogated,* § 1095. One Entitled to Redeem. — Where a party has a right to redeem, though under no obligations to pay the debt, ' 2 Strahan's Domat's Civil Law, Cnshing's ed., p. fiOS, poct. 1783. 2 Civil Code, art. 2156; Harrison v. Bigland, 5 Rob. (La.) 204; Hoyle v. Cazabat, 25 La. Ann. 438 ; Brice v. Watkins, 30 La. Ann. 21. * Ellsworth V. Lockwood, 42 N. Y. 89, 97. * Bissell V. Lewis, 5G Iowa, 231 ; Gatewood v. Gatewood, 75 Va. 407 ; Clev- inger v. Miller, 27 Gratt. (Va.) 740 ; Deering v. "Winchelsea, 1 Smith's Lead. Cas. in Eq. 154 ; National Bank v. Gushing, 53 Vt. 321 ; Fievel v. Zuber, 67 Tex. 273 ; McClure v. Andrews, 68 Ind. 97 ; Faurot v. Neff, 32 Ohio St. 44. 1066 EIGHTS OF PARTIES BEFORE DEFAULT. and pays the debt, he will be subrogated to the rights of the mortgagee, though he takes no formal assignment of it. His payment of the debt and his relation to the estate uphold his title.^ And so if the owner of the equity of redemption who pays one of several mortgage notes, and agrees with the mort- gagee that he shall hold the note in the same manner that the mortgagee held it, he is entitled to the same security and the same priority under the mortgage that a stranger would have under an assignment,^ and the mortgagee cannot defeat the substitution by executing a release of the mortgaged premises instead of an assignment.^ And when a party advances money to pay a mortgage under an agreement with the mortgagor that it shall be assigned to him as security, and takes a discharge of the mortgage, he is entitled to be subrogated to the rights of the mortgagee and have the discharge vacated.^ But if the mortgage is discharged and after some delay a new mortgage is given to the party advancing the money, this does not take priority of a second recorded mortgage which was outstanding and of which the lender had no actual notice.^ § 1096. When Mortgagor Purchases His Own Mort- gage. — If the mortgagor sells his land subject to the mort- gage and pays or purchases the mortgage, which the vendee agreed to pay as part purchase-money, this discharges the debt, and the mortgagor, without taking an assignment of the mort- gage, is subrogated to the security of the mortgage, which has become the principal security for the payment of the debt, and the mortgagor is entitled to be reimbursed out of the land for J Cobb V. Dyer, 69 Me. 494 ; Ward v. Seymour, 51 Vt. 320 ; Walker v. King, 45 Vt. 525 ; 44 Vt. 601 ; Wheeler v. Willard, 44 Vt. 640 ; Kelly v. Duff, 61 N. H. 435 ; Gatewood v. Gatewood, 75 Va. 407 ; Tradesmen's Build. & L. Asso. v. Thompson, 32 N. J. Eq. 133 ; White v. Hampton, 13 Iowa, 259; Warren v. Hayzlett, 45 Iowa, 235 ; Guckian v. Riley, 135 Mass. 71 ; Carithers v. Stuart, 87 ind. 424. "" Morrow v. United States Mort. Co., 96 Ind. 21. =* Citizens' Nat. Bank v. Wert, 26 Fed. Rep. 294. * Bolman v. Lohman, 74 Ala. 507 ; Morgan v. Hammett, 23 Wis. 30. 6 Holt V. Baker, 58 N. H. 276 ; Fears v. Albea, 69 Tex. 437. SUBROGATION. 1067 the amount of his payment.^ Or if he is compelled to pay the debt after selling the land he is subrogated to the rights of the mortgagee against the land." So the satisfaction of a judgment for a mortgage debt, on other property of the mortgagor, will subrogate the mortgagor to the security, when equity requires that the mortgage should be assigned to him rather than discharged.^ However a mortgagor will not be subrogated to the rights of the first mortgagee when such mortgagee has a second mort- gage upon the same property, unless he pays both mortgages. Because the money collected of the mortgagor on the judgment on the first mortgage debt is a payment and not a purchase of the mortgage.* And a purchaser of a part of the mortgaged premises under execution, takes the property subject to the payment of a share of the mortgage debt remaining unsatis- fied.' A senior mortgagee purchased premises on foreclosure, and afterward quit-claimed to plaintiff, a junior mortgagee, who paid in full the debt secured by the senior mortgage. After- ward it was held that no title passed by the sale. Plaintiff, or the junior mortgagee, then sold under his own mortgage, and bid in the property and took a deed which passed to him the legal title and entered into possession. But where plaintiff, or the junior mortgagee, sought to foreclose the mortgagor's equity of redemption under the senior mortgage, he was not entitled to be subrogated to the rights of the senior mortgagee. And if the mortgagor should bring suit to redeem, plaintiff, or the 1 Orrick v. Durham, 79 Mo. 174 ; Greenwell v. Heritage, 71 Mo. 459 ; Welton V. Hull, 50 Mo. 296 ; Stillman v. Stillman, 21 N. J. Eq. 126 ; Kamena v. Huel- bi^, 23 N. J. Eq. 78 ; Hart v. Chase, 46 Conn. 207 ; Ely v. Stannard, 44 Conn. 528 ; Fla^g v. Geltmacher, 98 111. 293 ; Johnson v. Zink, 51 N. Y. 333 ; Halsey V. Reed, 9 Paige (N. Y.), 446, 453. See, also, Bensieck v. Cook (Mo.), 19 S. W. Rep. 642. 2 Smith ?'. Ostermeyer, 68 Ind. 432, 435 ; Josselyn v. Edwards, 57 Ind. 212 ; Orrick v. Durham, 79 Mo. 174 ; Hoffman v. Risk, 58 Ind. 113 ; Russel v. Pistor, 7 N. Y. 171 ; Halsy v. Reed, 9 Paige (N. Y.), 446, 453 ; Fisher r. Dillon, 62 III. 379 ; Stebbins v. Willard, 53 Vt. 665 ; Simpson r. Gardiner, 97 111. 237. nVoodbury v. Swan, 58 N. H. 380 ; Funk v. McReynold, 33 111. 481. * Knoblauch v, Foglesong, 37 ]\Iinn. 320. '= Funk V. McReynold, 33 111. 481. 1068 RIGHTS OF PARTIES BEFORE DEFAULT. junior mortgagee, would then be entitled to be reimbursed for the amount which he paid to satisfy the senior mortgage.^ Article 2. Plights of Mortgngee. 1 1097. Mortgagee Must Be Fully Paid. §1099. A Mortgage Discharged of Re- 'i 1098. Mortgage By Executor. cord— Paid By One Who Bought the Land. § 1097. Mortgagee Must Be Fully Paid. — The mortgagee must be fully paid before subrogation can take place. Thus, when mortgaged premises are sold by an assignee for creditors subject to the lien of a mortgage, and the mortgagee, without being first required to proceed on his mortgage, is allowed a dividend upon his bond out of the proceeds, creditors whose dividends have been thereby reduced are entitled to be sub- rogated, to that extent, to the mortgagee's rights.^ But a decree of subrogation cannot be made so long as any part of the superior creditor's claim remains unsatisfied, as, until then, he is entitled to the sole direction and control of his security, and of all actions, remedies, or arrangements that he may desire to take thereon.^ Until the creditor has been fully j^aid, subrogation cannot take place on any terms whatever.* Justice Mitchell says : " If bonds, by reason of judgment and levy, or for any other reason, had had preference, and the fund had been sufficient to pay them in full, no doubt could have arisen as to the duty of the courts to subrogate the other creditors to the remedy under the mortgages ; and the only difference here is that the bonds and the debts they secure are not paid in full. This difference, however, has been uniformly treated in our cases as material. Subrogation never takes 1 Long V. Long (Mo.), 19 S. W. Rep. 537 ; 79 Mo. 644 ; 96 Mo. 180. "Graff's Estate, 139 Pa. St. 69. See, also, Stamford v. Benedict, 15 Conn. 437. »Kyner v. Kyner, 6 Watts (Pa.), 221 ; Forest Oil Co.'s Appeal, 118 Pa. St. 138. * Forest Oil Co.'s Appeal, 118 Pa. St. 138. SUBROGATION. 1069 place to the prejudice of any other right. The appellants can- not be deprived of any part of their security, or have its prece- dence and effectiveness impaired in any way. However small the real debt to which the mortgage may be reduced, they are not only entitled to the whole bond for its security and ulti- mate payment, but also to the whole and unimpeded posses- sion, direction, and control of the mortgage, and of all actions, remedies, or arrangements that they may desire to take thereon." ^ A vendor sold land and gave the vendee notes to secure him against a mortgage on the jDremises. The vendor paid the mortgage. The vendee collected the notes, sold the land, and took a mortgage back for security. It was held that the origi- nal vendor, on foreclosure of this mortgage, should be subro- gated to the rights of the mortgagee, who was his vendee, for the amount of the notes originally deposited.^ When the insurance is taken by the mortgagor in favor of the mortgagee, who assigns the policy, notes, and mortgage to another, who assigns to the insurers upon payment of the loss after destruc- tion of the building, it is a payment of the mortgage pro taiito? § 1098. Mortgage by Executor. — A mortgagee who takes a mortgage of the executor of an estate in pursuance of the order of the county court, which is invalid, is entitled to be subrogated to the rights of the prior mortgagee whose mort- gage was thus paid. He will not be treated as a volunteer in the legal sense of that term.* § 1099. A Mortgage Discharged of Record — Paid By One Who Bought the Land. — When a mortgage has been paid by one who has bought the premises subject to the mort- gage, and in ignorance of the existence of a judgment lien subsequent to the mortgage, and the mortgage has been dis- charged of record, it may be reinstated, and he takes all rights > Graff's Estate, 139 Pa. St. 69, 75. See, also, Shutea v. Woodard, 57 Mich. 213 ; Myres v. Yaple, 60 Mich. 339. 2 McGuffey v. McClain (Ind.), 30 N. E. Rep. 296. 2 Home Ins. Co. v. Marshall (Kan.), 29 Pac. Rep. 161. * Levy V. Martin, 48 Wis. 198. See, also, Chaffe v. Oliver, 39 Ark. 531. 1070 RIGHTS OF PARTIES BEFORE DEFAULT, that the mortgagee had, because it was discharged by mistake, and ecpity will presume such mistake and give him the bene- fit of subrogation. In New York he would also be entitled to an assignment of the mortgage.^ But where a person purchases land subject to a mortgage pending proceedings to establish a ditch, and afterward pays the mortgage, he pays it as owner, and presumptively as part of the purchase-money, and thereby extinguishes it ; and he is not entitled to be subrogated to the lien of the mortgage, so as to defeat the lien of the assessment for constructing the ditch.^ Article 3. Rights of Junior Mortgagee. I 1100. Legal Sul)rogation. Foreclosure of First Mort- § 1101. Priorities of Liens. gage. § 1102. Payment— Tender. ? 1105. Usurious Mortgages. § 1103. Intervening Mortgage. ^ 1106. Rights as to the First Mort- § 1104. Second Mortgagee Cut off By gagee. § 1100. Legal Subrogation. — Legal subrogation takes place for the benefit of one who being himself a creditor pays the claim of another who has a preference over him by reason of liens and securities. Hence, at common law, if a junior mort- gagee pays off a prior mortgage, he is entitled to demand an assignment thereof. The mere fact that the proceeds of a second mortgage are used in paying off a prior mortgage does not always entitle the second mortgagee to be subrogated to the rights of the prior mortgagee.^ Subrogation will not take place to the injury of an innocent party, who has acquired interests in the property relying upon the apparent discharge of the mortgage upon the records.^ 1 Barnes v. Mott, 64 N. Y. 397. 2 Shirk V. Whitten (Ind.), 31 N. E. Rep. 87. See, also, Hancock v. Fleming, 103 Ind. 533 ; Robins v. Swain, 68 111. 197 ; Johnson v. Zink, 51 N. Y. 333. 3 Jeffries i'. Allen, 29 S. Car. 501. *Gaskill V. Wales, 36 N. J. Eq. 527; Ahern v. Freeman, 46 Minn. 156. 1 SUBROGATION. 1071 § 1101. Priorities of Liens. — A grantee of land incum- bered by a mortgage and a judgment, who agrees to assume all incumbrances cannot, after paying the mortgage, have a lien declared in his favor as against the judgment, though it is subsequent to the mortgage ; ^ nor can he on paying the mort- gage be subrogated to the rights of a mortgagee as against a pur- chaser of the land under a foreclosure of a second mortgage.^ But where, on a foreclosure of a second mortgage, it appeared that the loan by the second mortgagee was made under an agreement with the mortgagor that it should be apj^lied to ex- tinguish the first mortgage, and that part of the loan was actually so applied, the second mortgagee is entitled to a decree subrogating him to the rights of the first mortgagee on pay- ment of the balance due on the first mortgage.^ The fact that a part of the proceeds of a subsequent mortgage was applied by the mortgagor in discharge of a purchase-money mortgage, does not entitle the subsequent mortgagee to subrogation to the rights of the purchase-money mortgage.* But when one who contracts to sell land subject to a mortgage, but afterward pays the same and has it satisfied of record, he is entitled when sued for specific performance to be subrogated to the rights of the mortgagee.^ And where funds of an estate have been diverted to pay an unprobated debt secured by a first mort- gage, a junior mortgage will be postponed to the rights of cred- itors with probated claims, but subrogated to the lien of the debt discharged.® The holder of a second mortgage cannot control the sale or disposal of proceeds under the first mortgage without making payment.^ 1 IMartin v. Aultman, SO Wis. 150. = Kellogg V. Colby (Iowa), 40 N. W. Rep. 1001. 3Quinlan v. Stratton, 128 N. Y. 059. *Ayers v. Staley (N. J.), 18 At. Rep. 1046. * Arnold r. Green, 116 X. Y. 566. See, also, Swain r. Stockton Sav. and L. Sec, 78 Cal. 600 ; Gerdine v. Menage, 41 Minn. 417 ; Jeffries v. Allen, 29 S. Car. 501 ; Scriven v. Hursh, 68 :Mich. 176. * Jefferson v. Edrington, 5.3 Ark. 545. ^ Andrews v. Fiske, 101 Mass. 422 ; Meysenburg v. Schlieper, 46 Mo. 209 ; Gilbert v. Gilbert, 39 Iowa, 657. 1072 EIGHTS OP PARTIES BEFORE DEFAULT. Where a widow renounces her right of dower in a mortgage by her husband's executor, the fact that the proceeds of the mortgage were used to pay a prior mortgage given by the hus- band and wife does not entitle the second mortgagee to be subrogated to the rights of the prior mortgagee.^ § 1102. Payment — Tender, — It is sufficient to entitle a junior mortgagee to be subrogated to the rights of a senior mortgagee, if he tender to such senior mortgagee the amount secured by his mortgage, with interest and costs before the foreclosure sale, though the amount tendered be not accepted until after such sale.^ And the right of the junior mortgagee to pay off the debt is not affected by an agreement by the parties to the senior mortgage for a higher rate of interest than that specified in the mortgage.^ § 1103. Intervening Mortgage. — Where the proceeds of a third mortgage were used in the discharge of a part of the first mortgage, and the first mortgagee agreed with the third mort- gagee that the third mortgage should have priority over the unpaid balance of the first mortgage, it was held that the pro- ceeds should be applied, first, to the payment of the amount remaining due on the first mortgage, and the third mortgagee be subrogated thereto ; second, to the payment of the second mortgage ; third, to the payment of the balance due on the third mortgage.* So, where a junior mortgagee redeems from a prior lien, intermediate or subsequent incumbrancers, in equity, must re- fund the redemption money before they can enforce their claims upon the property ; they must also pay all prior liens to theirs, and then they will be subrogated to the rights of the first mortgagee.^ This is done in order that junior mortgagees may be able to secure their own claims, as the first mortgagee 1 Jeffries v. Allen, 29 S. Car. 501. 2 Marshall v. Ruddick, 28 Iowa, 487 ; Dings v. Parshall, 7 Hun (N. Y.), 522. 3 Gardner v. Emerson, 40 111. 29(3. * Bank r. Moore, 94 N. Car. 734. ^Milligan's Appeal, 104 Pa. St. 503 ; Clark v. Mackin, 95 N. Y. 346. SUBROGATION. 1073 is not obliged to assign his mortgage as a general rule.^ And a party who purchases 'the equity of redemption in a first mortgage, with full knowledge of the rights of the assignees of the mortgagee, and who, as mortgagee under a second mort- gage, is tenant in common with the assignee of the assignees of the first, in the lands therein conveyed, which lands are charged with an incumbrance under a decree of partition, is primarily bound to extinguish such incumbrance, as well as all others existing or afterward accruing.^ A third mortgagee may protect himself by purchasing at the foreclosure sale of the senior mortgage, or pay the prior debts before foreclosure.^ § 1104. Second Mortgagee Cut Off by Foreclosure of First Mortgage. — Where the junior mortgagee's right of re- demption has been cut off by the foreclosure of the first, he may sometimes have the right of subrogation, or even be enti- tled to an assignment, but it will depend on circumstances to show equity, and he will not be entitled to a stay of the sale by injunction without clearly showing that the payment of the first or its foreclosure or sale will work him injustice.^ § 1105. Usurious Mortgages. — A junior mortgagee cannot avail himself of usury in the senior mortgage.^ So, on the other hand, if a valid mortgage is discharged and a new mort- gage is taken in its place which is void for usury, the mort- gagee cannot be subrogated to the mortgage discharged, because his right is based upon a usurious mortgage.^ § 1106. Rights as to the First Mortgagee. — A mortgagee who diminishes the security of a second mortgagee by releas- ing the mortgagor's personal liability, if he does not absolutely ' Ward r. Seymour, 51 Vt. 320 ; Flachs v. Kelly, 30 111. 4G2 ; Shimer v. Ham- mond, 51 Iowa, 401 ; Downer v. Fox, 20 Vt. 388 ; Wood v. Hubbard, 50 Vt. 82. * Pullen V. Heron Mininj? Co., 71 N. Car. 563. ' Blooniingdale v. Barnard, 7 Hun (N. Y.), 459. * Bloomingdale v. Barnard, 7 Hun (N. Y.), 460. ^Powell V. Hunt, 11 Iowa, 430. •Perkins v. Hall, 105 N. Y. 539 ; Baldwin v. Moffett, 94 N. Y. 82. 68 1074 EIGHTS OF TARTIES BEFORE DEFAULT. discharge the premises from the lien of his mortgage, as in the case of a subsequent purchaser, at least subordinates his lien to that of the second mortgagee.' And a prior mortgagee is not entitled to notices of a junior's application to be subrogated to a tax lien which he has paid, as it is immaterial to him by whom the tax lien is held.^ Where a senior mortgagee at his foreclosure sale buys in the mortgaged premises for less than the debt, and after receiving his certificate of purchase procures an award for a special exe- cution to make the residue, a junior mortgagee, redeeming under the statute from the sale, takes the land free from any lien of the first mortgage.^ A purchaser at a sale under a senior mortgage cannot inter- vene to keep down the amount claimed in a suit against the mortgagor by a junior mortgagee.* A second mortgagee who has paid the taxes or other assess- ments is entitled by equitable subrogation to hold the lien of such taxes or assessments as against all parties.^ But his voluntary payment of claims against the mortgaged property, which was not necessary for his own protection that he should pay, does not entitle him to subrogation.^ But when he is compelled to pay for his own protection, and instead of taking an assignment of the mortgage this is discharged of record, he can claim indemnity for this payment out of the mortgaged estate,^ except as to a bona fide purchaser who has relied upon the record.^ If a joint mortgagor pays the debt, he is subrogated to the interest of the joint mortgagor until he is reimbursed.^ 1 Sexton V. Pickett, 24 Wis. 346 ; Ingalls v. Morgan, 10 N. Y. 178, 187. 2 Abbott V. Ins. Co., 127 Ind. 70. See, also, Horton v. Ingersoll, 13 Mich. 409. ^Seligman v. Laubheimer, 58 111. 124. As to the relative rights of senior and junior mortgages, see Carpentier v. Brenham, 40 Cal. 221. *Bronson v. Railroad Co., 2 Black (U. S.), 524. 5 Fiacre r. Chapman, 32 N. J. Eq. 463. « Bayard v. McGraw, 1 111. App. 134. ' Ebert v. Gerding, 116 111. 216 ; Rappanier v. Bannon (Md.), 8 At. Rep. 555. » Davis V. Winn, 2 Allen (Mass.), 111. 9 Simpson v. Gardiner, 97 111. 237 ; Stebbins v. Willard, 53 Vt. 665 ; Fisher t?. Dillon, 62 111. 379. SUBROGATION. 1075 The first mortgagee, after he has purchased the equity of redemption, cannot give a mortgage wliich shall take prece- dence, b}^ way of subrogation, of tlie incumbrance existing at the time he became the owner of the equity of redemption.^ Article 4. Rights of Sureties or Guarantors. ? 1107. Rights of Sureties to Subroga- § lll-l. For Further Security and for tion. Further Advances. § 1108. Doctrine of Equity. § 1115. Purchaser Becoming Surety. § 1109. Holding as Trustee. 1 1116. Subrogation of Principal ^ 1110. Efiect of Discharging the Se- Creditor to Indemnity. curity. OH"- Security Given by a Stranger. § 1111. Rights to Subrogation to Debt ? 1118. Laches May Defeat Subroga- and Security — American Doc- tion. tiine. 1 1119. Defense to Equitable Claim § 1112. English Doctrine. of the Creditor. 1 1113. The Surety is Entitled to All Equities. § 1107. Rights of Sureties to Subrogation. — A surety may be subrogated to tlie rights of the creditor to whom tlie principal debtor has made a mortgage as security for tlie pay- ment of the debt, if such surety is compelled to pay it.^ So the indorser of a note will be subrogated, on paying the note, to the rights of the owner of the note in the mortgage given him as security.^ So a creditor may avail himself, as a security for his debt, of the benefit of a mortgage which his debtor has made to a surety for such debt by way of indemnity.^ Thus, where one gives to an accommodation indorser a mortgage of indemnity ^Durgan v. Lyman (N. J.), 23 Atl. Rep. 057. ^ Burton v. Wheeler, 7 Ired. Eq. (X. Car.) 217 ; Cheesebrough v. Millard, L Johns. Ch. (N. Y.) 409; Drew ?-. Lockett, 32 Beav. 499; O'Hara v. Haas, 4(3 Miss. 374 ; Fields v. Sherrill, 18 Kan. 365. 3 Nat. Bank v. Shields, 55 Hun (N. Y.), 274 ; Gossin v. Brown, 11 Pa. St. 527 ; Ottman v. Moak, 3 Sand. Ch. (N. Y.) 431 ; Motley r. Harris, 1 Lea (Tenn.), 577 ; Rooker v. Benson, 83 Ind. 250 ; Knight v. Rountree, 99 N. Car. 389 ; Thomas v. Stewart, 117 Ind. 50. * Curtis V. Tyler, 9 Paige (N. Y.), 432; Stewart v. Preston, 1 Fla. 10; Moore V. Moberly, 7 B. Mon. (Ky.) 299. 1076 RIGHTS OP PARTIES BEFORE DEFAULT. and both maker and indorser become insolvent, the holder of the notes may avail himself of the mortgage security ; ' so one surety may avail himself of a mortgage made by the principal to his co-surety.^ A surety is subrogated to the benefit of the security without any assignment of it, by force of law.^ § 1108. Doctrine of Equity. — The right of subrogation was originally a doctrine of equity, but has become recognized as a legal right.* So if two co-debtors mortgage land belong- ing to them jointly to secure a joint debt, and one of them is obliged to pay the whole debt, technically he is subrogated to the rights of the mortgagee, as to the mortgage upon the co-debtor's half of the estate, as security for his contributing his share of the debt.^ But if, as between the debtors, one is principal and the other the surety in the mortgage debt, and the real principal pay the debt, the doctrine of subrogation as to the land of the other mortgagor does not apply .^ § 1109. Holding as Trustee. — A mortgage given to several guarantors to indemnify them against a several and joint lia- bility upon it, when the debt is paid by one of them, is held in trust by the mortgagee for the payer's benefit.'^ So a surety paying one of several notes or bonds secured by ^ Rice V. Dewey, 13 Gray (Mass.), 47. "^ Hall V. Cushman, 16 N. H. 462. 3 Beaver v. Slanker, 94 111. 175 ; Murrell v. Scott, 51 Tex. 520 ; Richeson v. Crawford, 94 111. 166 ; Darst v. Bates, 95 111. 493 ; Gerber v. Sharp, 72 Ind. 553 ; Dick v. Moon, 26 Minn. 309 ; Jones v. Tincher, 15 Ind. 308 ; National Bank v. Gushing, 53 Vt. 321 ; Taylor v. Bank, 87 Ky. 398 ; Macklin v. Bank, 83 Ky. 314 ; Legett v. McClellan, 39 Ohio St. 624 ; Eddy v. Traver, 6 Paige (N. Y.), 521 ; Rooker v. Benson, 83 Ind. 250. Compare Lynn v, Richardson, 78 Me. 367. * La Farge v. Herter, 11 Barb. 159 ; Aiken v. Gale, 37 N. H. 501. ^Sargent v. M'Farland, 8 Pick. (Mass.), 502; Fisher v. Dillon, 62 111. 379; Simpson v. Gardiner, 97 111. 237 ; Stebbins r. Willard, 53 Vt. 665. « Crafts V. Crafts, 13 Gray (Mass.), 362; Cherry r. Monro, 2 Barb. Ch. (N.Y.) 618. See, also, as to co-sureties, Hall v. Cushman, 16 N. H. 462 ; Low v. Smart, 5 N. H. 353. ^ Dye V. Mann, 10 Mich. 291. SUBROGATION. 1077 a mortgage, is subrogated to a proportionate part of the mort- gage, and the mortgagee holds as a trustee for him/ Where a mortgage has been assigned to a surety or to a trustee to secure him against his hability upon the debt, the creditor is entitled to the benefit of the security,^ because the mortgage creates a trust and equitable lien in favor of the creditor, which attaches to the property.* And whenever the mortgagor is compelled to pay the debt, after transfer of his estate in the propert}^ subject to the mort- gage, he is subrogated to the rights of the mortgagee upon the land mortgaged ; * and a surety may have the benefit of the mortgage, even though, before he has been called on to pay the debt, the mortgagor has sold and conveyed the estate to another.^ A mortgage made by a principal to a surety to secure the payment of a note is not to be regarded in equity simply as an indemnity to the surety. It is not important whether it is in form to pay the debt or to indemnify the surety. Where its object is to provide for the payment of debts, or to enable the surety to do so, he is constituted a trustee for the creditors whose debts are enumerated in the condition.'' The implication is that a pledge made expressly to one is in trust for another, because the relation between the' parties is such that that construction of the transaction best effectuates the express purpose for which it was made.' Where a mortgage provides that if the mortgagor shall pay the notes, and in every way indemnify and save harmless the mortgagee from trouble and expense, then the deed shall be void, the mortgage to the surety creates a trust and an equit- able lien for the holders of the notes. Such lien attaches to 'Lynch v. Hancock, 14 S. Car.G6. ^Cullum V. Bank, 23 Ala. 797 ; Curtis r. Tyler, 9 Paige (N. Y.), 432. ^ Graydon v. Church, 7 Mich. 36 ; Eastman v. Foster, 8 Met. (Mass.) 19. * Baker v. Terrell, 8 Minn. 195 ; Risk v. Hoffinan, 69 Ind. 137 ; Johnson v. Zink, 52 Barb. (N. Y.) 396. ^Gossin V. Brown, 11 Pa. St. 527. « Aldrich v. Blake, 134 Mass. 582. ^ Hampton v. Phipps, 108 U. S. 260. 1078 RIGHTS OF PARTIES BEFORE DEFAULT. the property in the nature of a trust and would so remain until the debts are paid/ § 1110. Effect OF Discharging the Security. — Where the creditor voluntarily does an act invalidating or discharging the security that he held from the principal debtor, to which there is a surety, he thereby loses his claim on the surety, to the same extent as the latter is injured by such act of the creditor.^ But a surety is not entitled to be subrogated as to the secur- ity until the whole debt shall have been discharged.^ And he may lose the benefit of the subrogation by his own laches in suffering other persons to acquire a valuable interest in the land in consequence of his omitting to make known his own claim upon it.* § 1111. Rights to Subrogation to Debt and Security — American Doctrine. — The general doctrine of the American courts is, that, upon the payment of a debt by the surety, he is entitled to the benefit of the collateral security and of the debt as represented by the bond or note, and to the assignment of the debt as well as the mortgage.^ A purchaser who has bought a portion of the mortgaged premises, and has assumed the whole mortgage debt, is per- sonally liable to another purchaser who has bought another portion of the estate, and is compelled to pay the mortgage debt, and is also subrogated to the mortgagee's right.^ § 1112. English Doctrine. — The surety, upon paying the debt of his principal, is entitled to the full benefit of all col- lateral securities which the creditor has taken for the payment of the debt, but is not subrogated to the creditor's rights as to 1 Eastman v. Foster, 8 Met. (Mass.) 19 ; Plaut v. Storey (Ind.), 30 N. E. Kep. 886 ; Brandt on Sur. (2d ed.), sect. 324. 2 Hayes r. Ward, 4 Johns. Ch. (N. Y.) 123. 3 Stamford Bank v. Benedict, 15 Conn. 437. * Jarvis v. Whitman, 12 B. Mon. (Ky.) 97. 5 Ellsworth V. Lockwood, 42 N. Y. 89, 98. ® Rardin /'. Walpole, 38 Ind. 146, which is an able discussion of the doctrine of subrogation as applicable to the parties to a mortgage. SUBROGATION. 1079 the debt itself. The general rule is that the suret}'' is entitled to the benefit of all the securities which the creditor has against the principal, but it applies only to such securities as continue to exist, and does not get back upon payment to the person of the principal debtor/ § 1113. The Surety is Entitled to All Equities. — The surety is entitled to the equities which the creditor holds against the principal debtor, and to those he has against all parties claiming under him.^ And if he pays off a j)art of the mortgage debt he is entitled as against the mortgagor to hold the estate for the amount he has paid.^ And after paying the whole debt, he is entitled to the securities given by the debtor after the contract of suretyship as well as those given before or at the same time, and whether the surety knew of the exist- ence of the securities or not.* An indorser upon a note not yet matured gave a mortgage upon a vessel to secure his contingent liability, by which he was entitled to an extension of time of payment. It was held that as to the mortgagee it was to be deemed a mortgage for a valuable consideration, and the mortgagee was entitled, as such, to intervene for the protection of his interest in a libel against the vessel to recover wages. Either the extension of time for the payment of the debt, or the waiver by the holder of the note of the right to sue the in- dorser, and in such suit to attach the vessel, constituted a suffi- cient consideration for this purpose.^ § 1114. For Further Security and for Further Ad- vances. — Where the principal debtor executes to the payee of a note, on which there is personal security, a mortgage for further security, until the surety pays the debt, he has no » Copis V. Middletown, Turn. & R. 224, 229 ; Hodgson v. Shaw, 3 Myl. & K. 183, 190 ; Craythorne v. Swinburne, 14 Ves. 160. ^ Havens v. Willis, 100 N. Y. 482 ; Drew t'. Lockett, 32 Beav. 499. ^Gedge v. Matson, 25 Beav. 310. *Mayhew v. Crickett, 2 Swanst. 185, 191. See, also Curtis v. Tyler, 9 Paige (N. Y.), 432 ; Gossin v. Brown, 11 Pa. St. 527. 5 The Dubuque, 2 Abb. (U. S.) 20. 1080 RIGHTS OF PARTIES BEFORE DEFAULT. right to be subrogated to the rights of the mortgagee, and to have the mortgaged premises sold and the money paid to him.^ And he is not entitled to an assignment from the creditor of a mortgage upon which the creditor has, after first taking it, made further advance, unless he pays off such advance in ad- dition to the original sum for which he became surety.^ Where there is a special contract on the part of the creditor that the securities given by the principal debtor shall be pri- marily liable, or that the surety may redeem upon paying a certain amount, the creditor cannot, as against him, make a further loan to the debtor, but must transfer the securities upon a tender from the surety of the amount of the original loan.^ § 1115. Purchaser Becoming Surety. — When a party pur- chases land, and assumes in his deed to pay off a bond and mortgage of his grantor to which the land is subject, he thereby becomes a surety in respect to the mortgage debt.* And the acceptance by the grantee of a deed of conveyance of land subject to a specified mortgage, and providing that he shall assume and pay the mortgage, binds him as effectually as tliough the deed was inter partes, and executed by both grantor and grantee. The mortgagee may treat both the mortgagor and his grantee under such a promise as principal debtors, and may have personal decree against either or both.^ A promise by the grantee to the grantor to pay a mortgage debt as part of the purchase-money of the land conveyed does not render the grantee surety for the grantor, but, as between the parties, the grantee is the principal debtor and the grantor the surety." 1 Conwell V. McCowan, 53 111. 364. "Williams v. Owen, 13 Sim. 597. ^Bowker v. Bull, 1 Sim. (N. S.) 29. See, also, Farebrother r. Wodehouse, 23 Beav. IS, 23. * Klapworth v. Dressier, 2 Beas. (N. J.) G2 ; Hoysradt v. Holland, 50 N. H. 433. ^Crawford v. Edwards, 33 Mich. 354, «Huyler v. Atwood, 26 N. J. Eq. 504. subrogation. 1081 § 1116. Subrogation of Principal Creditor to Indem- nity. — Collateral securities given by a debtor to his surety are considered as trusts for the better security of the creditor's debt, and chancery will see that their intention be fulfilled.^ This doctrine is the corollary of the doctrine that a surety is en- titled to the benefit (5f any security which the creditor may have taken from the principal. The creditor and the surety have correlative rights ; they are each entitled to the benefit of the securities by the action for the payment of the debt.^ In some cases an attempt has been made to raise a distinc- tion between a mortgage executed by the debtor to his surety to secure the debt, and a mortgage simjDly to indemnify the surety. It is held that such a mortgage merely indemnifying the surety does not in the first instance attach itself to the debt as an incident to it ; but \\ibatever equity arises in favor of the creditor in regard to the security arises afterward, and comes into existence only upon the insolvency of the parties holden for the debt ; and until this equity arises the surety has a right in equity as well as at law to release such security. But upon the insolvency of the principal and surety the cred- itor will be entitled to the benefit of the security held by the surety from the principal.^ But it is well settled that the creditor has an equitable claim to the security, as well when the mortgage is given for mere indemnity as when the condition is added that the principal shall pay the debt. The equitable right of the creditor does not rest upon contract, but upon the same equitable footing with a co-surety. It cannot be that if an indorser, who has been made liable by demand and notice, goes into insolvency, ' Keene Five Cents Sav. Bank r. Herrick, 62 N. H. 174 ; Demott v. Stockton Paper Ware Manuf. Co., 32 N. J. Eq. 124. '^ Saviors v. Saylors, 3 Heisk. (Tenn.) 525; Osborn v. Noble, 46 Mips. 449; Wrijiht V. Morley, 11 Ves. 22; Bank v. Throop, 18 Johns. (N. Y.) 505; Pratt V. Adams, 7 Paige (N. Y.), 617, 627 ; Curtis v. Tyler, 9 Paijxe (N. Y.), 432, 435 ; Parsons v. Briddock, 2 Vern. 608 ; Ex parte Waring, 19 Ves. 345 ; Ex parte Parr. Buck, 191 ; Ex parte Prescott, 3 Deac. & Ch. 218. ^ Jones V. Bank, 29 Conn. 25. See, also, Shelden on Subro., sects. 160, 161, 162 ; In re Foye, 16 Bank. Reg. 572 ; In re Fickett, 72 Me. 266 ; Keyea v. Brush, 2 Paige (N. Y.), 311 ; King v. Harman, 6 La. 607. 1082 EIGHTS OF PARTIES BEFORE DEFAULT. the mortgage taken by him for indemnity is thereby released. It ought to be held by his assignee for the benefit of his estate. But it was taken for the general benefit of all his creditors, and its object was to indemnify his estate from the payment of the particular debt. Primarily, therefore, it would seem to be the proper course to apply the security to the payment of that debt, and thus leave the other creditors of the indorser in the same condition as if the indorsement had not been made.^ In case where the principal and the sureties are all insol- vent, the creditor is entitled to the benefit of the security held by the sureties.' Thus, the payee of a promissory note is en- titled to have a mortgage given by the maker to his surety as- signed to him after their insolvency, although the condition of the mortgage is for indemnity of the surety and not to pay the note.^ § 1117. Security Given by a Stranger. — But when secu- rity is given by a stranger to indemnify the surety, and not for the payment of the debt, a trust does not attach to it for the creditor, and he cannot be subrogated to the rights of the surety. Nor is it material that the security was given by the wife of the principal, she being a stranger to the debt. Thus, when a wife gives a mortgage on her property to in- demnify an indorser of her husband's draft, to which the wife was not a party, a holder or acceptor of the draft who did not take it on the faith of such mortgage, is not subrogated to the indorser's mortgage.* Nor can the principal creditor obtain subrogation to securi- ties which several sureties of the principal debt have pi-ovided 1 Moses V. Murgatroj'd, 1 Johns. Ch. (N. Y.) 119; Phillips v. Thompson, 2 Johns. Ch. (N. Y.) 418 ; Ten Eyck v. Holmes, 3 Sandf. Ch. (N. Y.) 428 ; Aldrich r. Martin, 4 K. I. 520; Hopewell v. Bank, 10 Leigh (Va.), 214, 221; New Bedford Sav. Inst. v. Bank, 9 Allen (Mass.), 175. 2 In re Fickett, 72 Me. 266 ; In re Foye, 16 Bank. Reg. 572 ; In re Jay Cox, 8 Bank. Res. 241. =* Keene Five Cents Sav. Bank v. Herrick, 62 N. H. 174 ; Holt v. Bank, 62 N. H. 551. * Taylor v. Bank, 87 Ky. 398; Leggett r. McClelland, 39 Ohio St. 624; MackHn v. Bank, 83 Ky. 314. I SUBROGATION. 1083 among themselves to secure the payment by each of his equal share of the principal debt, because the sureties' liabilities have never become fixed and absolute/ Where the principal creditor has a right to be subrogated to the indemnity mortgage, his equity is the same whether he knew of the surety's indemnity or not.^ When the design of the mortgage is merely to protect the sureties against the note, and protection having been given by the creditor's discharge of the sureties, the condition of the mortgage is fulfilled. Thus, when the sureties assign the mort- gage to the creditor for his security, and take a discharge under seal, the mortgage is no longer in force.^ § 1118. Laches May Defeat Subrogation. — Subrogation is founded on the principles of equity and benevolence, and is not to be allowed in favor o-^ one who has permitted the equity he asserts to sleep in secrecy until rights of others would be injuriously affected by its assertion and enforcement.^ So when one has purchased or expended money in good faith, without notice, he is in no fault, and there is no ground for demand upon his conscience in favor of one who lacks dili- gence in making known a latent equity which he claims.^ § 1119. Defense to Equitable Claim of the Creditor. — It is no defense to the equitable claim of the creditor that his personal remedy by an action at law against the surety is barred by the statute of limitations ; the debt remains in force and the lien is not discharged as a general rule until the debt is paid. The creditor has a double remedy, one upon the mortgage to recover the land, and the other upon the note against the principal or surety to recover the debt." 1 Seward ?-. Huntington, 94 N. Y. 104 ; Grant v. Ludlow, 8 Ohio St. 1. ''Carpenter v. Bowen, 42 Miss. 28 ; McMuUen v. Neal, 60 Ala. 552. 3 Sumner r. Bacheldcr, 30 Me. 35. * Grins's Appeal, 89 Pa. St. 336 ; Sheldon on Subro., sects. 110, 111 ; Jarvis v. Whitman, 12 B. Mon. (Ky.) 97. * Thomas v. Stewart, 117 Ind. 50. « Eastman v. Foster, 8 Met. (Mass.) 19 ; Crosby ?•. Crafts. 5 Hun (N. Y.),327; Thayer ;■. Mann, 19 Pick. (Mass.) 535 ; Holt r. Bank, 62 X. H. 551. See, also, Spears v. Hartly, 3 Esp. 81 ; Clark v. Ely, 2 Sandf. Ch. (N. Y.) 166. 1084 RIGHTS OF PARTIES BEFORE DEFAULT. Security was given by the principal on a note to the indorser or surety to indemnify him ; and it was held that the security inured to the benefit of the creditor.^ And so where property mortgaged to an indorser as security is sold by the assignee of the insolvent principal, the proceeds will be applied in payment of the debts for which the security was given.^ When the surety takes a mortgage from the principal to in- demnify him against the debt, and afterward assigns the mort- gage to the creditor in consideration that he will release him from all liability on the debt other than the use of his name in the collection of the same, he is not discharged from the incumbrance of the mortgage, and the creditor is entitled to hold the land as against a subsequent purchaser of the equity of redemption, until the latter shall pay the amount of the creditor's claim.^ And when the notes upon which the mort- gagee is surety are held by different persons, he holds the mort- gaged premises in trust for the benefit of all holders, and can- not by assigning the mortgage to one of the creditors terminate the trust as to the others.* And when the principal debtor has become insolvent it would seem that even under the authority of the Connecticut cases, which modify somewhat the rule fol- lowed in other jurisdictions,^ the equitable lien, which attached to the property in the hands of the mortgagee in the nature of a trust for the security and payment of the notes will remain so attached in the hands of assignees of the mortgage. It is no defense to the equitable claim of the creditor that the mortgage of indemnity has been foreclosed against the mortgagor by an assignee of the mortgage.® > In re Fickett, 72 Me. 266. 2 Aldrieh v. Martin, 4 R. I. 520. 2 Hayden v. Smith, 12 Met. (Mass.) 511. *Hoiti). Bank, 62N. H. 551. * Jones V. Bank, 29 Conn. 25; Thrall v. Spencer, 16 Conn. 139; Homer v. Savings Bank, 7 Conn. 478. «Holt V. Bank, 62 N. H. 551. I CHAPTER XXVII. payment of the debt. Article 1. Constructive Payment. I 1120. Tender. I 1130. Effect of a Valid Tender. § 1121. Reinvestment of Title. ^ 1131, Defense by Mortgagee. § 1122. Tender After Default. | 1132. Mode of Making Tender. § 1123. Where a Mortgage is Merely a § 1133. In What Money. Lien. I 1134. United States Treasury Notes. ? 1124. By Whom Made. I 1135. In Bank Bills. §1125. To Whom Made. I 1136. Depreciated or Un cur rent § 1126. Where to be Made. Money. I 1127. When a Tender May be Ex- I 1137. Mortgagor May Collect Over cused. Payments. I 1128. Time of Day of Making Ten- § 1138. Costs. der. I 1139. Production of Money. I 1129. A Valid Tender Must Be Un- conditional. § 1120. Tender — at Common Law. — At common law a ten- der of the anount due must be made on the very day on which the money is due ; ^ so at common law where the legal title is in the mortgagee, the effect of the tender at the law day will satisfy the condition of the mortgage as fully as if payment had been made, and the estate is revested in the mortgagor," and the mortgagor may re-enter, and the lien is discharged, but the mortgagee may recover the debt by action against the mortgagor.^ But a tender of money before it is due is of no avail, as the mortgagee or creditor is not bound to receive it before due according to the terms of the contract.* 1 Salinas v. Ellis, 26 S. Car. 337 ; Dixon v. Clark, 5 C. B. 365 ; Powe v. Powe, 42 Ala. 113 ; Toulmin v. Sager, 42 Ala. 127. 2 Salinas v. Ellis, 26 S. Car. 337; Grain v. McGoon, 86 HI. 431 ; Doody r. Pierce, 9 Allen (Mass.), 141. ' Martindale v. Smith, 1 Add. & El. N. S. 389 ; Weeks v. Baker, 152 Mass. 20. *Tillou V. Brittan, 4 Halst. (N. J.) 120; Saunders v. Frost, 5 Pick. (Mass.) 1085 1086 RIGHTS OF PARTIES BEFORE DEFAULT. But it has been held that if the debt does not draw interest, a tender before the law day will be good/ and that a tender before due of the amount with all interest up to law day may be good.^ However, if the creditor accej^ts the payment, it is sufficient and valid.'* § 1121, Reinvestment of Title. — Whenever the condition of the mortgage has been fully performed by payment the title revests in the mortgagor.* If the condition be to sup- port the mortgagee, upon his death the title revests in the mortgagor without any reconveyance.^ But a failure to perform according to condition is not sufficient to revest the title without a reconveyance." And in general whenever the mortgagee receives satisfaction of the debt according to agreement, the title then revests in the mortgagor.' And if the mortgagee accepts the money after condition broken and before suit, this action as to chattels revests the title in the mortgagor.^ § 1122. Tender After Default. — At common law a tender after default is not sufficient, and does not discharge the lien.^ The general rule is that a tender made after default in the terms of the mortgage must be kept good and paid into court 267 ; Mitchell v. Cook, 29 Barb. (N. Y.) 243 ; Brown v. Cole, 14 Sim. 427 ; Abbe V. Goodwin, 7 Conn. 377. 1 M'Hard v. Whetcroft, 3 Harr. & McH. (Md.) 85. ^ Hoyle V. Cazabat, 25 La. Ann. 438. ^Carpenter i'. Welch, 40 Vt. 251 ; Talbott v. Braddell, 1 Vem. 394. * Merrill v. Chase, 3 Allen (Mass.), 339 ; Erskine v. Townsend, 2 Mass. 493 ; Richardson r. Cambridge, 2 Allen (Mass.), 118; Hohnan v. Bailey, 3 Met. (Mass.) 55. ^ Munson v. Munson, 30 Conn. 425. ^ Camp V. Smith, 5 Conn. 80. T Patchin v. Pierce, 12 Wend. (N. Y.) 61 ; West v. Crary, 47 N. Y. 423 ; Harrison v. Hicks, 1 Port. (Ala.) 423 ; Greene v. Dingley, 24 Me. 131 ; Moak v. Bourne, 13 Wis. 514 ; Barry v. Bennett, 7 Met. (Mass.) 354. 8 Leighton v. Shapley, 8 N. H. 359. 9 Shields v.Lozear, .34 N. J. L. 496; Powell v. Mitchell, 68 Me. 21 ; Powe v. Powe, 42 Ala. 113 ; Maynard v. Hunt, 5 Pick. (Mass.) 240 ; Storey v. Krewson, 55 Ind. 397. PAYMENT OF THE DEBT. 1087 to be sufficient.' The mortgagor must keep the tender good by bringing it into court, where an action is begun.^ Payment after condition broken does not revest the mortgagor with the legal title is the general rule, and he will have to resort to a court of equity for a reconveyance of the title when the mort- gagee refuses to make such a release of title, and this doctrine is held by many States where the common-law rule is adopted.^ In ejectment by a mortgagor against a mortgagee in posses- sion after condition broken, proof that the mortgagor tendered what he claimed was the balance due on the mortgage debt, without showing that the sum tendered was the full amount due, is insufficient to show that the mortgagee's right to pos- session has terminated.* § 1123. Where a Mortgage is Merely a Lien. — In most of those States where a mortgage is merely a lien, a tender made after default before action brought will discharge the lien of the mortgage.^ So a tender of the money due at any time be- fore foreclosure discharges the lien, though made after the law day and not kept good.^ In New York, in reference to real estate mortgages, a tender on the law day discharges the lien of the mortgage ; and a tender after the law day will have the same effect, if made before action to foreclose, though not kept good by depositing the amount in court,^ but this rule does not apply to chattel mortgages.^ In Massachusetts the equitable rule is adopted as to tender that the payment or tender of payment of the debt and all 'Musgat V. Pumpelly, 46 "Wis. 660 ; Greer v. Turner, .36 Ark. 17 ; Alexander V. Caldwell, 61 Ala. 543. ^ Werner v. Tuch, 127 N. Y. 217 ; Strusguth v. Pollard, 62 Yt. 157. 3 Stewart r. Crosby, 50 Me. 130 ; Parsons v. Welles, 17 Mass. 419 ; Howe v. Lewis, 14 Pick. (Mass.) 329 ; Cross v. Robinson, 21 Conn. 379. * Brown v. Bookstaver (111.), 31 N. E. Rep. 17. * Salinas v. Ellis, 26 S. Car. 337. « Kortright v. Cady, 21 N. Y. 343 ; Moynahan r. Moore, 9 Mich. 9 ; Thornton V. Bank, 71 Mo. 221 ; Ferguson v. Popp, 42 Mich. 115; Flanders v. Chamber- lain, 24 Mich. 305 ; Yan Husan v. Kanouse, 13 Mich. 303 ; Potts v. Plaisted, 30 Mich. 149 ; Salinas v. Ellis, 26 S. Car. 337. •^ Kortright r. Cady, 21 N. Y. 343 ; Jackson v. Crafts, 18 Johns. (N. Y.) 110. sNoyes v. Wyckoff, 30 Hun (N. Y.), 466. 1088 RIGHTS OF PARTIES BEFORE DEFAULT. proper charges at any time before foreclosure, has the same effect upon the rights of the parties in the property which it would have had if made when the debt was due.' And, in Minne- sota, a tender of the amount due, even after the law day and before action to foreclose, discharges the lien of the mortgage, and the tender need not be kept good by bringing the money into court/ In New Hampshire the money must be brought into court, if made after the law day.^ Under this doctrine, the mortgage being merely a lien, when the debt is paid the lien is discharged.* This rule, however, does not apply where the debt is discharged by the statute of limitations, or by a discharge in bankruptcy.^ § 1124. By Whom Made. — If there be but one debtor, he is the right person to make the tender ; or, if there are several debtors, a tender by one or by all of them is sufficient ; and this is so whether the debt is joint or joint and several. Or an authorized agent may make the tender.® So the mortgagor may make the tender, even though he has sold his estate,^ and a purchaser who has assumed the payment of the mortgage may make a valid tender of payment.^ But a party, having no interest in the mortgaged premises or in a tender made, has no right to make a tender on his own behalf of the amount due on the mortgage.^ And so a tender of the amount due on a joint and several promissory note, by a 1 Weeks v. Baker, 152 Mass. 20. * Moore v. Norman, 43 Minn. 428. 3 Robinson v. Leavitt, 7 N. H. 73, 93 ; Bailey v. Metcalf, 6 N. H. 156. * Kortright v. Cady, 21 N. Y. 343, 366 ; Remington Paper Co. v. O'Dougherty, 81 N. Y. 474 ; Wanzer v. Gary, 76 N. Y. 526 ; Griffin v. Lovell, 42 Miss. 402 ; McNair v. Picotte, 33 Mo. 57 ; Caruthers v. Humphrey, 12 Mich. 270 ; Dutton V. Merritt, 41 Mich. 537 ; Sliields v. Lozear, 34 N. J. L. 496 ; Osborne v. Tunis, 25 N. J. L. 633, 651 ; Johnson v. Sherman, 15 Cal. 287 ; McMillan v. Richards, 9 Cal. 365 ; Salinas v. Ellis, 26 S. Car. 337 ; Moore v. Norman, 43 Minn. 428 ; Ledyard v. Chapin, 6 Ind. 320 ; Terrio v. Guidry, 5 La. Ann. 589 ; Shinkel v. Hanewinkel, 19 La. Ann. 260. * Bush V. Cooper, 26 Miss. 599 ; Chamberlain v. Meeder, 16 N. H. 381. 6Read u. Goldring, 2 Maul. & Selvv. 86. •' Blim V. Wilson, 5 Phil. (Pa.) 78. 8 Harris v. Jex, 66 Barb. (N. Y.) 232 ; 55 N. Y. 421. 'Mahler v. Newbaur, 32 Cal. 168. PAYMENT OF THE DEBT, 1089 surety, while an action brought by the holder against the prin- cipal is pending, will not discharge the surety, unless he also offers to indemnify the holder against the costs of such action.^ So, where a mortgage is given to indemnify a surety on the mortgagor's note, and four days before maturity a third per- son, in pursuance of an arrangement made by the surety, paid the note, it does not amount to the payment of the note by the debtor.' It has been held that the grantee of the redemption, who is not jiersonall}^ liable for the mortgage debt, cannot discharge the mortgage lien by tender ; that he must redeem by actual payment.^ In general, a tender, in order to bar, must be made by the debtor or his legal representative, and not by a stranger.* § 1125. To Whom Made. — A tender to the mortgagee or creditor in person is legal. And if the debt is due to several persons jointly, it may be tendered to either of them, though it must be pleaded as a tender to them all.^ The tender must be made to the creditor, or to some one authorized to receive it on his behalf^ Mone}' due a cestui que trust must be tendered to the trustee.^ The party having the right to reconvey or to satisfy the mort- gage after payment is a proper party to tender the' amount of the debt.^ And a tender to an assignee of the debt is a good tender,* and if the debtor or mortgagor has notice of such 1 Hampshire ]Manuf. Bank >\ Billings, 17 Pick. (Mass.) 87. ^ Camp r. Smith, 5 Conn. SO. 3 Harris r. Jex, 66 Barb. (X. Y.) 232. ♦McDougald v. Dougherty, 11 Ga. 570. Pee, also, Cropp r. Hambledon, Cro. Eliz. 4S ; Watkins r. Ashwick, Cro. Eliz. 132. s Douglas v. Patrick, 3 Term R. 683; Oatman v. Walker, 33 Me. 67. 6 Hornby v. Cramer, 12 How. (X. Y.) 490; King v. Finch, 60 Ind. 420; Kir- ton V. Braithwaite, 1 Mees. & Wei. 310 ; Goodland v. Blewith, 1 Camp. 477 ; Smith V. Goodmn, 4 Barn. & Ad. 413 ; Crozer v. Pilling, 4 Barn. & Cres. 26 ; Billiot V. Robinson, 13 La. Ann. 529 ; Jackson v. Crafts, 18 Johns. (N. Y.) 110. ^Chahoon >i Hollenback, 16 Serg. & R. (Pa.) 425. ^Van Buren r. Olmstead, 5 Paige (N. Y.), 9. 'Goodland v. Blewith, 1 Camp. 477. 69 1090 RIGHTS OF PARTIES BEFORE DEFAULT. assignment he must tender the amount to the assignee.^ But it has been held that if the mortgagor has no knowledge of the assignment, he may make a valid tender to the mortgagee which will extinguish the lien.^ A tender to one who is, in fact, the attorney of the creditor, although he denies his authority, is a good tender.^ An agent may have authority to demand payment, but no authority to receive it, in which case a tender to him would be ineffectual.* § 1126. Where to be Made. — When the contracts provide for the payment at a particular place, a tender at that place will be sufficient. When no place of payment is mentioned, and the debt is due in money, a tender to the person is suffi- cient,^ and the debtor is bound to seek the creditor wherever he may be within the State, and make tender to him,'' but he is not bound to go to another State for that purpose ; "^ with this exception, the debtor must seek the creditor.^ But when the mortgagee has removed from the State, leaving no authorized agent to receive the payment of the debt, then the mortgagor is relieved from the duty of making a tender.^ § 1127. When a Tender May Be Excused. — A mortgagor or debtor may be excused in making tender under some cir- cumstances. Thus, where the creditor designedly absents him- self from home, for the fraudulent purpose of avoiding a ten- 1 Dockray v. Noble, 8 Me. 278. •^ Hetzell V. Barber, 6 Hun (N. Y.), 534. See, also, Reed v. Marble, 10 Paige (N Y.), 409. 3 Mclniffe v. Wheelock, 1 Gray (Mass.), 600 ; Moffat v. Parsons, 5 Taunt. 307. *Grussy v. Schneider, 50 How. Pr. (N. Y.) 134. ^Slingerland v. Morse, 8 Johns. (N. Y.) 474; Bates v. Bates, "Walk. (Miss.) 401. « King V. Finch, 60 Ind. 420 ; Littell v. Nichols, Hard. (Ky.) 71 ; Houbie v. Volkening, 49 How. Pr. (N. Y.) 169. •^ Allshouse V. Ramsey, 6 Whart. (Pa.) 331. 8 Smith V. Smith, 25 Wend. (N. Y.) 405. 9 Conklin v. Conklin, 54 Ind. 289 ; Houbie v. Volkening, 49 How. Pr. (N. Y.) 169. See, also, Hale v. Patton, 60 N. Y. 233 ; Hoag v. Parr, 13 Hun (N. Y.), 95. PAYMENT OF THE DEBT. 1091 der.' The mortgagee's conduct or declarations may be such as to excuse a tender being made, as when he endeavors to avoid a tender.^ Mr. Fisher says that a tender may be suffi- cient when made at the mortgagee's house in his absence, where the mortgagee is dehberately keeping out of the way to avoid the tender ; or, in case the mortgagee has expressed a determination to hold the property as long as he could, and after tliat to transfer it.^ The mortgagor will be excused from making a tender, when it is shown that a proper tender would not be accepted by the mortgagee.* A mortgagee claiming more than is due does not excuse the making of the tender, because if made, he may ac- cept it.^ § 1128. Time of Day of Making Tender. — AVhere a thing is to be done anywhere, a tender at a convenient time before midnight is sufficient ; where a thing is to be done at a par- ticular place, and where the law im|:Jies a duty on the party to whom the thing is to be done to attend, that attendance is to be by daylight, and a convenient time before sunset.*^ A tender after sundown of the day on which the payment, under a contract whereof time was of the essence, was due, was held to be sufficient.^ If some hour has been fixed upon for payment, a tender at any time within the hour following the time named continued to the end of the hour is sufficient.^ ^ Southworth v. Smith, 7 Cush. (Mass.) 391 ; Gilmore v. Holt, 4 Pick. (:Mass.) 257. 2 Manning r. Burges, 1 Cas. in Eq. 29 ; Gyles v. Hall, 2 P. Wms. .378 ; 2 Fisher on Mort. (3d ed.) 790. 3 2 Fisher on Mort. (3d ed.) 790. *Gorham v. Forson, 119 111. 435 ; Atkinson v. Morrissy, 3 Oreg. 332 ; Vaupcll V. Woodward, 2 Sandf. Ch. (N. Y.) 143 ; Kerford v. Mo'ndel, 28 L. J. Eq. 303 ; Scarfe r. Morgan, 4 Mees. & Wels. 270. s Allen r. Smith, 12 C. B. X. S. 638; Ashmole v. Wainwright, 2 Ad. & El. (N. S.) 837. ^ Startup V. Macdonald, 6 Man. & Gr. 593. ' McClartey v. Gokey, 31 Iowa, 505. 8 Knox V. Simmona, 4 Bro. C. C. 433. See, also, Bernard v. Norton, 10 L. T. N. S. 183. 1092 EIGHTS OF PARTIES BEFORE DEFAULT. § 1129. A Valid Tender Must be Unconditional. — A tender of money in paj^ment of a debt must be without qual- ifications ; there must be nothing raising the impUcation that the debtor intends to cut off or bar a claim for any amount beyond the sum tendered,^ And the mortgagee must have a reasonable time to compute the amount due.^ The mortgagee must, in every case, have a reasonable opportunity to look over the mortgage and accompanying papers to calculate and ascer- tain the amount due, and if such papers are not present he must be allowed a reasonable time to procure them and make the computations.^ A condition that the holder shall execute a quit-claim deed or a discharge of the record or an assignment is insufficient and invalid.^ And, on the other hand, the mortgagee has no right to add conditions to his acceptance.^ A tender must be unconditional and unqualified, and if there is either an express or implied demand of a receipt, or that the mone}^ shall be?j ; Hitchcock v. Harrington, 6 Johns. (N. Y.) 290; Glass ?).' Elhson, 9 N. H. 69; Snow v. Stevens, 15 Mass. 278; Fay v. Cheney, 14 Pick. (Mass.) 399 ; Ely v. Scofield, 35 Barb. (N. Y.) 330 ; Swartz V. Leist, 13 Ohio St. 425 ; Griffin v. Lovell, 42 Miss. 402 ; Tabor v. Tabor, 3 Swanst. 636. ^Stribling v. Coal Co., 31 W. Va. 82; Wood's Appeal, 92 Pa. St. 379. *Reed v. Miller, 1 Wash. St. 426. 5 Bank v. Charles, 86 Cal. 322. 8 Hatch V. Proctor, 102 Mass. 351 ; Fosters. Bates, 12 Mees. & W. 226 ; Reece V. Reece, 34 N. J. Eq. 33. ^ Fesmire v. Shannon, 143 Pa. St. 201 ; Stuyvesant v. Hall, 2 Barb. Ch. (N. Y.) 151 ; People v. Keyser, 28 N. Y. 226, 228 ; Begert v. Hertell, 4 Hill (N. Y.), 492 ; Douglass v. Satterlee, 11 Johns. (N. Y.) 16. PAYMENT OF THE DEBT. 1113 elude a subsequent action for the foreclosure of the mortgage, in which the estate may be subjected to costs.^ § 1161. Foreign Executor, or Administrator. — The title to real estate is regulated, governed, and established by the lex rei sitse, and whenever it is necessary to make title to lands through the official acts of the executor or administrator, it must be the executor or administrator deriving his authority from or recognized by the lex rei sitse? If a foreign executor can collect a debt due from the debtor in another State, he has authority to do so, and may give an acquittance. But it is necessary to show a clear record that ad- ministration be taken in the State where the land lies that is mortgaged.^ But a foreign administrator, as such, has no power to bring suit in another State.* The courts of the State where the land lies will not aid a foreign administrator or executor, as such, to enforce the payment of a mortgage, until he takes out ad- ministration in such State.^ He has no authority or power to bring suit in another State in his representative capacity, until he has taken out administration in such State.® ^ Moran v. Gardemeyer, 82 Cal. 96. ■■^ Kerr v. Moon, 9 Wheat. (U. S.) 565 ; Cutter v. Davenport, 1 Pick. (Mass.) 81; Hutching v. Bank, 12 Met. (Mass.) 421, 424; Hayes v. Lienlokken, 48 Wis. 509 ; Stone v. Scripture, 4 Lans. (N. Y.) 186. 'Hutchins v. Bank, 12 Met. (Mass.) 421, 425. * Dial V. Gary, 14 S. Car. 573 ; Doolittle v. Lewis, 7 Johns. Ch. (N. Y.) 45, 46. 5 Peterson v. Bank, 32 N. Y. 22; Parsons v. Lyman, 20 N. Y. 103, 112; Vroom V. Van Home, 10 Paige (N. Y.), 549 ; Trecothick v. Austin, 4 Mason, C. C. 16, 33. « Dial V. Gary, 14 S. Car. 573. 1114 EIGHTS OF PARTIES BEFORE DEFAULT. Article 4. Foreclosure is a Payment Pro Tanto. § 1162. Payment by Foreclosure. § 1166. Sale Set Aside. i 1163. Union of the Titles of the g 1167, Foreclosure by Entry and Mortgagor and Mortgagee. Possession. § 1164. Sale Under Power. § 1168. Purchasing Under Execution ^ 1165. The Mortgage Lien is Dis- Sale. charged if the Whole Estate is Sold. § 1162. Payment by Foreclosure. — The foreclosure of a mortgage does not satisfy the debt, provided it does not bring enough to pay the debt. To the extent of the value of the property acquired, at the time when the mortgagor's right therein was extinguished the mortgagee's debt is to be re- garded as satisfied, but no further.^ Chief Justice Doe says that the foreclosure of the mortgage by which the notes were secured is a payment to the amount of the value of the land.^ So where a deed of trust, executed to secure the note of the grantor, provided that in default of payment the trustee should sell the property on these terms : " The amount of indebtedness secured by said deed of trust unpaid, with ex- penses of sale, in cash, and the balance at twelve and eighteen months," and the proceeds of the sale made by the trustee were less than the amount due on the note, the holder is not estopped to deny that his note is satisfied by the payment to him of such proceeds.''' The question of the value of the land at the time the fore- closure is complete, is one of fact to be determined on all the evidence.^ ^ Clark V. Jackson, 64 N. H. 388. *Lane v. Barron, 64 N. H. 277 ; Dearborn v. Nelson, 61 N.H. 249 ; Fletcher V. Chamberlin, 61 N. H. 438, 493, 494 ; Shepherd v. May, 115 U. S. 505 ; De- vereaux v. Fairbanks, 52 Vt. 587 ; Vansant v. AUmon, 23 111.30 ; Nunemacher V. Ingle, 20 Ind. 135 ; Germania Build. Asso. v. Neill, 93 Pa. St. 322. ^ Shepherd v. May, 115 U. S. 505. See, also, Noyes v. Rockwood, 56 Vt. 647. * Androscoggin Bank v. McKenney, 78 Me. 442 ; Lane v. Barron, 64 N. H. 277. PAYMENT OF THE DEBT. 1115- If the mortgaged premises are of greater value than the debt, of course, the debt becomes extinguished by foreclosure.^ A junior mortgagee may make payment of the prior mort- gage by buying in the property at a foreclosure sale for an amount equal to the debt and costs.^ In case of strict foreclosure, if the mortgagor does not elect to redeem, and a judgment is obtained against him for the balance of the debt — that is, the difference between the value of the land and the debt — there is no ecjuity thereafter in permitting him to redeem.^ At one time, a foreclosure and possession of the mortgaged propert}'' by the mortgagee extinguished the debt, in Connecti- cut,^ but this law has been changed to correspond to the gen- eral rule of other States.^ § 1163. Union of the Titles of the Mortgagor and the Mortgagee. — When the mortgagee purchases the equity of redemption at a sale of the mortgagor's assignee in insolvency, as against those lands, the union of the titles of the mortgagor and the mortgagee becomes perfected in the latter, and his remedy exhausted, but the mortgage debt is neither satisfied in fact nor extinguished in law.^ To hold otherwise would be inequitable, and in such case it is held that the union of titles will not of itself be considered a merger so as to operate as payment or satisfaction of the mortgage debt ; and this is the rule both at law and in equity.^ Judge Blodgett says : " The process of foreclosure is only one of the ways and remedies of a mortgagee to obtain an ab- solute title to the property. Among others he may obtain 1 Hurd V. Coleman, 42 Me. 182 ; Green v. Cross, 45 N. H. 574 ; Clark v. Jack- son, 64 N. H. 388. 2 Hill r. Helton, 80 Ala. 528. 3 Lovell V. Lcland, 3 Vt. 581 ; Noyes v. Rockwood, 56 Vt. G47. * Derby v. Landon, 3 Conn. 62; M'Ewen v. Welles, 1 Root (Conn.), 202. * Post V. Tradesmen's Bank, 28 Conn. 420 ; Bassett v. Mason, 18 Conn. 131 ; Peck's Appeal, 31 Conn. 215 ; Findlay v. Hosmer, 2 Conn. 350. 6 Clark V. Jackson, 64 N. H. 388, 391. ^ Walker v. Baxter, 26 Vt. 710. 1116 RIGHTS OP PARTIES BEFORE DEFAULT. such title by becoming the purchaser of the equity of redemp- tion at a sale by the mortgagor's assignee in insolvency, or an execution, both of which may often be a convenient and inex- pensive mode of procedure ; and, as the law gives the mortgagor the same right to redeem from the sale as from a foreclosure, and imposes the same accountal^ility for rents and profits upon the mortgagee, there would seem to be no difference in princi- ple between the one mode and the other in respect of the mortgage debt ; and we are of opinion there is none." ^ And this seems to be the weight of authority. The purchase of the equity of redemption by the mortgagee under such cir- cumstances is not at law a payment of the mortgage debt, and the mortgagee may claim and show that the property is of less value than the debt.^ The mortgagee may take the equity of redemption in full payment of the debt, by accepting a deed of the mortgagor, of the premises mortgaged, and such payment extinguishes the mortgage ; ^ and this is the presumption when the mortgagee makes no demand for the balance for a long time after taking the premises.'* When the equity of redemption is released, any mortgage held as collateral security is thereby paid in full.^ When the mortgagee buys at a sale other than a foreclosure sale, it has been held that the debt is extinguished to the amount of the true value of the land,^ 1 Clark V. Jackson, 64 N. H. 388, 391. 2 Murphy r. Elliott, 6 Blackf. (Ind.) 482 ; Johnston v. Watson, 7 Blackf. (Ind.) 174 ; Post v. Tradesmen's Bank, 28 Conn. 420 ; Speer v. Whitfield, 2 Stockt. (N. J.) 107 ; Lydecker v. Bogert, 38 N. J. Eq. 136 ; Walker r. Baxter, 26 Vt. 710 ; Findlay v. Hosmer, 2 Conn. 350. See, also, Marston v. Marston, 45 Me. 412 ; Puffer v. Clark, 7 Allen (]Mass.), 80 ; Spencer v. Harford, 4 Wend. (N. Y.) 381 ; Hartz's Appeal, 40 Pa. St. 209. ^Triplett r. Parmlee, 16 Nebr. 649; Lyman r.Gedney, 114 111. 388; Cathn V. Washburn, 3 Vt. 25, 42. * Burnet ;'. Denniston, 5 Johns. Ch. (N. Y.) 35. See, also, Corwin v. Collett, 16 Ohio St. 2S9 ; Jennings v. Wood, 20 Ohio, 261 ; Loomer v. Wheelwright, 3 Sandf. Ch. (N. Y.) 135. 5 Wheelwright v. Loomer, 4 Edw. (N. Y.) 232 ; McGiven v. Wheelock, 7 Barb. (N. Y.)' 22. 6 Trimmier v. Vise, 17 S. Car. 499. PAYilENT OF THE DEBT. 1117 § 1164, Sale Under Power. — When the land, if sold under a power of sale contained in tlie mortgage, or by decree of court, brings less than the amount of the note, an action can be maintained on the note for the balance due.^ If the mortgagee buys the land himself at such sale, in all respects complying with the power, for a larger sum than the amount of the mortgage debt and expenses of the sale, the note is thereby paid and the mortgagee cannot by refusing to execute a deed rescind the sale and maintain an action on the note.^ If the amount fully pays the debt the mortgagee cannot hold the note or bond for a greater security of his title without the mortgagor's consent.^ When the mortgagee buys the land he is bound to complete the sale the same as any other purchaser."* So where land is sold under a power contained in a mort- gage which a subsequent grantee has assumed to pay, and the grantor buys the land for a sum less than the mortgage debt, the debt is not thereby fully paid, and the grantee is still liable for the balance due on the mortgage.^ If the mortgagee purchases at a foreclosure, sale but the equity has not been foreclosed, his mortgage title is unaff'ectfd." The sale must be so conducted as to obtain the full value of the property.^ § 11G5. The Mortgage Lien is Discharged if the Whole Estate is Sold. — When the whole estate is sold the mortgage lien is discharged. Thus, the whole property was sold to sat- isfy the amount due, leaving some of the notes not yet ma- tured. It was held that the mortgage lien was discharged as ^Draper r. Mann, 117 Mass. 4.'-)9 ; Winu' '-. Hayford, 124 Mass. 249; Pierce V. Potter, 7 Watts (Pa.), 475; Berger r. Hieser, G Whart. (Pa.) 210 ; Mott v. Clark, 9 Pa. St. 399 ; Fcnton v. Lord, 128 Mass. 4G6. ''Hood r. Adams, 124 Mass. 481. 3 In re Coster, 2 Johns. Ch. (N. Y.) 503. *Hood V. Adains, 124 Mass. 481. ^Fenton v. Lord, 128 Mass. 466. fiHollister v. Dillon, 4 Ohio St. 197. ^ Howard v. Ames, 3 ]Met. (Mass.) 308. 1118 KIGIITS OF PARTIES BEFORE DEFAULT, to the amount not due.^ And so when the estate is purchased by the holder of the note not yet due, will the lien be dis- charged.^ The same principle applies when a decree of sale has been made upon the last of a series of mortgage notes, without including the preceding notes. The lien is wholly discharged. Thus, when a mortgagee foreclosed his mortgage as to the last of three notes falling due, the first having been paid and the second then due, and a sale was made of the whole estate, it was held on a second bill by the mortgagee to foreclose the second note that the lien of the mortgage was released. A party holding a mortgage may foreclose the moitgage for any sum then due, and no more ; but when he elects to sell under a power in the mortgage, or to foreclose in chancery, he can only sell or foreclose for the amount then due, according to the terms of the mortgage, which of necessity operates to release the security for the amount not due.^ Where a decree of foreclosure directs a sale subject to the mortgage for the unforeclosed part of the debt, and the sale is so made under an announcement to that effect, the lien is not released as to the notes not due.* And the mortgagee's purchase at a foreclosure sale, though for a less sum than the mortgage debt, extinguishes the mortgage though not the debt.^ § 1166. Sale Set Aside. — When the sale is void for irregu- larities or for fraud it will be set aside, and the mortgage debt is not paid even in part, and the mortgagee may again pro- ceed to sell.^ But a purchaser under a defective foreclosure sale, which does not give him a clear title, takes the mortgage title, and there is no payment, but an assignment.'^ So when a 1 Smith V. Smith, 32 111. 198. ''Robins v. Swain, 68 111. 197. 3 Rains v. Mann, 68 111. 264. * Hughes V. Frisby, 81 111. 188. ^Seligman v. Laubheimer, 58 HI. 124; Finley v. Thayer, 42 111. 350. «Stackpole v. Robbing, 47 Barb. (N. Y.) 212. ^Johnson v. Sandhoff, 30 Minn. 197; Johnson v. Robertson, 34 Md. 165; Brown v. Smith, 116 Mass. 108 ; Moore v. Cord, 14 Wis. 213 ; Muir v. Berk- PAYMENT OF THE DEBT. 1119 mortgage has been foreclosed, and the value of the land ap- plied pro rata on the note, no action lies on the note for the balance, if it is barred by the statute of limitations, and the debt is therefore wholly discharged.' § 1167. Foreclosure by Entry and Possession. — When the mortgagee enters and takes possession of the mortgaged land, which is not sufficient to pay the debt, it inures by way of payment pro tanto? And when the foreclosure is complete and the mortgagee's title indefeasible, and the value of the land equal to the mortgage debt and costs, the mortgagor can then set up a defense of payment.^ A foreclosure by entry of a mortgage held by the assignee as collateral security must be done for the benefit of all the parties interested, and the property after foreclosure as before is held in trust to pay the debt for which it is pledged, and •then the surplus to the owner. The property must be sold and reduced to cash at a fair valuation, and the payment dates from the actual sale of the property and conversion into cash.* A second mortgagee who has never entered may purchase the title of a prior mortgagee who has foreclosed by entry, and he will then obtain an absolute title wholly independent of his own mortgage ; he can then sue on his own mortgage note, and the mortgagor will be debarred from showing tliat such debt is paid by the rents and j^rofits received by the mortgagees.' § 1168. Purchasing Under Execution Sale. — If the mort- gagee purchases the mortgaged premises upon an execution at law against the mortgagor in favor of a third person, and pur- chases subject to the mortgage, he thereby extinguishes his shire, 52 Ind. 149 ; Taylor v. A. & M. A^go., 68 Ala. 229. Compare Goodenow V. Ewer, 16 Cal. 461. I Gross ('. Gannett, 39 N. H. 140. =* Newall i). "Wright, 3 Mass. 138, 150; Amory r. Fairbanks, 3 :Masp. 562; Hedge r. Holmes, 10 Pick. (Mass.) 380; George v. Wood, 11 Allen (Mass.), 41 ; Dooley v. Potter, 140 Mass. 49, 59; Hatch v. AVhite, 2 Gall. C. C. 152. 3 Wet^t V. Chamberlain, 8 Pick. (Mass.) 336. * Brown v. Tyler, 8 Gray (Mass.), 135. 6 Hedge v. Holmes, 10 Pick. (Mass.) 380. 1120 RIGHTS OF PARTIES BEFORE DEFAULT. debt ; if he purchases upon execution at law upon a judgment for his mortgage debt, then he extinguishes his debt against the mortgagor to the amount only given for the land/ Where the land mortgaged is sold subject to the mortgage, at execution sale, to the mortgagee, the debt secured by the mortgage is paid.^ So where a mortgage is given to secure the payment of sev- eral notes maturing at diiferent times, and a foreclosure and sale is had for a part of the notes, leaving one note unpaid, and the holder of the unpaid note becomes the purchaser of the premises and receives a deed, the legal and equitable title to the premises will be merged and it will operate as a pay- ment of the mortgage and the remaining indebtedness for the reason that the purchaser in such a case is presumed to have bought the land at its value, less the unpaid note.* Article 5. ' Change in the Form of the Debt. ? 1160. The General Rule. ? 1180. No Payment. I 1170. Doctrine of Renewal of Note ? 1181. In Case of Indemnity. Modified. I 1182. New Note for Accrued Inter- ? 1171. When New Note is Payment. est. §1172. Taking Subsequent Mortgage. §118.3. Extension of Tim3. § 1173. Intention May Control. § 1184. Guarantor of Note. § 1174. Substitution of Another Note. § 1185. Reduced to Judgment. § 1175. (Substitution of New Mortgage. § 1186. Imprisonment of Debtor or §1176. Substitution of Defeasance. Mortgagor. § 1177. Entire Change in the New Note. § 1187. Release of Judgment. § 1178. Additional Security. § 1179. Additional Loan Included in New Note. § 1169. The General Rule. — As a general rule, the mere change in the form of the debt does not satisfy a mortgage given to secure it, unless it is intended so to operate. The lien of the debt attaches to the mortgaged premises, and the lien can, ^ Speer v. Whitfield, 2 Stockt. (N. J.) 107 ; Biggins v. Brockman, 63 III. 316 ; Murphy v. Elliott, 6 Blackf. (Ind.) 482. 2 Biggins V. Brockman, 63 111. 316. SEobins z;. Swain, 68 111. 197. PAYMENT OF THE DEBT. 1121 as between the parties, only be extinguished b}- the payment or discharge of the debt, or by a release of the mortgage. Mere change of the form of the evidence of the debt in no wise affects the lien. A renewal of the note, its reduction to judgment, or other change not intended to operate as a discharge of the lien, still leaves it, as between the parties, in full vigor. This is the rule in equity. In that forum mere form is disregarded, and the substance only is considered.' The mortgage remains a lien until the debt is satisfied, and is not affected by a change in the form of the debt, as by change of note, or by giving a different instrument as evidence of the note, or by judgment at law on the secured note.^ The courts regard the interest of the mortgagee ■with great liberality, for the purpose of effectually securing to him the performance of the contract which the mortgage was given to secure ; and they allow no change of the form of indebtedness to discharge the mortgage where there has been no actual pay- ment or release.* § 1170. Doctrine of Renewal of.Note Modified. — It is well settled law in some States that a negotiable note given for a sim- ^ Flower v. Elwood, 66 111. 438 ; Tabor v. Hamlin, 97 Mass. 489, 492 ; Baxter V. Mclntire, 13 Gray (Mass.), 168, 171 ; Foster v. Paine, 63 Iowa, 85 ; Swan v. Yaple, 35 Iowa, 248 ; Geib v. Reynolds, 35 Minn. 331 ; Rogers r. Trustees, 46 111. 428; Citizens' Nat. Bank v. Dayton, 116 111. 257 ; Jenkins v. Bank, 111 111. 462 ; Ponder v. Ritzinger, 102 Ind. 571 ; Seymour r. Darrow, 31 Yt. 122 ; Slo- cum V. Catlin, 22 Vt. 137. 2 Vick V. Smith, 83 N. Car. 80 ; Kidder v. Mcllhenny, 81 N. Car. 123 ; Focke V. Weishuhu, 55 Tex. 33; Kieser v. Baldwin, 62 Ala. 52(5; Smith r. Stanley, 37 Me. 11 ; Parkhurst v. Cummings, 56 ]Me. 155 ; Bollcs 7'. Cliauncey, 8 (^3nn. 389 ; Thornton v. Irwin, 43 Mo. 153 ; Jagger Iron Co. r. Walker, 76 N. Y. 521 ; Hill r. Beebe, 13 N. Y. 556; Franklin r. Cannon, 1 Root (Conn.), 50); Oli- phint V. Eckerley, 36 Ark. 69 ; Coles v. Withers, 33 Gratt. (Va.) 186 ; Elliot v. Sleeper, 2 N. H. 525 ; Williams v. Starr, 5 Wis. 534 ; Farmers' Bank r. ^Mutual Assur. Society, 4 Leigh (Ya.), 69 ; Sledge v. Obenchain, 58 Miss. 670 ; Gleason r. Wright, 53 Miss. 247 ; Morse v. Clayton, 13 Sm. & :M. (Miss.) 373 ; Burton v. Pressly, 1 Cheves (S. Car.), 1 ; Bond r. Ins. Co., 106 111. 654 ; Cullnni r. Bank, 23 Ala. 797 ; Helmetag v. Frank, 61 Ala. 67 ; Bunker r. Barron, 79 :\Ie. (>2 ; Ponce V. Armstrong, 95 Ind. 191 ; Walters r. Walters, 73 Ind. 425 ; Port r. Robl)ins, 35 Iowa, 208 ; Jordan r. Smith, 30 Iowa, 500 ; Hendershott >'. Ping, 24 Iowa, 134; Lippold V. Held, 58 M<~i. 213 ; Christian r. Newberry, 61 IMo. 446. ^ 1 Wash. Real Property, 560, and cases cited. 71 1122 RIGHTS OF PARTIES BEFORE DEFAULT. pie contract debt is prima facie to be deemed a payment or satisfaction of such debt. But this jjresumption may be re- butted and controlled by evidence that such was not tlie inten- tion of the parties.^ And where the debt consists of a note secured by a mortgage, the renewal of the note is not to be presumed a jjayment so as to discliarge the mortgage.^ So when it appears that the creditor has other and better security than such renewal note, for the payment of his debt, it will not be presumed that he intended to abandon such security and rely upon his note.^ The general doctrine is that the taking of a new note is to be regarded as payment only when the security of the creditor is not thereby impaired.* In many, if not most, of the cases where the presumption of payment has been held to apply, it will be found that the original claim was not secured.^ And the cases are numerous in which this presumption has been held to be overcome by the facts and circumstances surround- ing the transaction of giving the note." And as a general rule, and in the absence of any express agreement, this presumption will be overcome when it would deprive the creditor taking the note of the substantial benefit of some security such as a mortgage, guaranty, or the like. Nothing but payment of the debt or its release will discharge the mortgage.'^ § 1171. When New Note is Payment. — Where a debt, evidenced by a note, secured by a mortgage is included in a ^ Fowler v. Ludwig, 34 Me. 460 ; Dodge v. Emerson, 131 Mass. 467 ; Bunker V. Barron, 79 Me. 62 ; Langley v. Bartlett, 33 Me. 477. 2Taft V. Boyd, 13 Allen (Mass.), 86. 3 Kidder I'. Knox, 48 Me. 551 ; Lovell v. Williams, 125 Mass. 439. * Paine v: Dwinell, 53 Me. 52. 5 Bunker v. Barron, 79 Me. 62, 68. * Parkhurst v. Cummings, 56 Me. 159 ; Atkinson v. Minot, 75 Me. 193 ; Thurs- ton V. Blanchard, 22 Pick. (Mass.) 18 ; Appleton v. Parker, 15 Gray (Mass.), 174 ; Holmes r. Banjc , 126 Mass. 359 ; Dana v. Binney, 7 Vt. 493 ; Seymour v. Darrow, 31 Vt. 122. ^ Bunker r. Barron, 79 Me. 62 ; Lovell v. Williams, 125 Mass. 442 ; Maneely V. M'Gee, 6 Mass. 143 ; Cowan v. Wheeler, 31 Me. 443 ; Machine Co. v. Brock, 113 Mass. 196. PAYMENT OF THE DEBT. 1123 new note given for all past indebtedness between the parties, and intended as a discharge and satisfaction of the debt in- cluded in it, the mortgage is thereb}'' discharged/ The mortgagor cannot affect the security of the mortgagee by any dealings with third parties. If the mortgage debt be paid and if there be no intervening incumbrances the mort- gagor may use the mortgage again and may pledge it for another debt to secure other notes.^ A subsequent incumbrancer can- not claim that a new note for the debt operates as a payment, unless the facts are such that the parties so intended it.^ And a statute passed after the execution of a mortgage, and before a renewal of it, does not affect the new security to the mort- gagee's detriment/ In the absence of any express agreement and of any con- trolling circumstances the general rule is that the renewal of the note does not affect the security/ § 1172. Taking Subsequent Mortgage. — The deliver}^ to the first mortgagee of a bond secured by a second mortgage does not amount to payment where the bond was merely delivered to him for sale, and he being unable to sell it returned it to the corporation, which sold it and appropriated the proceeds.® And a second mortgage and note taken for the same debt, with no discharge or surrender of the first, will be presumed to be a further security for the same debt.^ Where the mortgagee took a new note and mortgage from the purchaser of the mortgaged estate and agreed not to enforce the prior mortgage, he may lose the right to enforce the prior mortgage by sleeping on his rights and allowing intervening in- cumbrancers to secure rights, he having neglected for a long time to record the new mortgage.* 1 Joyner v. Stancill (N. Car.), 12 S. E. Rep. 912. ^ Robinson r. Urquhart, 1 Beas. (N. J.) 515. 3 Strachn v. Foss, 42 N. H. 43. * Ponder v. Ritzinger, 102 Ind. 571. = Bond V. Ins. Co., 106 111. 654 ; Seymour v. Mackay, 21 111. App. 449 ; Coles V. Withers, 33 Gratt. (Va.) 186 ; Cullum v. Bank, 23 Ala. 797. « MuUanphy Bank v. Schott, 135 111. 655. ' Schumpert v. Dillard, 55 Miss. 348, 364. «Teaff V. Ross, 1 Ohio St. 469. 1124 EIGHTS OP PARTIES BEFORE DEFAULT. In general a second mortgage for the same debt on the same property does not extinguish the first/ § 1173. Intention May Control. — Any arrangement by which the debt is paid or discharged satisfies the mortgage.' Thus, the giving of one's own note in discharge of a debt, evidenced by an existing note, is a good payment thereof, if it has been so accepted by the party entitled to receive payment, and a mortgage executed to secure such existing note will be thereby satisfied.^ And in some cases this intention may be shown by attending circumstances.* The burden of proof is upon the mortgagor ; ^ but the taking of a new note by a mortgagee afte^ the institution of proceedings in bankruptcy against the mortgagor, under a composition agree- ment of all the creditors, operates as a release of the mortgage.^ The question of intention in the absence of an express agree- ment is one of fact to be determined by a jury.'' Payment by a negotiable note shall operate as a discharge and extinguishment of a prior debt when so intended by the parties. The rule in Massachusetts differs from that of the common law only in determining wliat shall be presumed to be the intent of the parties from the fact of giving and accept- ing a negotiable note for a simple contract debt. Without further evidence of intention, it is construed to be payment, but the common law deems it collateral security.** ' Gregory v. Thomas, 20 Wend. (N. Y.) 17 ; Watkins v. Hill, 8 Pick. (Mass.) 522 ; Burdett v. Clay, 8 B. Mon. (Ky.) 287 ; Hill v. Beebe, 13 N. Y. 556. ^ Jackson v. Stackhouse, 1 Cow. (N. Y.) 122 ; Runyan v. Mersereau, 11 Johns. (N. Y.) 534 ; Moore v. Cord, 14 Wis. 213 ; Arnot v. Post, 6 Hill (N. Y.), 65. ^ Iowa County v. Foster, 49 Iowa, 676 ; Hardin v. Branner, 25 Iowa, 364 ; Sloan y. Rice, 41 Iowa, 465 ; Taft v. Boyd, 13 Allen (Mass.), 84; Hawkes r. Ins. Co., 11 Wis. 188 : Curtis ';. Ingham," 2 Vt. 287 ; Jaffray v. Crane, 50 Wis. 349 ; Meyer v. Lathrop, 73 N. Y. 315 ; AVorcester Nat. Bank v. Cheeney, 87 111. 602. 614 ; Sledge /-. Obenchain, 58 Miss. 670. ' Baker v. Gavitt, 128 Mass. 93 ; Hoas v. Starr, 69 111. 365 ; Flower v. El- wood, 66 111. 438 ; Lippold v. Held, 58 Mo. 213 ; McDonald v. Hulse, 16 Mo. 503 ; Birrell v. Schie, 9 Cal. 104. * Sloan V. Rice, 41 Iowa, 465. ^Jarnagan v. Gaines, 81 111. 203. ' Hodgman v. Hitchcock, 15 Vt. 374 ; Couch v. Stevens, 37 N. H. 169 ; Colla- mer ;'. Langdon, 29 Vt. 32. 8 Fowler v. Bush, 21 Pick. (Mass.) 230. i PAYMENT OF THE DEBT. 1125 § 1174. Substituting Another Note. — The substitution of a new note for an antecedent debt does not discharge the debt unless expressly given and received as an absolute pay- ment.^ So where a new note and mortgage are given merely for the purpose of securing the same debt, this is not a payment of the former mortgage and note, for nothing short of actual pay- ment of the debt or release will operate to discharge a mort- gage.' It is a familiar rule that if the holder of a mortgage takes a new mortgage as a substitute for a former one, and cancels and releases the first in ignorance of the existence of intervening liens upon the mortgaged premises, equity will, in the absence of some special disqualifying act, restore the lien of the first mortgage and give it its original priority.^ The payment of one note by another is only conditional and not absolute payment. It extends the time for payment until the maturity of the new note, or suspends the remedy upon the old note, but does not extinguish it.* So, as the remedy upon the debt is suspended, it is clear that the remedy upon the mortgage, which is a mere incident to the debt, is suspended. And when the new note has not ma- tured at the time of an intervention of a third party, the in- tervener will not be entitled to have the old mortgage fore- closed.^ § 1175. Substitution of New Mortgage. — The moi-tgagee may discharge his mortgage and take a new one for the same 'Nightingale v. Chafce, 11 R. I. 609; Hutchinson ;•. Swartsweller, .^l X. J. Eq. 205. '^Geib V. Reynolds, 35 Minn. 331; Brinkerhoff v. Lansing, 4 Johns. Ch. (N. Y.)65; 8 Am. Dec. 538; Heively r. Mattoson, 54 Iowa, 505 ; Frink i'. Branch, 16 Conn. 260, 274 ; Walters '■. Walters, 73 Ind. 425. ^Bruse v. Nelson, 35 Iowa, 157 ; Cobb r. Dyer, 69 Me. 494 ; Barnes ?•. ]\Iott, 64N. Y. 397; Hutchinson r. Swartsweller, 31 N. J. Eq. 205; Robinson v. Sampson, 23 Me. 388. * Brewster r. Bours, 8 Cal. 501 ; Smith v. Owens, 21 Cal. 23 ; Brown v. Olm- sted, 50 Cal. 165 ; Tobey r. Barber, 5 Johns. (N. Y.) 68 ; 4 Am. Dec. 326. 5 In re Mathews, L. R. 12 Q. B. Div. 596 ; 2 Daniel on Neg. Inst., sect. 1272. 1126 RIGHTS OF PARTIES BEFORE DEFAULT. amount, when the discharge and taking the new one being but one transaction. Release of the old mortgage and taking a new one must be part of the same transaction.^ So third parties may pay off the ■ old mortgage and take a new mortgage for a security of the money advanced, provided the transaction be one and the same.^ But as regards inter- vening liens of third persons, a court of equity will recognize their liens unless fraud, accident, or mistake was the cause of releasing the prior mortgage." Third parties may advance money to pay off the mortgage and take a new one from the mortgagor as security. In equity the substance of the transaction would be an assignment of the old mortgage in consideration of the money advanced.^ If the original mortgage is not discharged* it remains a se- curity for the original debt in the absence of any express agreement.^ The substitution of a new mortgage does not operate to dis- charge the old one, but merely suspends the remedy upon it. It is well settled that in the absence of an agreement to that effect the payment of one note by another is only conditional and not absolute paj^ment.^ It is well settled that a subsequent security for a debt of equal degree with the former, for the same debt will not b}'' operation of law extinguish it.'^ So where two notes and mort- gages are retired and a new note and mortgage given to cover ^ Holbrook v. Finney, 4 Mass. 566 ; Clark v. Munroe, 14 Mass. 351 ; Haynes V. Jones, 5 Met. (Mass.) 292 ; Burns v. Thayer, 101 Mass. 426. 2 Swift V. Kraemer, 13 Cal. 526 ; Sledge v. Obenchain, 58 Miss. 670. ^ Smith V. Bynum, 92 N. Car. 108 ; New Eng. Mort. Secur. Co. v. Hirsh (Ala.), 11 S. Rep. 63; Dingman v. Randall, 13 Cal. 513 ; Washington County V. Slaughter, 54 Iowa, 265 ; St. Alban's Trust Co. v. Farrar, 53 Vt. 542 ; Lasselle -'. Barnett, 1 Blackf. (Ind.) 150 ; Stearns v. Godfrey, 16 Me. 158. Compare Childs V. Stoddard, 130 INIass. 110. * Dillon V. Byrne, 5 Cal. 455 ; Birrell v. Schie, 9 Cal. 106 ; Carr v. Caldwell, 10 Cal. 380. * Hill r. Beebe, 13 N. Y. 556. Compare Iowa County v. Foster, 49 Iowa, 676. «Tolman v. Smith, 85 Cal. 280; Tobey v. Barber, 5 Johns. 68 ; 4 Am. Dig. 326. ^ Gregory v. Thomas, 20 Wend. (N. Y.) 18. PAYMENT OP THE DEBT. 1127 the old one, and an additional advance in cash, the retired mortgages will be kept alive as against an intervening home- stead, because the cancellation of the old mortgages and the substitution of the new are contemporaneous acts. It does not create a new incumbrance, but simply changes the form of the old.^ Where the amount due on two mortgages is paid by a third person at the request of the mortgagor, and there is no under- standing that they shall be considered satisfied, a court of equity will for the purposes of justice keep the mortgages alive,^ and much more so if the party paying takes an assign- ment of the mortgages.^ § 1176. Substitution of Defeasance. — A bond of defea- sance recorded together with the deed of land, made to secure a debt, was delivered by the grantor to another creditor, and the first creditor, on receiving from the second payment of his debt, conveyed the land to him, and the second creditor gave the debtor a new bond of defeasance conditioned for the payment of the amount of both. It was held that the second creditor could hold the bond as security for the amount paid by him to the first creditor.' § 1177. Entire Change in the New Note. — When the holder of one of several notes secured by mortgage delivers it up to the mortgagor and maker, and a new note is exchanged for it, having a different amount, payable at another time, and without any agreement that it should be secured by the mort- gage, the holder loses his right to the security as against the holder of the other notes secured by the mortgage.^ But a difi'erent amount may be agreed upon, and the mort- gage made to secure it.*' ' Swift V. Kraemer, ir, Cal. 530 ; 73 Am. Dec. G03. ^Matzcn v. Shaeffer, 65 Cal. 81 ; Gans r. Thieme, 93 N. Y. 232 ; Yaple v. Stephens, 36 Kan. 680 ; Bacon v. Goodnow, 59 N. H. 415. 'Tolman v. Smith, 85 Cal. 280. * Judd V. Flint, 4 Gray (Mass.), 557. *Wilhelmi v. Leonard, 13 Iowa, 330. ^ Renshaw v. Taylor, 7 Oreg. 315. 1128 RIGHTS OF PxVRTIES BEFORE DEFAULT. § 1178. Additional Security. — Taking a second mortgage is not to be regarded as j^ayment of the first, but as additional security.' Taking a new note with additional indorsers does not discharge the mortgage ; ^ and taking a new note with an indorser does not affect the security ; ^ nor does the renewal of the note with different names change the lien.* Of course where the agreement is tliat taking additional security for a part of the mortgage debt with the understand- ing that such part shall be taken from the lien of the first mortgage, such intention will control.^ § 1179. Additional Loan Included in New Note. — It is not necessary to constitute notes, subsequently issued, renewals of the original notes, that they be issued for the same amount to the same periods, and that each successive note shall have been applied to take up its immediate predecessor." And where a note has been renewed several times, the mort- gage remains as security until it is all paid,^ Parol evidence is admissible to show that the new note was taken with the agreement that the mortgage should continue as security for it.* §1180. No Payment. — When there is, in fact, no payment the mortgage will not be discharged. Thus, where it is shown that all payments have been merely receipts for renewals of notes, on which no money was paid, it will not be a j^ayment.^ 1 Burdett v. Clay, 8 B. Mon. (Ky.) 287, 296 ; Byers v. Fowler, 14 Ark. 86 ; Firemen's Ins. Co. v. Wilkinson, 35 N. J. Eq. 160 ; Gregory v. Thomas, 20 Wend. (N. Y.) 17 ; Flower v. Elwood, 66 111. 438. '^Darst V. Bates, 51 111.439 ; New Hampshire Bank ?-. Willard, 10 N. H. 210. ^Darstt'. Bates, 51 111.439. *Pond r. Clark, 14 Conn. 334. See, also, Latiolais v. Bank, 33 La. Ann. 1444 ; Christian v. Newberry, 61 Mo. 446, 451. 5 Boston Iron Co. v. King, 2 Cash. (Mass.) 400. ' « Gault V. McGrath, 32 Pa. St. 392 ; De Cottes v. Jeffers, 7 Fla. 284 ; Port v. Robbins, 35 Iowa, 208. ' Brinkerhoff V. Lansing, 4 Johns. Ch. (N. Y.) 65. 8 Pomroy ?). Rice, 16 Pick. (Mass.) 22; Ellsworth v. Mitchell, 31 Me. 247; Goenen V. Schroeder, 18 Minn. 66 ; Port v. Bobbins, 35 Iowa, 208. 'Humphreys v. Danser, 32 N. J. Eq. 220; Shipman v. Cook, 16 N. J. Eq. 251 ; Tucker v. Alger, 30 Mich. 67. PAYMENT OF THE DEBT. 1129 So where a mortgage is paid by a check and bill of exchange which are dishonored, and the mortgagor becomes bankrupt, the mortgage is not thereby discharged and can be enforced.' So, if a bill of exchange is not paid, although an indorsement of payment has been made upon the note and mortgage, this does not release the lien of the mortgage.^ § 1181. In Case of Indemnity. — When a mortgage has been given to indemnify an accommodation indorser on a note and the note at maturity is not paid but renewed with a re- newal of the indorsement, the security applies to the renewal note in the same manner as to the original one. So long as the renewal note is not paid, the indorser is not indemnified for his original indorsement.^ And this rule holds good, though there are several renewals.^ And the renewal note may be for a larger amount ; ® so long as the mortgagee remains liable for the debt, any successive renewals will not change his rights.^ § 1182. New Note for Accrued Interest. — When the mortgagee takes a new note for the accrued interest, this does not necessarily take this part of the debt from the lien of the mortgage.^ So the indorsement of the amount for which the new note is given upon the original mortgage note is not a payment unless subsequent purchaser had reason to believe that such amount had been actually paid.® iTeed v. Carruthers, 2 Y. & C. Ch. 31. ''Maryland, etc., Co. v. Wingert, 8 Gill (Md.), 170. See, also, Barrows v. Bangs, 34 Mich. 304. ' Boswell V. Goodwin, 31 Conn. 74 ; Bolles v. Chauncey, 8 Conn. 389 ; Dun- ham V. Dey, 15 Johns. (N. Y.) 555 ; Smith v. Price, 14 Conn. 472 ; Easton v. Friday, 2 Rich. (S. Car.) 427, n.; Markell i'.EichelberL'or,12 Md. 78; Choteau V. Thompson, 3 Ohio St. 424 ; Handy v. Bank, 10 B. Mon. (Ky.) 98. * Boxheimer v. Gunn, 24 Mich. 372. ^Boxheimer v. Gunn, 24 Mich. 372. « Nightingale v. Chafee, 11 R. I. 609 ; National Bank v. Bigler, 83 N. Y. 51 ; Pond V. Clarke, 14 Conn. 334, overruling Peters v. Goodrich, 3 Conn. 146; Robinson v. Urquhart, 1 Beas. (N. J.) 515. ^Feldman v. Beier, 78 N. Y. 293 ; Elliot v. Sleeper, 2 N. H. 525 ; Parkhurst V. Cummings, 56 Me. 155. 8Frink v. Branch, 16 Conn. 260; Humphreys v.Danser, 32 N. J. Eq. 220. 1130 RIGHTS OF PARTIES BEFORE DEFAULT. § 1183. Extension of Time. — The subsequent agreement to extend the time to pay the debt by a future date, in consideration that the mortgagee will forbear suit on the debt until that day, is not a release of the mortgage.^ So giving a new note for the extension of time does not release the prior note, default being made in the payment of the last note.^ But if the mortgagee, without the consent of the mortgagor, wlien the mortgage is given to secure the notes of a third party, extends the time for a consideration paid to him, the lien is thereby discharged, as the mortgagor occupies the place of a surety of the debt.^ The mortgagor, though not personally liable as surety, yet, as owner of the mortgaged land, he occupies that position, and consequently the extension granted to the principal debtor, without the mortgagor's consent, discharges the lien from the mortgaged land." Taking additional security to a subsisting mortgage, with no extension of time, does not affect the rights of the surety, and he is not thereby released.^ Where a mortgage given to secure a debt by one who does not own the land, provides that the holder of the note may extend the time of payment on the maker's executing coupons for interest to accrue during such extension, the holder of the note may extend it and fix the rate of interest which such coupons shall bear after maturity, without further consent of the mortgagor.® § 1184. Guarantor of Note. — The guarantor of the pay- ment of a note is not discharged from liability by reason of the iFord V. Burks, 37 Ark. 91; Cleveland v. Martin, 2 Head (Tenn.), 128; AVhittacre v. Fuller, 5 Minn. 508 ; Bank of Utica v. Finch, 3 Barb. Ch. (N.Y.) 293. =* Naltner v. Tappey, 55 Ind. 107. » Metz V. Todd, 36 Mich. 473. *Christner v. Brown, 16 Iowa, 130; Gahn v. Niemcewicz, 11 "Wend. (N. Y.) 312 ; Walker v. Goldsmith, 7 Oreg. 161 ; Smith v. Townsend, 25 N. Y. 479 ; Leary v. Shaffer, 79 Ind. 567, 571 ; Bank v. Burnss, 46 N. Y. 170. ° Firemen's Ins. Co. v. Wilkinson, 35 N. J. Eq. 160. *Benneson v. Savage, 130 111. 352, PAYMENT OF THE DEBT. 1131 failure to serve him with notice of tlie non-payment, unless he can show that he suffered detriment thereby/ Thus, the guar- antor of a mortgage which provided that the debt secured there- by should become due and payable in case of default, was held to be liable on the guaranty upon such default being made, al- though the note given for the mortgage debt, which was in- dorsed by him, was not by its terms due. His liability was on the guaranty and not on the indorsement of the note, and would not be contingent upon notice of non-payment.^ § 1185. Reduced to Judgment. — Reducing the debt to a judgment does not release the mortgage. So a mortgagee who has taken judgment upon the mortgaged debt may also insti- tute proceedings for foreclosure of the mortgage.^ The mort- gage continues a lien until the judgment is satisfied, or the judgment is barred by the statute of limitations.* Hence, suing the notes secured by mortgage and procuring judgment upon them without satisfaction in any way, do not affect the validity of the mortgage.^ The rule is the same when only a part of the debt is re- duced to judgment.^ And a judgment on scire facias does not affect the mortgage lien.'^ The same rule is applicable when the security is in the form of a trust deed.^ And a decree in a foreclosure suit does not release the mortgage lien.® ^ Rodabaugh v. Pitkin, 46 Iowa, 544. ^ Claflin V. Reese, 54 Iowa, 544. See, also, Mitchell v. Clark, 35 Vt. 104 ; Hilton V. Catherwood, 10 Ohio St. 109. 3 Thornton v. Pigg, 24 Mo. 249 ; Riley v. McCord, 21 Mo. 285 ; Jordan v. Smith, 30 Iowa, 500 ; Shearer v. Mills, 35 Iowa, 499 ; Butler v. Miller, 1 N. Y. 496 ; Morrison v. Morrison, 38 Iowa, 73. * Lewis V. Conover, 21 N. J. Eq. 230 ; Torrey v. Cook, 116 Mass. 163 ; AVay- man v. Cochrane, 35 111. 152 ; Priest v. Wheelock, 58 111. 114 ; Vansant v. AU- mon, 23 111. 30 ; Hamilton v. Quimby, 46 111. 90. 5 Jewett V. Hamlin, 68 Me. 172 ; Cissna v. Haines, 18 Ind. 496 ; Flanagan v. Westcott, 3 Stockt. (N. Y.) 264; Jenkin.son i'. Ewing, 17 Ind. 505; IMarkle v. Rapp, 2 Blackf. (Ind.) 268; Ely v. Ely, 6 Gray (Mass.), 439 ; Hendershott v. Ping, 24 Iowa, 134. ^Applegate v. Mason, 13 Ind. 75. ^ Rockwell V. Servant, 63 111. 424 ; Hehnbold v. Man, 4 Whart. (Pa.) 410. « Hamilton v. Quimby, 46 111. 90. 8 Priest V. Wheelock, 58 111. 114 ; Hendershott v. Ping, 24 Iowa, 134 ; Riley 1132 RIGHTS OF PARTIES BEFORE DEFAULT. However, the mortgagor or one claiming under him may pay the judgment, and the Hen is discharged;^ and if sale under foreclosure satisfies the debt the lien is then discharged/ unless the sale is set aside.^ A judgment under trustee process is no waiver of the mort- gage lien/ A release from imprisonment is no satisfaction of the mort- gage debt.^ If a mortgagee who has foreclosed his mortgage accepts payment of the mortgage debt, it is a waiver of the foreclosure suit.® §1186. Imprisonment of Debtor or Mortgagor. — The mortgagee who has taken the body of his debtor in execution for the mortgaged debt is, nevertheless, entitled to the benefit of his security, because the imprisonment of his debtor does not discharge his mortgage lien upon the j)roperty.^ § 1187. Release of Judgment. — The release of the judgment obtained upon the mortgage debt, generally discharges the lien of the mortgage ; * but the mortgagee's acknowledgment of satisfaction of judgment is not conclusive,^ and whether the judgment is released is a question of fact for the jury when the evidence is conflicting. Thus, where the mortgagee entered under process of law and subsequently released the judgment, whether this is a waiver of such foreclosure, when the evidence is conflicting, is a question of fact for the determination of the jury.^« V. McCord, 21 Mo. 285 ; Evansville Gas Light Co. v. State, 73 Ind. 219 ; Stahl r. Roost, 34 Iowa, 475 ; Peck's Appeal, 31 Conn. 215 ; Lapping v. Duffy, 47 Ind. 51 ; Teal v. Hinchman, G9 Ind. 379. Compare Gage v. Brewster, 31 N. Y. 218 ; People V. Beebe, 1 Barb. (N. Y.) 379. 1 Sibley v. Rider, 54 Me. 463 ; Yeomans v. Rexford, 35 Pa. St. 273. * People V. Beebe, 1 Barb. (N. Y.) 379. 'Stackpole v. Robbins, 48 N. Y. 665. See Applegate v. Mason, 13 Ind. 75. * Watkins v. Cason, 46 Ga. 444. ^ Cary v. Prentiss, 7 Mass. 63. ^McCormick v. Irwin, 35 Pa. St. 111. ^ Davis V. Battine, 2 Russ. & M. 76 ; 11 Eng. Ch. 76. See, also, Cary v. Prentiss, 7 Mass. 63. 8 Porter v. Perkins, 5 Mass. 233, 236. 9 Perkins v. Pitts, 11 Mass. 125. w Couch V. Stevens, 37 N. H. 169. payment of the debt. 1133 Article 6, Presumption of Payment. § 1188. Note and Mortgage Being in ^ 1192. Presumption of Payment the Mortgagor's Possession. May be Rebutted. ? 1189. Notice to Purchasers. - ^ 1193. Kind of Evidence Required ^ 1190. Payment is Presumed from to Overcome the Pre- Lai)se of Time. sumption. ^ 1191. Presumption of Payment by ? 1194. Questions for the Jury and Lapse of a Less Tinae than the Court. Twenty Years. § 1188. Note and Mortgage Being in the Mortgagor's Possession. — It is prima facie evidence that tlie mortgage has been paid when tlie mortgagor has possession of the note and mortgage. Thus, the discharge of the mortgage of record and the possession by the mortgagor of the instrument with the accompanying note or bond, cancelled by one not the mort- gagor, i^ prima facie evidence of the payment.^ It is not reasonable that a party holding a note and who ex- acted security by mortgage, would upon the execution of the mortgage, deliver it into the hands of his debtor, evidence of his debt, and which in the possession of the mortgagor would be prima facie evidence that the mortgage was discharged.^ And if the mortgagor has been in possession of the papers for a long time with no interference of the mortgagee, it is a strong presumption of payment.^ But the mortgagor should ha\'e possession of both instruments, as the possession of the mort- gage only does not give rise to the presumption of payment.' . If the instrument shows no payment of interest after due, the 1 Braman v. Bingham, 26 N. Y. 4S.3 ; Garlock v. Geortner, 7 Wend. (N. Y.) 198; Pahner r. Gurnsey, 7 Wond. (N. Y.) 248. See, also, Novelh v. Rossi, 2 Barn. & Adol. 757. 2 Johnson v. Nations, 26 Miss. 147 ; Crocker r. Tliompson, 3 Met. (Mass.) 224 ; Bell V. Woodward, 34 X. H. 90 ; Chapman / . Hunt, IS N. J. Eq. 414 ; Ormsby r;. Barr, 21 Mich. 474; Flower v. El wood, 66 111. 438; Richardson v. Cam- bridge, 2 Allen (Mass.), 118; Pui-ser r. Anderson, 4 Edw. Ch. (N. Y.) 17; Harrison v. New Jersey, etc., Co., 19 N. J. Eq. 488 ; Grey v. Grey, 47 N. Y. 552 ; Leby v. Merrill, 52 How. Pr. (N. Y.) 360. •'•Gardner v. James, 7 R. I. 396. * Harrison v. New Jersey, etc., Co., 19 N. J. Eq. 488. 1134 RIGHTS OF PARTIES BEFORE DEFAULT, presumption is that it is in default/ and, of course, there is no presumption that interest not due is paid. § 1189. Notice to Purchasers. — AVhen a mortgage is not discharged a purchaser must take notice at his peril, even if the mortgagor has possession of the notes, when facts present themselves that a prudent man would investigate before pur- chase.^ But if the mortgage had been discharged of record and there is no evidence that the notes are held by some other party, or were negotiable, a purchaser can buy without danger.^ If the mortgagor produces the mortgage, though the seal be torn off, and makes the statement that he can have it released at any time, as it is fully paid, though he does not produce the notes, it is sufficient to indicate payment.* And the mortgagee can be estopped from asserting the non- payment of the mortgage debt by his actions.^ Thus, if he represents to the purchaser that the mortgage has been satis- fied, or that it will be paid from the proceeds, or by assisting the mortgagor in selling the mortgaged premises and leading the purchaser to buy.^ § 1190. Payment is Presumed from Lapse of Time. — A mortgage will be presumed to be satisfied after a lapse of twenty years, nothing to the contrary appearing ; or whatever may be the statutory limit.'^ When the mortgagee fails to offer in evidence the mortgage 1 OlmPtead v. Elder, 2 Sandf. (N. Y.) 325. ^Boxheimer v. Gunn, 24 Mich. 372. => Marburg v. Cole, 49 Md. 402. * Harrison v. Johnson, 18 N. J. Eq. 420. 5 Ormsby v. Barr, 21 Mich. 474. ^M'Cormick v. Digby, 8 Blackf. (Ind.) 99; Taylor v. Cole, 4 Munf.. (Va.) 351. ' Wilson V. Albert, 89 Mo. 537 ; Chouteau v. Burlando, 20 Mo. 482 ; Cape Girardeau v. Harbison, 58 Mo. 90 ; Pattie v. Wilson, 25 Kan. 326 ; Butler v. Washington, 28 S. Car. 607 ; Murray r. Fishback, 5 B. Mon. (Ky.) 403 ; Ow- ings V. Norwood, 2 H. & J. (Md.) 96 ; Chick v. Rollins, 44 Me. 104 ; Brown v. Becknall, 5 Jones Eq. (N. Car.) 423; Wanmaker i;. Van Buskirk, Saxt. (N. J.) 685; Cheever v. Perley, 11 Allen (Mass.), 584; Lynch v. Pfeiflfer, HON. Y. 33. PAYMENT OF THE DEBT. 1135 or to explain its absence, and has rested for thirteen years without demanding payment, and who liad begun the suit after a chance discovery in tlie record of the mortgage, he cannot maintain a suit for payment, as it has been barred/ Under the North Carolina law,^ which provides that the pre- sumption of par'ient of a mortgage debt shall arise where the mortgagor remains in possession of the mortgaged premises for ten years, after the right of action accrues, a mortgage is presumed to be paid where the mortgagor and his heirs re- mained in possession for more than ten years after default and the mortgage was not foreclosed.^ And, in general, the possession of the mortgaged premises for more than twenty years, without recognition of the mortgage or of the debt secured by it, is presumptive proof of payment, which, in the absence of evidence to the contrary, is a discharge of the debt and lien.* No presumption of payment can arise from lapse of time when the mortgagee or his assignee is in possession of the land.^ But no length of time of holding possession by a mortgagee will bar the right of redemption, if the mortgage is treated during that time as a subsisting security for the debt.*^ On the other hand, there are presumptions in favor of the mortgagor arising from long-continued possession by him of the mortgaged premises, without paying rent or interest, or ad- mitting the existence of an outstanding mortgage debt. If this is continued for twenty years after the condition broken, it raises a presumption that the debt has been paid and the mortgage redeemed. But there must be something on the part of the mortgagor showing affirmatively that he does not hold in subordination to the mortgagee's title in order to have 1 Butler r. Washington, 28 S. Car. 607. "^ Rev. Code of 1885, ch. 05, sect. 19. ^Pemberton r. Simmons, 100 N. Car. .310. *Cheever v. Perloy, 11 Allen ("Mass.), 584; Andrews v. Sparhawk, 13 Pick. (Mass.) 393, 400 ; Rowland r. Shurtleff, 2 Met. (Mass.) 20 ; Bacon v. Mclntire, 8 Met. (Mass.) 87 ; Kellogg v. Dickinson, 147 Mass. 432, 437. 5 Crocker v. Jewell, 31 INIe. 300; Brobst v. Brock, 10 Wall. (U. S.) 519). «2 Wash. Real Prop. (2d ed.) p. 601, sect. 25. 1136 RIGHTS OF PARTIES BEFORE DEFAULT. the time of limitation begin to run. But the mortgagor may give to his possession an adverse character by some unequivocal act hostile to the title of the mortgagee and brought distinctly home to his knowledge. Such act must be a clear, open, ex- plicit denial of the mortgagee's title, and a refusal to hold under it, brought home to the knowledge of the mortgagee, and until then the statute of limitations does not begin to run.' The possession of the mortgagor, in absence of a distinct re- pudiation of the mortgage, is not adverse to the mortgagee.^ Under the common law the constructive possession of the mortgagee, when the mortgagor is allowed to hold possession, continues until the mortgagor directly repudiates the right of the mortgagee.^ This presumption of payment arises from the policy of the law and is well settled.* § 1191. Presumption of Payment by Lapse of a Less Time THAN Twenty Years. — Less than twenty years may afford presumption of payment if supported by other facts which may amount to full proof.^ So, where no possession had been taken under the mortgage, and no interest had been paid, and no steps had been taken to enforce it for nineteen years, it was held not to be an outstanding title.'' There is a presumption of fact, or, more properly, in the nature of evidence, which can be drawn by a jury from the circumstances of the case, in less than twenty years.''' 1 2 Wash. Real Prop. (2d. ed.) p. 603, sect. 27 ; Harrison r. Harrison, 1 Call (Va.), 419 ; Pitzer ?'. Burns, 7 W. Va. 63 ; Harris v. Mills, 28 111. 44. ^ Benton County v. Czarlinsky, 101 Mo. 275. 3 Jones V. Williams, 5 Ad. & E. 291 ; Hall v. Surtees, 5 Barn. & Aid. 686, 687 ; Atkinson v. Patterson, 46 Yt. 750 ; Martin v. Jackson, 27 Pa. St. 504 ; Ben- son ?\ Stewart, 30 Miss. 49. * Hoffman v. Harrington, 33 Mich. 392; Field v. Wilson, 6 B. Mon. (Ky.) 479 ; Goodwyn r. Baldwin, 59 Ala. 127 ; Downs v. Sooy, 28 N. J. Eq. 55 ; Boon V. Pierpont, 28 N. J; Eq. 7 ; Crook v. Glenn, 30 Md. 55 ; Demarest v. Wynkoop, 3 Johns. Ch. (N. Y.) 129, 135. 5 Saddler v. Kennedy, 11 W. Ya. 187 ; Walker v. Emerson, 20 Tex. 706. ^Jackson v. Pratt, 10 Johns. (N. Y.) 381. See, also, Buckmaster v. Kelley, 15 Fla. 180; Butler v. Washington, 28 S. Car. 706 ; Oswald v. Legh, 1 Term. E. 270. 'Cheever v. Perley, 11 Allen (Mass.), 587 ; Goldhawk v. Duane, 2 Wash. C. payment of the debt. 1137 § 1192. Presumption of Payment May Be Rebutted. — The inference of payment arising from mere lapse of time is not sufficient to overcome convincing proof of non-payment.' Such evidence of payment can be overcome by direct proof,^ and the presumption is, 'always disputable.^ Thus, where the mortgagor endeavors to prove payment by working for the mortgagee, the latter may rebut his evidence by showing that he paid all his laborers at short and stated intervals, and that the mortgagor was poor and compelled to live upon his earnings.^ The presumption of payment arising from the lapse of time is liable to be rebutted and overcome by proof and facts and circumstances, the legitimate tendency of which is to render it more probable than otherwise that payment in fact has not been made.* But circumstances merely rendering the collection of a debt improbable, as the poverty of the debtor, are not admissible to rebut the presumption of payment.® So an indorsement on a note that a release of a trust deed, securing it, had been made and delivered by the order of the holder is not a pre- sumption of payment when the note is produced by the payee with the indorsement cancelled by drawing a pen through the words/ The presumption of payment is not conclusive that the debt has been paid, and may be controlled by evidence.^ C. 323 ; Bander v. Snyder, 5 Barb. (N. Y.) 63 ; Hender°on v. Lewis, 9 Serg. & R. (Pa.) 384 ; Milledge v. Gardner, 33 Ga. 397 ; Lyon v. Guild, 5 Heif3k. (Tcnn.) 175 ; Fleming v. Emory, 5 Harr. (Del.) 46 ; Wooten v. Harrison, 9 La. Ann. 234 ; Gamier v. Eenner, 51 Ind. 372. ' Delaney v. Brunette, 62 Wis. 615. nVanmaker t-. Van Bupkirk, Saxt. (X. J.) 605 ; 23 Am. Dec. 748. 'Rowland v. Shurtleff, 2 Met. (Mass.) 26; 35 Am. Dec. 384 ; Kane v. Blood- good, 7 Johns. Ch. (N. Y.) 90 ; 11 Am. Dec. 417, 439 ; Schafer v. Hartz, 56 Ind. 389 ; Popple v. Day, 123 Mass. 520 ; Gallup v. Jackson, 47 Mich. 475 ; Prichard V. Sharp, 51 Mich. 432, 435. *Waugh V. Riley, 8 Met. (Mass.) 290. * Grantham v. Canaan, 38 N. H. 268 ; Wood v. Deen, 1 Ired. L. (N. Car.) 230; Arden v. Arden, 1 Johns. Ch. (N. Y.) 313; Abbott v. Godfroy, 1 Mich. 178; Sutphen v. Ciis^hman, 35 111. 186 ; Waugh v. Riley, 8 Met. (Mass.) 290. « Rogers v. Judd, 5 Vt. 236. ^Steinmetz v. Lang, 81 111. 603. 8 Locke V. Caldwell, 91 lU. 417; Earned v. Earned, 21 N. J. Equity; Cold- 72 1138 eights of parties before default. § 1193. Kind of Evidence Required to Overcome the Presumption. — The evidence to rebut the presumption of pay- ment after twent}'' years must be satisfactor}^ and convincing, and especially so when the suit is not brought until after the death of the debtor. Such evidence may consist of the debt- or's admissions to the creditor himself, or to his agent, or even to a stranger, but an admission will not be as readily implied from language addressed casually to a stranger as when ad- dressed to the creditor in reply to a demand made. In such case the debtor stands upon a presumption of law binding upon both court and jury until invalidated by proof. The creditor in rebuttal stands upon a presumption of fact, which he claims arises out of the evidence. Wherefore, whether the facts sought to be established in rebuttal of the presumption are true is a question of fact for the jury, but whether if true, they legitimately give rise to the inference of non-payment, is a question of law for the court.^ The pre- sumption of payment is a presumption of law. The law shifts the burden of proof upon the shoulders of the creditor and re- quires him to show that the debt is not paid. He may do this by showing such acts and declarations of the debtor as are con- tradictory or inconsistent with the theory that the debt is paid.^ In case where the trial is by jury, the presumption of payment is such a one as the law makes through the medium of the jury.^ The evidence may consist of the debtor's admissions made to the creditor himself,* or to his agent or even to a stranger.^ But an admission will not be as readily implied from language casually addressed to a stranger as when addressed to the creditor himself in reply to a demand for the debt.^ cleugh V. Johnson, 34 Ark. 312 ; Cook v. Parham, 63 Ala. 456 ; Philbrook v. Clark, 77 Me. 176 ; Jarvis v. Albro, 67 Me. 310 ; Ray v. Pearce, 84 N. Car. 485 ; Cheever v. Perley, 11 Allen (Mass.), 584 ; Murphy v. Coates, 33 N. J. Eq. 424 ; Hart V. Boyt, 54 Miss. 547 ; Biddel v. Brizzolara, 56 Cal. 374. ' Gregory v. Commonwealth, 121 Pa. St. 611. "Waugh V. Riley, 8 Met. (Mass.) 290. 5 Crist V. Brindle, 2 P. & W. (Pa.) 262. *Eby w. Eby, 5Pa. St. 435. 5 Morrison v. Funk, 23 Pa. St. 423 ; Reed v. Reed, 46 Pa. St. 239. 6 Bentley's Appeal, 99 Pa. St. 500. PAYMENT OF THE DEBT. 1139 Justice Clark ably says : " The facts and circumstances relied on to rebut the pre- sumption must necessarily be within twenty years before suit is brought, and as the recollections of the exact words and im- port of an oral admiss^'^n must necessarily become more in- distinct with the lapse of years, the force of such an admission will in general be lessened as the time from its occurrence in- creases. On the other baud, after twenty years the presump- tion will gather strength with each succeeding year, and the evidence to overthrow it must, of course, be correspondingly increased. After what lapse of time beyond twenty years, if ever, this presumption, which is disputable, will be conclusive has never been determined, and as the law now stands each case must stand on its particular facts and circumstances. It is not required that the same precision and particularity of proof shall in all respects be observed as has been required to remove the bar of the statute of limitations, but as the pre- sumption of payment after twenty years is a strong one,^ the evidence to rebut it must be satisfactory and convincing.^ Especially is this so when the suit is not brought until after the defendant's death. It must, according to the cases, carry conviction to the mind of the court that if the facts alleged are true, the matters in issue are definitely and distinctly estab- lished." ^ Parol evidence is admissible to explain payments made upon the mortgage notes, or to show that they were erroneously made.* § 1194. Questions for the Jury and the Court. — In cases of presumption of payment, the debtor stands upon a presump- tion of law which is binding alike upon the court and jury, until invalidated by proof ; and the creditor in rebuttal, upon 1 Kline v. Kline, 20 Pa. St. 50.S. "Peter's Appeal, 106 Pa. St. 340; Eby v. Eby, 5 Pa. St. 435; Sellers v. Hol- man, 20 Pa. St. 321. 3 Gregory v. Commonwealth, 121 Pa. St. 611, 622. * Humphreys v. Danger, 32 N. J. Eq. 220 ; Austin v. Austin, 9 Vt. 420. See, also, McDaniels v. Lapham, 21 Vt. 222. 1140 RIGHTS OP PARTIES BEFORE DEFAULT. presumption of fact only, which he claims to arise out of the evidence ; whether or not the matters sought to be estabhshed are true is a question for tlie jury, but whether tlie facts and circumstances relied on, if true, would legitimately give rise to the presumption of fact referred to, is necessarily a question of law for the court. ^ And where there is no evidence to authorize the verdict, Jus- tice Simmons says every court which has the power should set aside the verdict, regardless of the number of verdicts which the jury may erroneously return.^ Thus, the reception without objection by the mortgagors of accounts of sales showing the disposition made of the proceeds, and allowing the mortgage to remain in the hands of the mortgagees, with all other facts and circumstances of the case, are opposed to a verdict support- ing a plea that the mortgage was paid off.^ Article 7. Evidence of Payment. ? 1195. Sufficient Proof. § 1197. Parol Evidence. I 1196. Insufficient Proof. I 1198. Burden of Proof. § 1195. Sufficient Proof. — The extinguishment of a debt by payment must be shown by reasonable certainty.* When defense is interposed to a note or other security, and the testi- mony is conflicting and evenly balanced, the possession by the creditor of the uncancelled security is a material circumstance and should turn the scale in his favor, unless satisfactorily ex- plained by the debtor.'^ Express proof as well as acts of the parties may show that a mortgage debt has been paid.^ When the preponderance of evidence is against the mort- gagee, he has the weight of proving his claim.'^ ^ Gregory v. Commonwealth, 121 Pa. St. 611 ; Peter's Appeal, 106 Pa. St. 340. 2 Kennedy v. Davis, 82 Ga. 210, 213 ; Mitchell (). Malone, 77 Ga. 301. 3 Kennedy v. Davis, 82 Ga. 210. * Succession of Moreira, 16 La. Ann. 368. * Doty V. Janes, 28 Wis. 319. « Ackla V. Ackla. 6 Pa. St. 228. ' Ketchum v. Gulick (N. J.), 20 At. Rep. 487. See, also, Whitman v. Foley, 125 N. Y. 651. PAYMENT OF THE DEBT. 1141 Where evidence is conflicting as to whether the mortgage has been paid, and whether the mortgage is simply lield by the assignee as security for advances made to a subsequent purchaser of the land, the mortgagor may testify to admissions by the mortgagee to the effect that the mortgage debt has been paid by such subsequent purchaser of the land/ The docket entries of a case required by law to be kept by the clerk, showing there is a judgment, are admissible in evi- dence in connection with a copy of the judgment ; but the declarations of the mortgagor and others that the mortgage has been paid are inadmissible to affect the assignee.^ So where a deposit of cash has been made by the mortgagor with a third person to pay a mortgage and the mortgagee takes a note of the third party for part of the cash and purposely conceals this fact from the mortgagor for a period of ten years, such conduct on the part of the mortgagee was a continuing admission to his mortgagor that he had received cash on his mortgage, which estopped him from asserting rights incon- sistent with such admissions.^ In an action on a mortgage where the plaintiff is proceed- ing as assignee for the benefit of the creditors of one of the owners of the mortgage, it is not error to admit in evidence under the plea of payment the office inventory and appraise- ment of the assigned estate to show that the interest sought to be recovered had not been appraised as a portion thereof. Justice Mitchell, speaking for the court, says that it is no error to admit in evidence the record entry of satisfaction of the in- terest, made by the assignor himself after the date of the as- signment, as a self-deserving declaration, admissible not only against the assignor, but against the assignee, when accom- panied with instruction that the assignor had no right to make the entry, if he had not received payment before the date of his assignment.* 1 Blake v. Broughton, 107 ISi . Car. 220. ^Shipley v. Fox, 69 Md. 572. '^ Rhinesmith r. Slote, 44 N. J. Eq. 578. * Cox V. Ledward, 124 Pa. St. 435, 449. 1142 RIGHTS OF PARTIES BEFORE DEFAULT. § 1196. Insufficient Proof. — In order to sustain the proof of payment, the evidence must show it. When the mortgagor claims a payment has been made, his evidence must not be conflicting. Tlius, when he claims in his testimony that an assignment of the mortgage was made after the mortgagee's death, when it appears of record that the mortgagee himself assigned the mortgage, the evidence of payment is insufficient, the mortgagor not having the note or mortgage in his posses- sion.' And the mere introduction of the mortgage bond, with evidence that proves that it had been in the mortgagor's pos- session for a long time, is not sufficient proof of payment, when the bond appears to consist of two pieces of paper of dif- ferent quality, and the mortgage is not produced or its absence accounted for, and there is no indorsements on the bond of payments, as these circumstances rebut the presumption of payment arising from the possession by the mortgagor.^ Where a mortgagor asserts that certain receipts in his pos- session indicate that he had j^aid usurious interest on the mortgage, but when produced no such evidence was shown ; * and where a subsequent mortgage is executed by the owner of the mortgaged property, showing that the mortgagor considered the property free from incumbrance at the time of making it ; it is evidence not admissible to show payment of a note secured by a prior mortgage, as the mortgagor cannot admit away rights of the holder of the note.* In case the vendee agrees to pay the mortgagee if he would release his mortgage, but fails to pay the amount after cancel- lation, evidence going to show that the mortgagor had in fact paid the debt prior to the agreement is irrelevant and inad- missible.^ A contention that a debt secured by a trust deed under which the defendant in ejectment claims has been paid, and iNau V. Brunette, 79 Wis. 664; Hann v. Dekater (N. J.), 20 At. Rep. 657.' ^ Anderson v. Culver, 127 N. Y. 377. 3 Hann v. Dekater (N. J.), 23 At. Rep. 657. * Thompson v. Longan, 42 Mo. App. 146. * Jones V. Hughes, 66 Miss. 413. PAYMENT OF THE DEBT. 1143 the debtor who is a witness for the plaintiff testifies tliat he nor the beneficiary claims that payment made by him to the beneficiary was to be applied on the debt secured by the trust deed, does not establish payment/ § 1197. Parol Evidence. — In a contest between original parties to notes secured by deed of trust, executed subsequent to the date of the notes, parol evidence is admissible to show that other payments have been made on the notes than those recited in the trust deed. Judge Black says that a deed of trust being under seal im- ports a consideration, and want of consideration could not be shown for the purpose of defeating it as a deed. This is true in resj^ect to other deeds, and the principle is applicable to mortgages and deeds of trust in the nature of mortgages. But for the purpose of ascertaining what is due the consideration may be inquired into. Parties are concluded by recitals in deeds to prevent denial of affirmation upon the faith of which affirmation third persons have acted or exjDended their money .^ § 1198. Burden of Proof. — The burden of proof is upon the mortgagor where he alleges payment of the mortgage debt and a set-off and breach of another contract, and the assignee of the mortgagee is not obliged to produce the books of the mortgagee to prove his case, which the mortgagor alleges were kept by the mortgagee and showed the amount due.^ Where the evidence is wholly circumstantial some of the parties to the transaction being dead and the others therefore incompetent to testify, and the collateral facts are nearly all evidenced by writings, and form as a whole a ftiir basis for a conclusive inference of payment, the question sliould be sub- mitted to the jury accompanied with the instruction that the burden of proof is upon those claiming payment. The court says that when the evidence is limited to a series of collateral facts, none of them conclusive, or perhaps very weighty, taken singly, but forming as a whole the fair basis of > Collins V. Stocking, 98 Mo. 290. ^Estes V. Fry, 94 Mo. 266 ; Farniim v. Burnett, 21 N. J. Eq. 87. 'Coon V. Bouchard, 74 Mich. 488 ; Brown v. Scott, 87 Ala. 453. 1144 RIGHTS OF PARTIES BEFORE DEFAULT. a conclusive inference by the jury in favor of payment, the jury was properly told that the burden of proof was on the defendants, and there was more than a scintilla in support of the latter's contention.^ Article 8. Application of Payment. I 1199. General Rule. § 1206. Eights of Third Parties. § 1200. Application by the Mortgagor I 1207. What is a Sufficient Appro- or Debtor. priation. § 1201. Ai)plication by Creditor or ? 1208. Payment of Interest. Mortgagee. I 1209. Partial Payments of Usurious § 1202. Application by the Law. Interest. I 1203. Debts With Different Securi- I 1210. Payment of Collateral Secu- ties. rity. §1204. Money Derived from a Par- § 1211. Payment of Insurance Money ticular Source. for Losses. I 1205. When the Eight of Appropri- ation Must Be Made. § 1199. General Rule. — The general rule of law in refer- ence to the appropriation of payment is that a debtor owing several debts to the same creditor has a right to apply his pay- ment, at the time of making it, to which debt he pleases. If he makes a general payment without appropriating it, the creditor may apply it as he pleases. And when neither party appropriates it, the law will apply it according to its own view of the intrinsic justice and equity of the case.^ § 1200. Application by the Mortgagor or Debtor. — Where a debtor who owes to his creditor several distinct debts makes a payment to his creditor, the debtor or mortgagor may apply such payment to any one of such debts which he chooses,* and the creditor cannot, without the consent of the debtor, change such appropriation.^ The mortgagor may appl}'' the ^Cox V. Ledward, 124 Pa. St. 435, 450. '^Terhune v. Colton, 1 Beas. (N. J.) 232. ^Shellabarger t). Binns, 18 Kan. 345. See, also, Bean v. Brown, 54 N. H. 395 ; Champenois v. Fort, 45 Miss. 355. * Jackson p. Bailey, 12 111. 159 ; Semmes v. Boykin, 27 Ga. 47 ; Sherwood v. Haight, 26 Conn. 432; Calvert v. Carter, 18 Md. 73. PAYMENT OF THE DEBT. 1145 payment to the principal or to the interest, or to another debt due the mortgagee/ And the debtor unquestionably has the right to have the proceeds of sale of the mortgaged property appropriated to the satisfaction of the mortgage debt, without any special direc- tion to this effect. This duty of the mortgagee is one implied by law, in the absence of the mortgagor's consent to have the money credited upon some other debt.^ In an action to compel the discharge of a mortgage on the ground that the mortgagor applied certain payments to the satisfaction of the mortgage, when he owed the mortgagee other debts, the burden is upon the mortgagor to show such application.^ In some cases a payment b}'- the mortgagor has been presumed to be upon the mortgage debt.* § 1201. Application by Creditor or Mortgagee. — ^AVhere a debtor, who owes another several distinct debts, makes a payment to him without directing the mode of its appropria- tion, the creditor may apply the money as he pleases. This he may do without giving the debtor any notice of the act by which the appropriation has been made.^ This rule applies when the mortgagee receives money from the husband of the mortgagor, who is indebted to him, with- out any direction that it shall be applied to the mortgage debt of the wife.^ And if a creditor makes an application of a payment not applied by his debtor, generally on an open account, the law 1 Leeds v. Gifford, 41 N. J. Eq. 4G4 ; Vick v. Smith, 83 N. Car. 80 ; Hughes V. Johnson, 38 Ark. 285 ; Harris v. Hooper, 50 Md. 537 ; Mills v. Fowkes, 5 Bing. N. C. 455 ; Hammersley v. Knowlys, 2 Esp. 666 ; Bradley v. Heath, 3 Sim. 543. ^Lenystein r. Whitman, 59 Ala. 345 ; Sanders v. Knox, 57 Ala. 80; Johnson V. Thomas, 77 Ala. 367, 370 ; 2 Whart. Contr., sects. 924, 929. ^ Knox V. Johnston, 26 Wis. 41. ^ The Antarctic, 1 Sprague (Dist. Ct.), 206; Pattison v. Hull, 9 Cow. (X. Y.) 747. 5 Johnson v. Thomas, 77 Ala. 367; Terhune v. Colton, 1 Beas. (N. J.) 312; Feldman v. Beier, 78 N. Y. 293 ; Shellabarger v. Binns, 18 Kan. 345 ; Ege v. Watts, 55 Pa. St. 321 ; Prouty v. Price, 50 Barb. (N. Y.) 344 ; Mackenzie v. Gordon, 6 CI. & F. 875, 892 ; United States v. January, 7 Cranch (U. S.), 572; Bell V. Radcliff, 32 Ark. 645. 6 Greig v. Smith, 29 S. Car. 426. 1146 EIGHTS OF PAETIES BEFORE DEFAULT. will not afterward apply it to the payment of a judgment, even if older than the account, especially if the creditor has security for the judgment and not for the account.^ And if the mortgagor fails to make an application to one of two mortgages on the same property, held by the same mort- gagee, the latter may make the application/ In the absence of instructions as to how the creditor should apply the payment, the creditor can, under the common-law rule, apply the payment to any of the debts at his pleasure ; ^ but the rule under the civil law is that payment is, in the ab- sence of instructions, to be made on the debt most onerous to the debtor.* No presumption can control approi:)riations by the parties.^ A creditor, having received a mortgage from the debtor's wife on all the notes held against him, but who is not under any contract with parties who had indorsed a part of the notes, has a right to apply the proceeds of the mortgage to the ex- tinguishment of the notes other than the ones indorsed by the sureties, the sureties not being damnified by the creditor's ap- propriation of the property." This the creditor had a clear right to do, unless the surety acquired such a right in the se- curity the moment it was given as precluded the creditor from dealing with the same in the manner in which he clid.^ But it is equally clear that the creditor, receiving the mort- gage in the manner in which he did without any designation from the debtor of a particular note upon which the proceeds of the security should be applied, had the right to apply the entire proceeds upon notes other than those upon which the surety had indorsed.^ The surety was no party to this arrangement and had no right iWatt V. Hoch, 25 Pa. St. 411. " Parker v. Green, 8 Met. (Mass.) 137. ' Law V. Southerland, 5 Gratt. (Va.) 357 ; Johnson v. Anderson, 30 Ark. 745. * Forstall v. Blanchard, 12 La. 1. "Tharp v. Feltz, 6 B. Mon. (Ky.) 6. « Noble V. Murphy (Mich.), 52 N. W. Rep. 148. ^ Blair v. Carpenter, 75 Mich. 167 ; Wood v. Callaghan, 61 Mich. 402. 8 Mathews v. Switzler, 46 Mo. 301 ; Bank v. Lewis, 78 "Wis. 475 ; Hanson v. Manley, 72 Iowa, 48. I PAYMENT OF THE DEBT. 1147 to control its terms. His principal was dealing, not with the surety's property, but his own. The claims received by the creditor became in his hands a collateral security for the pay- ment of the notes generally ; and the surety had no right to ask that the creditor shall not be allowed the full benefit of his own vigilance.^ § 1202. Application by the Law. — When neither party appropriates the payment, the law will apply it according to its own notice of the intrinsic justice of the case ; ^ and in doing so the law will generally apply the payment to the oldest debt, or to the earliest item of the same debt, or to the debt that is due, in preference to the one that is not due. Generally, when one is secured and the other is not, the law will apply the payment to the debt which is not secured.^ And thus, when neither party avails himself of his power, it would seem reasonable that an equitable application should be made. It being equitable that the older debt should be paid, it cannot be inequitable to extinguish first those debts for which the security is most precarious.^ The power to make the application to earlier or later items of the account rests wholly with the debtor. The payment goes, by the force of law, to the oldest items, when this appli- cation is not made. And if this part be secured by mortgage, and the aggregate payments exceed its amount, it will be dis- charged, unless a contrary agreement has been made.^ The law will make no application of payments when the parties have done so.^ And if the debtor has made application of payment to usurious interest, the law will not retract it for him.^ 1 Gaston v. Barney, 11 Ohio St. 506; Wood r. Callaghan, CA "SUch. 403. i^Terhune v. Colton, 1 Beas. (N. J.) 232; Magarity v. Shipnian, 82 Va. 784. ^ Shallabarger v. Binns, 18 Kan. 345. * Field ?;. Holland, 6 Cranch (U.S.), 8. See, also, Fairchild v. Holly, 10 Conn. 175; Sprague v. Hazenwinkle, 53 111.419; Wendt v. Ross, 33Cal. 650; Shedd V. Wilson, 27 Vt. 478 ; Harrison v. Johnston, 27 Ala. 445. ^ Hughes V. Johnson, 38 Ark. 285, 295 ; Johnson v. Anderson, 30 Ark. 745. ^Dickey v. Permanent Land Co., 63 ]\Id. 170 ; Feldman v. Gamble, 26 N. J. Eq. 494 ; Trcadwell v. Moore, 34 Me. 112. ' Dickey v. Permanent Land Co., 63 Md. 170. 1148 EIGHTS OF PARTIES BEFORE DEFAULT. § 1203. Debts with Different Securities. — Where the debts are of different character and due when the payment is made without direction, and neither party makes appUcation, the law will apply it, upon the presumed intention of the debtor, to that debt a relief from which will be most beneficial to him. Therefore, if the debt be a mortgage and an account, or a judgment and an account, the law will apply the payment to the mortgage or judgment in preference to the account, because the former would bear more heavily on the debtor.^ But it has been held that the law in such case will apply the payment as will be most beneficial to the creditor ; " that is, if there are separate demands, part of which is secured and part not secured, the application will be made on those not secured ; ^ and that the court will exercise a sound discre- tion in making the application.* And if a creditor makes an application of a payment, generally on an open account, the law will not afterward apply it to the payment of a judgment even if older than the account, especially if the creditor has security for the judgment and not for the account.^ And in New York it was held that where payment is made, even by judgment of the court, without directing its application as among several securities, in subsequently determining the application, the court should do so upon equitable principles, and is not bound to apply the payment to the older security.^ And in Georgia it was held that the assignee of two judg- ments from different creditors against the same debtor, on the older of which judgments there is a security, and on the younger there is none, must apply money raised from the 1 Windsor v. Kennedy, 52 Miss. 164 ; Pattison v. Hull, 9 Cow. (N. Y.) 747 ; The Antarctic, 1 Sprague (Dist. C), 206; Dorsey v. Gassaway, 2 Harr. & J. (Md.) 402 ; Neal r. Allison, 50 Miss. 175. '' Gwinn v. Whitaker, 1 Harr. & J. (Md.) 754. 3 Sanborn v. Stark, 31 Fed. Rep. 18 ; Langdon r. Bowen, 46 Vt. 512. * Coles V. Withers, 33 Gratt. (Va.) 186. 5 Watt V. Hoch, 25 Pa. St. 411. ^ Campbell v. Vedder, 3 Keyes (N. Y.), 174. See, also, Bosley v. Porter, 4 J. J. Marsh. (Ky.) 621 ; Chester r. Wheelwright, 15 Conn. 562 ; Smith v. Wood, Saxt. (N. J.) 74 ; Field v. Holland, 6 Cranch (U. S.), 8 ; State v. Thomas, 11 Ired. L. (N. Car.) 251. PAYMENT OF THE DEBT. 1149 debtor's property to the senior judgment ; if he applies it to the junior the surety is discharged pro tanto} If a vendee of a part of the mortgage debt pays the amount to the mortgagee who releases that portion of the property', tlie application must be made to the mortgage debt.^ The law will appropriate a payment, other considerations being equal in the first instance, to the payment of a note absolutely due to the creditor, rather than to the payment of one transferred to him as collateral security only.^ So where a purchaser of an estate incumbered by a mort- gage has assumed a portion of the mortgage debt and has thus made himself personally liable to the mortgagee foi* this part of the debt, he is entitled to have a general payment made by him applied to the portion of the debt for which he is person- ally liable.* § 1204. Money Derived from a Particular Source. — When money is derived from any particular source or fund, payment must be applied to the relief of such source or fund, unless there is an implied agreement to apply it otherwise.^ Therefore money derived from rents of mortgaged premises, in the absence of any contrary agreement, must be applied by the mortgagee toward payment of such mortgage, and not to the satisfaction of other indebtedness of the mortgagor.*' But a mortgage containing a covenant that, in case of default, the mortgagee may enter and collect and apply the rents and profits to the indebtedness, does not bind the mortgagee to collect and apply the rents.^ When the mortgagor's tenants, with Ms consent, pa}' their rent to the mortgagee, who holds several mortgages on the same property, the mortgagee has no right, after suit for fore- ^ Simmons v. Gates, 50 Ga. 609. ''Hicks V. Bingham, 11 Mass. 300. 3 Bank v. Brown, 22 Me. 295. * Snyder v. Eobinson, 35 Ind. 311. 5 Levystein v. Whitman, 59 Ala. 345 ; Taybr t'. CbekrelJ, 80- Ala. 238 ; Burns v. Campbell, 71 Ala. 286. « Darden v. Gerson, 91 Ala. 323". 'Borel V. Kappeler, 79 Cal. 342. 1150 RIGHTS OF PARTIES BEFORE DEFAULT. closure has been begun, to apply these payments to the junior mortgage/ Where an agent to loan money takes from the borrower a separate note and mortgage for his commissions, the commis- sions paid to a sub-agent wrongfully appointed by the agent, will be credited on the mortgage debt.^ Where the assignee of some of a series of mortgage notes, has also another fund to which he can resort for payment, and the mortgage security is inadequate to pay the whole debt, he should first resort to such fund.^ So where the maker of the notes was the legatee of one of the mortgagees' estate, and the executor held a part of these notes as assignee, and foreclosure being brought for the benefit of the -estate, the executor and assignee of part of the notes, should apply the legacy of the maker first in discharging other unsecured debts to the estate from the maker of the notes, and then the balance in paying the notes he held as assignee, thus giving to the other mortgagee the benefit of the mortgage se- curity in paying the notes he held, the mortgage security being inadequate to pay all the notes. Judge Howell ably says that inasmuch as the mortgage se- curity was inadequate, and the executor has in his hands an- other fund to which he can legally resort for payment or part payment of his notes as assignee, equity required that he should resort to that fund before resorting to the mortgage se- curity to the damage of the other mortgagee or assignor ; for this course works no injury to either creditor, but does justice to both. But the executor is not bound to resort to that legacy to the detriment of the estate in respect of the unsecured debts that the legatee owes it. But aside from those debts, the legacy should in some way be made to profit the assignor in respect to his security.* ^Sanford v. Van Arsdall, 53 Hun (N. Y.), 70. "^ Scruggs V. Scottish American Mort. Co., 54 Ark. 566. » Jt'ff ('. Woods, 2 P. Wm. 128; CampbeU v. Graham, 5 Eng. Ch. 454 ; Tink- ham V. Smith, 56 Vt. 187. *Blairw.White, 61 Vt. 110. payment of the debt. 1151 § 1205. "When the Right of Appropriation Must Be Made. — It ma}'- be considered as settled that when a payment has been rightfully ascribed or a]3propriatcd to one of several debts, it requires the consent of both parties to change it. And the act may be considered complete, and irrevocable by the creditor alone, when, having the right of election, he has exercised it and communicated the fact to the debtor.' ' When the creditor has the right of appropriation, he must exercise this right ante litem motam, or before any controversy has arisen between the parties as to the act. It is too late to attempt it after such disputation and a fortiori at the time of the trial.^ Though the creditor need not do this at the time of the payment, yet it must be done before settlement.^ And this rule should apply though the mortgagor becomes bank- rupt.* Of course an agreement of the parties as to the appropriation controls.^ If the mortgagor give a mortgage which covers pre- existing as well as present debts, and the mortgagee applies the payments generally, this is an application pro rata upon the old and the new debts." •Of course the application must be made to a debt which existed at the time of payment and before the rights of the parties are in any way changed.^ § 1206, Rights of Third Parties. — If neither party makes an appropriation of the payments, and equities attach in favor of a third party, it is not in the power of either debtor or creditor, at a subsequent period, to make an appropriation affecting the equities of such third party.* So proceeds of a 1 Johnson v. Thomas, 77 Ala- 367 ; 1 Greenl. Ev., sect. 532 a ; 2 AVhart. Cent., sect. 932 ; 1 Addison on Cent., sect. 350 ; 2 Parsons on Cunt. {(>th ed.) (i30. ^ Callahan v. Boazman, 21 Ala. 24:(> ; 1 Addison on Cont., sect. 350 ; Sanford V. Van Arsdall, 53 Hun (X. Y.), 70. ^ Hughes V. Johnson, 38 Ark. 287 ; Clayton's Case, 1 Merv. 572 ; Feldnian V. Beier, 78 N. Y. 293 ; Wilkinson r. Sterne, 9 Mod. 427, *Ex parte Johnson, 3 De Gex, M. & G. 218, 236. 5 Mercer v. Tift, 79 Ga. 174. «Shelden v. Bennett, 44 Mich. 634. •^Terhune v. Colton, 1 Beas. (N. J.) 232, 312. 8Terhune v. Colton, 1 Beas. (N. J.) 232. 1152 RIGHTS OP PARTIES BEFORE DEFAULT. part of the mortgaged property made by consent of parties cannot be applied, as against subsequent incumbrances, to the payment of an unsecured debt of the mortgagor.^ The debtor may authorize the application of the fruit of parts of the mortgaged property to unsecured items in the account, if no rights of third parties have intervened.'^ But subsequent incumbrancers have no claim for relief against payments which are made by common consent of the parties to the interest if it be legal.^ And equity will not permit payment to operate as an extin- guishment against parties equitably entitled to substitution in the place of the party receiving payment.* § 1207. What is a Sufficient Appropriation. — An appli- cation of funds to the payment of a debt once made in good faith by the debtor or the creditor cannot be recalled.^ The appropriation by the debtor may be shown not only by his express declarations but by any circumstances from which his intention can be inferred ; but such intention must be sig- nified to the creditor in some way. A private entry made by the debtor in his own books of account is insufficient to de- termine the application of the payment." Where some of a series of mortgage notes are afterward sep- arately secured by anotlicr mortgage, the first mortgage is paid as to these notes which are tlius secured by another mortgage.^ So where a mortgagee begins to make additional advances to the mortgagor and opens a new account with him in which the mortgagee charges the advances and credits the proceeds of personal property theretofore and thereafter received, and MVebster v. Singley, 5S Ala. 208. " Hughes V. Johnson, 38 Ark. 285. 3 Mills V. Kellogg, 7 Minn. 469. * Richardson v. Bank, 3 Met. (IMass.) 536 ; Morris v. Oakford, 9 Pa. St. 498 ; Eddy ('. Traver, 6 Paige (N. Y.), 521 ; Matter of Foot^ 8 Benedict (Dist. Ct.) 228.' * Mayor v. Patten, 4 Cranch (U. S.), 317 ; Simson v. Ingham, 2 Barn. & C. 65 ; Johnson v. Thomas, 77 Ala. 367. ^Terhune v. Colton, 1 Beas. (N. J.) 232 ; Manning v. Westeme, 2 Vem. 606 ; Wrout V. Dawes, 25 Beav. 369. ' Bridenbecker v. Lowell, 32 Barb, (N. Y.) 9. I PAYMENT OF THE DEBT. 1153 sends a copy of this account to the mortgagor, who receives it without objection, and corresponding entries made on the mortgagor's books is an actual appHcation by the mortgagee of the proceeds of the personalty to his advances with the knowl- edge and consent of the mortgagor/ § 1208. Payment of Interest. — Payment made on a prom- issory note in the absence of agreement or direction as to how it shall be applied, in so far as it exceeds the interest which has accrued at the time of the payment, will be applied to the payment of the principal of the secured note and not to future or unearned interest. The payment is to be applied first to interest up to the date of the payment, and if there be a bal- ance, this will be applied to the principal." But if no interest be due, it will then be applied to the principal.^ § 1209. Partial Payments of Usurious Interest. — The holder of a usurious mortgage cannot, even with tlie assistance of the mortgagor, apply partial payments to the unsound part of the mortgage for the purpose of keeping alive that part which is valid to the prejudice of an existing subsequent mort- gage. Because the application of payments applies only where the mortgagor has paid on moral, honest, bona fide, legal claims, and it does not apply where one of tlie debts is spuri- ous, immoral, and usurious.* When the whole mortgage is due, it is immaterial whether the payment is applied generally upon the principal and in- terest or first to the extinction of the accrued interest, ^\'hen a usurious agreement is made for the extension of time, it is not a valid extension,'' and such usurious interest cannot' be re- garded as a payment of the interest so as to prevent a default in payment of interest ; but the judgment will be entered for the amount of the mortgage after deducting the amount of ' Lewis V. Hartford, etc., Co., 56 Conn. 25. 2 Monroe r. Fohl, 72 Cal. 568 ; Chase v. Box, Freem. Ch. 261. 3 Davis V. Fargo, Clarke (N.Y.), 470. * Greene v. Tyler, 30 Pa. St. 361. * Church V. Maloy, 70 N. Y. 63. 73 1154 RIGHTS OF PARTIES BEFORE DEFAULT. usurious interest paid, under the New York statute against usury.^ The mortgagor cannot, after suit is brought, have a partial payment on account of the interest first. It should be allowed on the principal and interest.^ § 1210. Payment of Collateral Security. — Payment and discharge of a mortgage given as collateral security for the payment of a prior mortgage, operate as a payment upon the principal debt. Prima facie there is nothing else upon which the money can be applied.^ But where stock of a building association is assigned as collateral security for a mortgage given to the association, paiyment on the stock is not ipso facto payment on the mortgage-.* § 1211. Payment of Insurance Money for Losses. — Money paid to a mortgagee by an insurance company in absence of its agreement with the mortgagor, cannot be applied by the mortgagee to the payment of the debt secured by the mort- gage, if it be not due,, without the consent of the mortgagor,^ and especially so where the mortgagee has other interest in the property ."^ But if the insurance money is payable to the mortgagee, he is bound to apply it to the payment of the mortgage debt, and any other use of it will be illegal and at his peril.^ But when the mortgagee insures the property for his own interest, the mortgagor cannot claim the money as payment.^ 1 Church V. Maloy, 9 Hun (N. Y.), 148. 2 Hartley v. Tatham, 1 Keyes (N. Y.), 222. sprouty V. Eaton, 41 Barb. (N. Y.) 409. * North American Building Asso. v. Sutton, 35 Pa. St. 463 ; Spring Garden Asso. V. Tradesmen's Loan Asso., 46 Pa. St. 493 ; Early's Appeal, 85 Pa. St. 411 ; Economy Building Asso. v. Hungerbuehler, 93 Pa. St. 258. * Gordon v. Bank, 115 Mass. 588; .^na Nat. Bank v. Ins. Co., 24 Fed. Rep. 770. 8 Louden v. Waddle, 98 Pa. St. 242. ^Connecticut Mut. L. Ins. Co. v. Scammon, 117 U. S. 634. 8 Foster v. Van Reed, 70 N. Y. 19 ; Stinchfield v. Milliken, 71 Me. 567 ; Ely V. Ely, 80 111. 532 ; Clark v. Wilson, 103 Mass. 219, 221 ; Dobson v. Land, 8 Hare, 216; Russell v. Southard, 12 How. (U. S.) 139,157. payment op the debt. 1155 Article 9. Reissue and Revivor of Mortgage. 1 1212. Keeping Alive a Mortgage 1 1216. Assignment of Mortgage to After Payment of the Debt. Mortgagor. ^ 1213. Reissue of Mortgage. ^ 1217. Reissue of Note to Cover a 1 1214. Rights of Third Parties. New Indebtedness. 1 1215. Intervening Creditors' Eights 1 1218. The Question of Payment. Must Be Preserved. § 1212. Keeping Alive a Mortgage After Payment of THE Debt. — Courts of equity will, to accomplish the ends of justice, keep alive a security which in form has been extin- guished. Thus where a mortgagor conveys the mortgaged premises to a first mortgagee to satisfy the debt without expenses of fore- closure, equity will consider the first mortgage as still subsist- ing as against a subsequent incumbrancer.^ Under the same principle, if the owner of the equity of re- demption acquires the mortgage, a court of equity will, when the purpose of justice requires it, treat the mortgage as still subsisting.^ So where a first mortgagee purchases under a foreclosure sale equity will ke«p his mortgage alive for the purposes of j)rotection against a second mortgage.^ And so where one mortgage is substituted for another, equity will kfeep the first alive when the interest of justice requires it.* § 1213. Reissue of Mortgage. — A mortgage cannot law- fully operate as security for any oiher debt than that which it was given to secure.^ It cannot be extended after payment to any other debt.^ Because the rei.ssue of a mortgage which has 1 Low-man r.Lowman, lis 111. 586; Richardson r. Hoekenhull, 85 111. 124; Edgerton ?•. Young, 43 111. 408 ; Tolman r. Smith, 85 Cal. 280 ; Brooks v. Rice, 56 Cal. 428 ; Smith v. Swan, 69 Iowa, 412 ; Stantons v. Tliompson, 49 N. H. 272 ; Collins v. Stocking, 98 Mo. 296 ; Silliman v. Gammage, 55 Tex. 366. * Thompson v. Chandler, 7 Me. 381 ; Duflfy v. McGuinees, 13 R. 1.597. ^ Carpentier v. Brenham, 40 Cal. 234- *Tolman v. Smith, 85 Cal. 280. ^ Morris v. Alston, 92 Ala. 502 ; Harris v. Hooper, 50 Md. 537 ; Laeber v. Langhor, 45 Md. 477, 482 ; Dolan r. Kehr, 9 Mo. App. 351. ^Pelton V. Knapp, 21 Wis. 63 ; Perkins v. Sterne, 23 Tex. 561 ; McGiven v, Wheelock, 7 Barb. (N. Y.) 22 ; Luce v, Mortg. Co., 6 Dak. 122. 1156 RIGHTS OF PARTIES BEFORE DEFAULT. been paid upon the agreement that it shall secure another debt than the one originally secured by it, does not create a lien/ The mortgage to be discharged must be paid to the mort- gagee.^ An absolute deed given as a mortgage cannot be extended to another debt without the consent of all persons interested.^ § 1214. Rights op Third Parties. — A paid mortgage as- signed to one of the mortgagors, the notes secured by which are long past due, cannot be reissued by the mortgagor's assignment of the same to a creditor so as to compete with the title of another creditor of the mortgagor, to the mortgage estate or a surplus of the same in the hands of the court of equity fixed by the decree of the court prior to the reissue of the mortgage, although the creditor who received the assign- ment of the mortgage was no party to the decree.^ The mortgage cannot be revived to the prejudice of a bona fide incumbrancer whose claim is subsequent to the mortgage but prior to the payment.^ Money once paid and appropriated by the parties to the mortgage note and indorsed upon it, cannot, by subsequent agreement, be transferred to secure any other demand, and such p»id indebtedness thereby becomes revived and good against a second mortgagee.^ And the debtor and creditor becoming the same person, equity will preserve the equitable distinct from the legal right according to the intention of the parties and just requirements of the case.'' 1 Thompson v. George, 86 Ky. 311 ; Mead v. York, 6 N. Y. 449; Johnson v. Anderson, 30 Ark. 745 ; Spencer v. Fredendall, 15 Wis. 666 ; Walker v. Snedi- ker, Hoff. Ch. (N. Y.) 145; Murrell v. Chase, 3 Allen (Mass.), 339; Ledyard v. Chapin, 6 Ind. 320 ; Fewell r. Kessler, 30 Ind. 195 ; McClure v. Andrews, 68 Ind. 97 ; Thomas's Appeal, 30 Pa. 378 ; Bowen v. Manter, 33 N. H. 530 ; War- ner V. Blakeman, 36 Barb. (N. Y.) 501; Gardner v. James, 7 R. I. 396 ; Large v. Van Doren, 14 N. J. Eq. 208. 2 Fields /;. Sherrill, 18 Kan. 365. ^ Spencer v. Fredendall, 15 Wis. 666. * Gardner v. James, 7 R. I. 396. 5 Mitchell V. Coombs, 96 Pa. St. 430 ; Kellogg v. Ames, 41 Barb. (N. Y.) 218. 6 York County Sav. Bank v. Roberts, 70 Me. 384. ' Champney v. Coope, 32 N. Y. 543. PAYMENT OF THE DEBT. 1157 However equity will sometimes give to the actions of parties a force and effect different from what they actually intended. Thus, where tlie actual intention was not to pay and satisfy a mortgage, but to substitute another holder in the place of the original mortgagee, and to keep it alive, if such action will operate as a fraud on any person, equity might, in favor of such person, in order to defeat the fraud, give an effect to the trans- action different from that so intended.^ The condition of a mortgage having been performed, a sub- sequent incumbrancer cannot be postponed to equities newly created which are, in fact, subsequent to his claim.^ When the old mortgage is paid it loses its lien as to third parties.^ But where the assignee of two mortgages makes fur- ther advances to the mortgagor, who gives a new mortgage covering the amounts of the old mortgages and the further advances, but there is no agreement or understanding that the old mortgage shall be considered satisfied, and possession of them is retained, there is only conditional and not absolute payment.* In some cases the subsequent mortgagee and the mortgagor may be equitably estopped to claim that the old mortgage was paid. Thus, when the mortgage debt was paid and the notes surrendered before maturity, but the mortgage not released of record, and then the notes were reissued the indorsers of those notes and the holders of them may have priority.^ A mortgage given to indemnify the mortgagee for his liabil- ity as an indorser of the mortgagor's notes cannot, after the payment of the debt, be assigned for the mortgagor's benefit as security for another debt as against the holder of a second mortgage, upon the estate then of record." In those States where a wife is not emancipated but is allowed iHall V. Southwick, 27 Minn. 234. "Jones V. Brogan, 29 N. J. Eq. 139 ; Swope v. Leffingwell, 4 Mo. App. 525. 'McGiven v. Wheelock, 7 Barb. (N. Y.) 22; Hodgman v. Hitchcock, 15 Vt. 374. *Tolman v. Smith, 85 Cal. 280. 6 Jordan v. Forlong, 19 Ohio St. 89. ^Purser v. Anderson, 4 Edw. Ch. (N. Y.) 17. 1158 EIGHTS OP PARTIES BEFORE DEFAULT. to mortgage her estate for her husband's debts she is considered a surety, and is, therefore, entitled to the benefits of all securi- ties which the creditor receives from her husband for the debt.^ A husband and wife executed a mortgage upon their home- stead to secure an indebtedness of the husband. A portion of the debt was subsequently paid, and the amount indorsed on the note. Afterward the husband, by an arrangement with the mortgagee, agreed that the payment made on the mortgage debt should be applied on another indebtedness, and the note with the credit on it was given up, and another note of the same date and amount executed and delivered, with the agree- ment that the mortgage should stand security for it. This agreement was held to be valid against the husband but void as to the wife, who could claim satisfaction pro tanto for the amount paid.^ An extension or renewal of the debt, payment not having been made, does not invalidate the security as against the homestead.^ Thus, where an unmarried man executed a deed of trust on his land to secure a debt due by him, and afterward marries and occupies such land as a homestead, and before the bar of the statute of limitations attaches makes a new promise in writing to pay the debt, and a new period is thereby given for both the debt and security to run, such security is paramount to his homestead claim.* § 1215. Intervening Creditors' Rights Must be Pre- served. — If the mortgagee assigns the mortgage to the mort- gagor after payment it cannot be revived to a third person so as to defeat the rights of prior or intervening creditors.^ The repaying the money to the mortgagee and agreeing with him that it shall still stand as security, are prejudicial to interested ^ Purvis V. Carstaphan, 73 N. Car. 575. ^ Brockschmidt v. Hagebvisch, 72 111. 562. ' Hambrick v. Jones, 64 Miss. 240. * Smith V. Scherck, 60 Miss. 491. s Carlton v. Jackson, 121 Mass. 592 ; Marvin v. Vedder, 5 Cow. (N. Y.) 671 ; Champney v. Coope, 32 N. Y. 543 ; Dorst v. Gale, 83 111. 136. PAYMENT OF THE DEBT. 1159 third parties and is not a valid agreement or revivor of the mortgage.^ § 1216. Assignment of Mortgage to Mortgagor. — The performance of an agreement by the mortgagor to pay the mortgagee a sum to the amount of his debt if lie would assign the mortgage to the mortgagor's attaching creditor as security instead of the attachment does not extinguish the mortgage, and it can be enforced bv the creditor.^ So if the mortgagor makes a payment out of his ovrn. funds, yet if it is agreed at the time the payment is made and re- ceived on the condition that the mortgage should be kept alive and transferred to another creditor of the mortgagor, such an agreement will be valid, and the payment will not extinguish the mortgage.^ So where the assignment is made at the re- quest of the mortgagor to another creditor of his, even though the consideration moves from the mortgagor and not from the assignee, it is not a payment, but a valid assignment.* Thus, a mortgagor delivered to the mortgagee a check which he had procured from the bank on his own note, and the mortgagee gave him a receipt in full of his account and paid him in money the difference between the amount of the check and the amount of the mortgage debt. The mortgage was not can- celled, but turned over to the bank by the mortgagee as a sub- sisting obligation, and none of the parties understood that the mortgage had been discharged by the transfer of the clieck. Judge Walker said that though the transaction amounted on its fiice to a payment of the mortgage, equity would consider it as an assignment to the bank, and not an extmguisliment ; that in furtherance of the purposes sought to ho. accomplislied, the transaction was to preserve the life of the mortgage and of the debt secured thereby,^ and the only change made was the 1 Gardner v. James, 7 R. I. 396. 2 Sheddy v. Geran, 113 Mass. 378. ^Hubbell V. Blakeslee, 71 N. Y. 63. *Hall V. Southwick, 27 Minn. 234 ; Goulding v. BunBter, 9 Wis. 513; Hoy V. Bramhall, 19 N. J. Eq. 74 ; BoUes v. Wade, 3 Green (N. J.), 458. 5 Morris v. Alston, 92 Ala. 502. 1160 EIGHTS OF PARTIES BEFORE DEFAULT. substitution of a different holder of the mortgage and the debt, which was a vahd transaction/ Equity will not suffer mere appearances and external forms to conceal the true purposes, objects, and consequences of a transaction.^ So where the amount on two mortgages is paid by a third person at the request of the mortgagor, and there is no under- standing that they shall be considered satisfied, a court of equity will, for the purpose of justice, keep the mortgages alive, and much more so if the party payijig takes an assign- ment of the mortgages ; ^ even if he had not taken an assign- ment of them, a court of equity would, for the purposes of jus- tice, apply the principle of subrogation.* § 1217. Reissue of Note to Cover a New Indebtedness. — When the parties to the mortgage agree that it shall con- tinue as security for a new indebtedness, it has no binding force as a mortgage, still equity will not aid the mortgagor in obtaining a release of such mortgage, when the mortgagee has parted with his money under such agreement ; nor will the court aid one who has taken a conveyance from the mortgagor with knowledge of the facts.^ A conveyance of land in mortgage, at common law, is a con- veyance by a deed defeasible on a condition subsequent. By the performance of the condition the title of the mortgagee is defeated, and the mortgagor is in of his former estate. The condition is saved, and no release or discharge of the mortgage is necessary, and the mortgagor can gain possession by suit at law.^ So a reissue of the note for a valuable consideration could not afterward convey a title to the land without a new conveyance in mortgage, by deed ; ^ and the 1 Kieser v. Baldwin, 62 Ala. 526 ; Hall^;. South wick, 27 Minn. 234 ; McGuire V. Van Pelt, 65 Ala. 344 ; Boyd v. Beck, 29 Ala. 712 ; 3 Pom. Eq. Jur., sect. 1211. ^ 1 Pom. Eq. Jur., sect. 378, et seq. ^Tolman v. Smith, 85 Cal. 280. *Matzen v. Shaeffer, 65 Cal. 81 ; Bacon v. Goodnow, 59 N. H. 415; Yaple v. Stephen?, 36 Kan. 680 ; Gans v. Thieme, 93 N. Y. 232. * Joslyn V. Wyman, 5 Allen (Mass.), 62. "Holman ?'. Bailey, 3 Met. (Mass.) 55; Richardson «. Cambridge, 2 Allen (Mass.), 118; Merrill v. Chase, 3 Allen (Mass.), 339. 'Merrill v. Chase, 3 Allen (Mass.), 339. PAYMENT OF THE DEBT. 1161 fact that the parties, acting under a mutual mistake as to the validity of such contract, have undertaken to stipulate that the mortgage should continue in force, cannot change the legal title.^ So making a second mortgage, subject to the first, will not give the first any effect against an assignee of the second, if at its date there was nothing due upon the first.^ While an agreement to revive a mortgage may not operate in the way intended, as a revival of the mortgage, effect may be given to the intention of the parties by another mode, in de- claring it an equitable mortgage.^ When the note is found among the papers of a deceased mortgagor, the presumption is, in the absence of evidence, that it was paid according to the condition, and a return of the note by the heirs of the mortgagors to the heirs of the mortgagee will not revive the mortgage.* When a note is paid a reissue of it does not revive the debt.^ § 121S. The Question of Payment. — The question of the fact of payment is always open, and it is also a good answer to show that the giving up of the notes secured thereby or a formal discharge of the mortgage was obtained by fraudulent means.^ But it is equally clear that after an actual payment of the debt the mortgage cannot be revived by any oral agree- ment to keep it in force to secure a distinct and independent debt.^ AVlien the note has been paid, the mortgagee has no right to hold the same as security for any damages which the mortgagee may sustain by reason of a failure of the mort- gagor to perform another agreement.* 1 Whitney v. Claflin, cited 21 Pick. 10 ; Fnrbuph v. Goodwin, 25 N. H. 425 ; Claflin v. Godfrey, 21 Pick. (Mass.) 1. Compare Purser r. Anderson, -4 Edw. Ch. (N. Y.) 17. ' 2 iSIerrill v. Chase, 3 Allen (Mass.), 339, 340. ^Peckhani v. Haddock, 36 111. 39. * Richardson v. Cambridge, 2 Allen (Mass.), 118. * Murphy v. Simpson, 42 Mo. App. 654. « Barnes f. Camack, 1 Barb. (N. Y.) 392 ; Grimes v. Kimball, 3 Allen (Mass.), 518. 'Merrill v. Chase, 3 Allen (Mass.), 339. ^Beardsley i'. Tattle, 11 "Wis. 74. 1162 RIGHTS OF PARTIES BEFORE DEFAULT. And a mortgage upon a homestead once paid cannot be re- vived by an agreement of the husband alone.' And where the consideration named in a deed is the pay- ment of a prior mortgage, the payment of such mortgage by the grantee of the deed extinguishes it, even though he at- tempts to keep the mortgage alive by taking an assignment of it.' Where a party purchases land upon which there is an in- cumbrance which he pays and obtains a release and afterward procures a loan, giving the notes as collateral security, which he paid, the party loaning having no notice of their payment or of the release, and such loan was procured by his and others' acts and representations leading to the belief that the notes were unpaid and the incumbrance still a valid and sub- sisting lien, he and those co-operating with him to create such belief and cause the loan, are, in equity, estopped from show- ing and insisting upon the fact of the payment of the notes and the release.^ A mortgage cannot by a parol agreement be altered in its operations so as to stand as security for a new debt different in character and amount from that mentioned in the instrument.* 1 Spencer v. Fridendall, 15 Wis. 666. 2 Fouche V. Delk (Iowa), 48 N. W. Rep. 1078. ^ International Bank v. Bowen, 80 111. 541. * Morris v. Alston, 92 Ala. 502 ; Johnson v. Anderson, 30 Ark. 745 ; Whiting V. Beebe, 12 Ark. 421, 428. /^ LA it'- [|gS_lAiVG£X£^ ii AA 000 850 747 7