into the possession of A. J. Lawrence, one of such payees, with the consent of the other two payees, to hypothecate or sell it. That on the 22d day of July, 1889, the said A. J. Lawrence sold and delivered said note to the plaintiffs, and at the same time delivered to them the mortgage securing its payment, which said note and mortgage the plaintiffs still own and hold, and no part of which has ever been paid. That subsequently, but before the maturity of the note, the defendant Entermille paid to Anderson and Mandeville, two of the payees named therein, the sum of $50, for the purpose of liquidating in full the note and discharging the mortgage, whereupon Mandeville, one of the payees, wrote upon the margin of the mortgage record. as follows: "State of Oregon, county of Baker. Full and complete satisfaction of the within mortgage this 12th day of August, 1889, acknowledged. Lawrence, Anderson, and Mandeville. Per C. W. Mandeville. Attest: W. H. Packwood, Deputy County Clerk,"-all of which was without the knowledge or consent of the plaintiffs, and whose first knowledge of the same was acquired when the suit was commenced. That John Geiser, now deceased, took a mortgage on the same premises from the defendant Entermille to secure the payment of a sum specified therein, but that at the time of taking the same he knew of the payment of the $50 by the defendant Entermille to said Anderson and Mandeville, and that the note secured by the mortgage was not taken up nor delivered when the record was so indorsed. That on the 20th day of January, 1891, after the death of John Geiser, the defendants named as administrators of his estate, in payment of such mortgage, took a deed from the defendant Entermille, wherein and whereby he conveyed to the estate of John Geiser, deceased, all his right, title, and interest in and to the property described in said mortgage, and at the time of taking such deed the defendant Entermille represented to the defendant administrators aforesaid that the note was paid, and the mortgage canceled, and that said administrators examined the records of Baker county and found the mortgage canceled in the words as already set out. That neither the defendant Entermille nor the defendants Geiser, administrators aforesaid, knew that the plaintiffs owned the note until the commencement of this suit. The trial resulted in a decree in favor of the plaintiffs, foreclosing their mortgage, and ordering the property sold to satisfy the note, etc., from which decree the defendants have brought this appeal.

as

L. M. Robinson and T. C. Hyde, for appellants. Olmsted & Courtney, for respondents.

LORD, C. J., (after stating the facts.) The question to be determined is whether the discharge upon the record of a mortgage by a

mortgagee, after he has assigned it, operates to cancel such mortgage as against subsequent purchasers in good faith and for value. If this question is to receive an answer in the affirmative, it must be owing to some legal obligation which our registry laws impose upon an assignee to record his mortgage if he would protect himself against such subsequent purchasers and incumbrancers. It is well settled that a mortgagee and his assignee are regarded as purchasers under the registry laws. It is a familiar principle that, where a debt is secured by mortgage, the debt is the principal and the mortgage is the incident, and that an assignment of the debt is an assignment of the mortgage. Here there was a written assignment of a negotiable note before maturity, and a delivery of the mortgage. The assignment of the note carried the mortgage, as the former is the principal and the latter the incident. The assignee stands in the place of the payee. As the assignment of the note carried the mortgage, upon recognized legal principles the security is protected in the hands of a bona fide holder to the same extent as the note itself, unless there is some requirement of the law for the registry of such assignments. In Carpenter v. Longan, 16 Wall. 273, it was held that the assignment of a negotiable note before its maturity raises the presumption of a want of notice of any defense to it, and that this presumption stands until overcome by proof; Mr. Justice Swayne saying: "The case is a different one from what it would be if the mortgage stood alone, or the note was nonnegotiable, or had been assigned after maturity. The question presented for our determination is whether an assignee, under the circumstances of this case, takes the mortgage as he takes the note, free from the objections to which it was liable in the hands of the mortgagee. We hold the affirmative: The contract, as regards the note, was that the maker should pay it at maturity to any bona fide indorsee, without reference to any defenses to which it might have been liable in the hands of the payee. The mortgage was conditioned to secure the fulfillment of that contract. To let in such a defense against such a holder would be a clear departure from the agree ment of the mortgagor and mortgagee, to which the assignee subsequently, in good faith, became a party. If the mortgagor desired to reserve such an advantage, he should have given a nonnegotiable instrument. If one of two innocent persons must suffer by a deceit, it is more consonant to reason that he who 'puts trust and confidence in the deceiver should be a loser, rather than a stranger.'" We must turn, then, to our registry laws, and ascertain whether they impose any legal obligation upon the assignee of a note secured by a mortgage to take the assignment in the form of a conveyance, and have it recorded as a means of affording notice to subsequent purchasers and incumbrancers,

if he would avoid the postponement of his lien as to them. Section 3031, Hill's Code, provides that a mortgage may be discharged upon the record thereof "by the mortgagee or his personal representative or assignee" acknowledging satisfaction of the mortgage before the clerk, or executing a certificate to that effect with the formalities of a deed, and presenting the same to the clerk. This section recognizes the assignee as the proper party to discharge the record after the assignment of the note and mortgage. He is the bona fide owner and holder of the note and its security, which entitles him to discharge the mortgage. The mortgagee, after he has assigned his interest, has no power to extinguish the mortgage by acknowledgment of its satisfaction, release, or otherwise. Being without the power, his fraudulent acknowledgment of satisfaction cannot affect the rights of the assignee. As Mr. Justice Deady said: "Such an acknowledgment is simply a fraud, and, if any person must suffer by it, it ought to be the person who, by ignorance or carelessness or otherwise, was deceived by it, and acted upon it, but not the assignee who acquired the mortgage without fault, and is a stranger to the fraudulent transaction. As well say that the purchaser in good faith from the grantee in a forged deed that has been admitted to record is thereby protected at the expense of the true owner, who is without error or fault in the premises." Trust Co. v. Shaw, 5 Sawy. 340.

In Joerdon v. Schrimpf, 77 Mo. 386, under a similar statute, providing for the discharge of the record by the mortgagee and assignee, the court says: "The statute recognizes the assignee of the mortgage as the proper party to enter the satisfaction, and it has been held that he is the proper party to make the entry." In that case one Ohlendorf was the payee of the note secured by the deed of trust, and the court said: “If the plaintiff purchased the note for value, before maturity, and before the entry of satisfaction, the payment to Ohlendorf, and his entry of satisfaction on the record, could not affect the security afforded by the deed of trust. * Ohlendorf was not the cestui que trust when the entry was made, and was not the person authorized by the statute to make it, and it stands on the record a nullity."

* *

In Lee v. Clark, 89 Mo. 556, 1 S. W. Rep. 142, it was held that the payee of a note secured by a deed of trust, after he had assigned the note, cannot discharge the property of the lien as between a bona fide purchaser of the property and the assignee of the note by entering satisfaction of the debt on the margin of the record or otherwise. As notes secured by mortgage are transferable by the law merchant, ana as, after such transfer, the mortgagee has no right or power to acknowledge satisfaction or to release the mortgage, it follows, as the cases indi

cate, that a person, desiring to purchase property, who finds on the record a mortgage which purports to be satisfied or released, must ascertain whether it was satisfied or released by the person authorized to discharge it. "Purchasers," says Mr. Jones, "are bound to know that if the mortgagee has indorsed the notes before maturity to a bona fide holder, the mortgagee has no longer authority to satisfy the mortgage; and therefore they are bound to ascertain whether the mortgagee still held the notes at the time he discharged the mortgage." 1 Jones, Mortg. § 814.

To the question, often reiterated, what shall a person desiring to purchase do under such circumstances as are disclosed by this record? we may quote the answer of Henry, J., in Lee v. Clark, supra: "Let it alone until he can ascertain who holds the note. He is under no obligation to buy, and prudence would dictate that he should not buy until satisfied that the owner of the note had entered satisfaction of the debt." It may be true, as suggested by Mr. Justice Deady, that the statute (section 3031) is defective in not requiring the party making the acknowledgment or certiucate to produce the evidence that he is at the time such mortgagee or assignee as to entitle him to discharge the record. But, however that may be, it is clear that a mortgagee cannot extinguish a mortgage which has passed from him by assignment; and, consequently, that a discharge of the record by the mortgagee, after its transfer, is a fraud upon the assignee whose rights are unaffected thereby. Such being the case, unless the registry law makes it the duty of the assignee to take the assignment in the form of a conveyance, and have it recorded, he is not bound to do so. We are to inquire, then, whether there is any statute which imposes a legal obligation upon an assignee to record his assignment if he would protect himself against a subsequent purchaser or incumbrancer in good faith and for value. In many states provisions are made for recording the assignment of a mortgage, or, in default thereof, of postponing it to the conveyance of a subsequent purchaser or mortgagee. As the purpose of the registry laws is to protect subsequent purchasers against prior and unrecorded conveyances, the utility and convenience of extending such laws to the assignment of mortgages is conceded; but the registration of conveyances or other instruments is purely the creation of the statute, and, unless it requires the assignee to record the assignment of the mortgage, he is not guilty of negligence in failing to do so. There is no specific direction in the statute upon the subject. The only mention of an assignment, as such, is found in section 3030, Hill's Code, which provides that "the recording of the assignment of a mortgage shall not in itself be notice to the mortgagor so as to invalidate a payment made by him to the

mortgagee." But this was but a declaration of the rule established by the court long before there was a statute authorizing assignments to be recorded. In James v. Morey, 2 Cow. 246, Savage, C. J., said: "I know of no law requiring the assignment of a mortgage to be recorded. If notice of the assignment is not given to the mortgagor, he is protected in any payment he may make to the mortgagee; and this is the extent of the risk run by the assignee, who neglects to give notice of the assignment." This provision then, as Mr. Justice Deady said, was "merely the assertion of a rule that had long been established by the courts;" and he added: "The most that can be said for this provision is that it impliedly authorizes an assignment to be recorded, or rather contemplates that it may be recorded by virtue of some other provision or statute; and yet by a still stronger implication, arising out of sections 22 and 34 of said chapter, and the very nature of the case, it is provided that no instrument affecting the realty, which includes an assignment, shall be admitted to record unless acknowledged and certified as a conveyance. An assignment of a mortgage may be made by an instrument in the form of a conveyance, and in such case may be admitted to record. But an assignment of a mortgage may be a mere writing under the hand of the assignor, declaring that he thereby assigns the mortgage to a person therein named. Such a writing is effectual to pass the lien of the mortgage, but it would not be entitled to record unless acknowledged and certified; but in the case of a mortgage given as security for a negotiable note, the debt being the principal and the security the incident, the same may be assigned by the simple indorsement or delivery of the note. In such case there is no assignment to record. In the absence, then, of any legislative direction to that effect, there does not seem to be any obligation resting upon an assignee to record his assignment to protect himself against any subsequent purchaser or mortgagee." Trust Co. v. Shaw, supra. This decision was approved by the writer in Watson v. Investment Co., 12 Or. 481, 8 Pac. Rep. 548, but, owing to the absence of one member of the court and the dissent of the other, it failed to receive the approval of the court, so that Watson v. Investment Co. cannot be regarded as authority upon this subject. But a more thorough consideration of the subject, rendered necessary by the facts in the case at bar, has satisfied us that the recording acts do not extend to the assignment of mortgages, and that the construction given to them in Trust Co. v. Shaw, supra, is correct. There is nothing in section 3030, supra, expressly or otherwise requiring an assignee to record his assignment. It nowhere imposes any duty upon him to have the assignment of the mortgage acknowledged and recorded to protect himself either against the fraud of his assignor or the rights

of subsequent purchasers or incumbrancers. The most that can be said for this section is that there is an implication that when the instrument of assignment is in the form of a conveyance it may be admitted to record, but there is no language in it, or any other provision of the recording acts, which requires the assignee to record it in order to protect himself against the subsequently ac quired rights of purchasers or incumbrancers in good faith or for value. Where there is no legal obligation resting upon the assignee to record the assignment to protect himself against subsequently acquired rights in the property, a mortgage may be assigned without any formal conveyance, as in the present case, by a simple indorsement on the note, and delivery of the mortgage. The fact, therefore, that the assignee might take the assignment in the form of a conveyance and record it cannot make his failure to do so negligence which operates to postpone his lien as against subsequent purchasers or mortgagees. The question is not what the plaintiffs might have done to apprise the defendant grantees that they were incumbrancers, but what they were legally bound to do in order to preserve the priority of their lien against the subsequently acquired rights of the defendants in the property. As the plaintiffs were not bound, under the recording acts, to register their assignment, they were under no legal obligation to take the assignment of the mortgage in the form of a conveyance, and record it, in order to prevent a fraudulent discharge on the record, or to protect subsequent grantees or mortgagees. They had the right to assume that the defendant grantees knew the law, and that they would exercise that degree of care and prudence which the law imposed upon them to avoid loss. When the defendants found that the mortgage was satisfied upon the record they were bound to ascertain whether it was done by one having authority, or take the consequences of their neglect. As Elliott, C. J., said: "A second mortgagee who finds on record a mortgage receives notice of its existence, and he must ascertain whether the release was executed by one having authority, for he is bound to know, as matter of law, that notes secured by mortgage are transferable as articles of commerce, and that, after transfer, the mortgagee has no right to release the mortgage. He is bound, also, to know that he can obtain no notice from the record, because the law does not authorize the recording of assignments, and that he must, therefore, look elsewhere for information." Reeves v. Hayes, 95 Ind. 527. Section 7, 2 Rev. St. 1876, p. 335, of the Indiana statute is identical with section 3030, supra, and although there are terms in the registry laws of that state much more comprehensive than our own, yet it was held in Reeves v. Hayes, supra, (1) that a mortgagee, after assigning the debts secured by a mortgage,

has no power to enter satisfaction of a mortgage, and that such entry of satisfaction by him on the margin of the record will not give priority to a subsequent mortgagee in good faith, without actual notice of the assignment of the debt; and (2) that there is no law authorizing the recording of an assignment of a mortgage, and that such record, if made, would not have been notice to subsequent purchasers or mortgagees in good faith. In the absence, therefore, of any legislative direction requiring the assignment of mortgages to be recorded, there is no obligation resting upon an assignee to record an assignment to protect himself against any subsequent purchaser or mortgagee. It results from these considerations that there was no error, and that the decree must be affirmed.

(24 Or. 395)

CLEMMENSEN v. HOLCOMB et al. (Supreme Court of Oregon. July 5, 1893.) Appeal from circuit court, Coos county; J. C. Fullerton, Judge.

Action by Lars Clemmensen against Dora Holcomb and others for an accounting. From the judgment, defendants appeal. Affirmed.

John F. Hall, for appellants. S. H. Hazard, for respondent.

PER CURIAM. This is a suit between partners for an accounting. The record discloses that all the material allegations of the complaint were denied by the answer, and that the only issues in the case' to be determined are questions of fact. The business in which the partners were engaged was brewing beer, and, in connection with the brewery, they kept a saloon. One of the partners attended to the brewing, and the other conducted the saloon, and kept the books and accounts. The latter died, leaving the accounts in a state of confusion, and, no one being able to fully explain them, the referee found it difficult to accurately state the accounts as directed by the court. In looking at the books, we think the referee and the court below reached, under the circumstances, as nearly an accurate result as possible. We are unable to see any error, nor was any pointed out to us. In such case there is no other alternative than to affirm the decree.

(18 Colo. 548)

EQUATOR MINING & SMELTING CO. v. GUANELLA et al.

(Supreme Court of Colorado. June 19, 1893.) LEASES-EXECUTION-WAIVER OF CONDITIONSPAROL EVIDENCE.

1. A lease of the property of a mining company, signed for it by its superintendent, provided that it should not be valid or binding on the company until approved by its executive committee, said approval to be attested on the

lease by the company's secretary. Held that, though the lease did not receive the approval of the company, it would be considered to have waived this condition by permitting the lessees to commence work under the lease, and continue the same for more than three months.

2. The failure of one of the lessees to sign the lease would not destroy its binding effect on them, they having treated it as a valid contract by going into possession and prosecuting work under it.

3. Where the lease provided that the lessor should "put in order the water pipe and air compressor," the purpose for which they were to be used not being specified, parol evidence was admissible to show the object.

Appeal from district court, Clear Creek county.

Action by Thomas Guanella and others against the Equator Mining & Smelting Company. Judgment for plaintiffs. Defendant appeals. Affirmed.

The other facts fully appear in the following statement by HAYT, C. J.:

Appellees, in the court below, recovered the sum of $833.20, as damages alleged to have resulted from a breach of contract of lease. The lease out of which the suit originated covered a portion of the Munsell lode mining claim, in Clear Creek county. This claim was at the time owned by appellant. It had upon it a tunnel 550 feet in length, and, at the breast of this tunnel, a shaft 55 feet in depth. Appellees were to sink this shaft 125 feet below the 55 feet mentioned, and do other work, and, as a consideration, were to receive a percentage of the proceeds from the ore to be extracted. A lease was drawn up and signed for the Equator Mining Company, by its superintendent, and also by five of the six lessees. The concluding paragraph of the paper reads as follows: "It is understood and agreed that this lease shall not be valid or binding upon said company until approved by the executive committee, said approval to be attested herein by the secretary of the company." It was never approved as required. It provided, among other things, that appellant was "to put in order the water pipe and air compressor." The breach for which appellees were allowed damages in the court below arose out of the failure of appellant to put the water pipe and air compressor in order. Appellees contend that the agreement to put the water pipe and air compressor in order imposed upon appellant the duty of putting the same in a condition so that the air compressor would furnish sufficient power to run the engine which was to be used in hoisting material from the shaft, and also to run certain air drills which were to be used in mining. Appellant contends that it was only required to put the same in such condition as would furnish the necessary power to run the drills. At the trial, appellees, against the objection of appellant, were allowed to introduce oral evidence to show that, under an oral agreement with appellant, appellees were to excavate a chamber for the reception of the engine and hoister, and that the air com

pressor was to be in such order as that it would run the engine for the hoisting. The admission of this evidence is assigned for error. Appellant contends that the lease constitutes the sole and only contract between the parties, and that its terms cannot be varied by a contemporaneous oral agreement. Carpenter & McBird, for appellant. Morrison & Fillins, for appellees.

HAYT, C. J., (after stating the facts.) The lease, which appellees claim amounts only to a memorandum in writing, expressly provides that "it should not be valid and binding upon said company until approved by the executive committee," etc. This lease was not approved as required, and it was not signed by all the lessees. Appellees contend that, while it is admissible as some evidence of the agreement between the parties, it is not the exclusive evidence of such agreement. Appellant, on the contrary, urges that it furnishes the only evidence of the agreement made by the parties, and that it cannot be changed or contradicted by oral evidence. Although the lease does not appear to have received the approval of the executive committee of the company, the company, having permitted appellees to commence work under the lease, and continue the same for more than three months, must be held to have waived the condition inserted solely for its benefit, requiring the approval of its executive committee. Likewise, the failure of one of the lessees to sign the instrument does not destroy its binding force and effect upon the lessees, they having all treated the same as a valid contract, by going into possession and prosecuting work under it. Milling Co. v. Donat, 10 Colo. 529, 16 Pac. Rep. 157. We agree with appellant that the rights of the parties under these circumstances must be determined upon the basis that the lease is binding as a written contract between the parties, and that oral evidence cannot be allowed for the purpose of altering or contradicting its terms. This conclusion is not, however, decisive of the controversy.

The oral evidence introduced is directed to two points, viz.: (1) To show that the company agreed to furnish an engine and hoister; (2) to put the water pipe and air compressor in order, so that the compressor would furnish power to run such engine and hoister. The company did furnish an engine and hoister that were satisfactory to appellees,in other words, no breach of contract in this particular is alleged or relied upon; hence the admission of oral evidence to show that the company had agreed to do that which it in fact did do, if error, was error in no way prejudicial to appellant. And, as to the oral evidence tending to show the purpose for which the air compressor was to be used, this was competent under the written lease, imposing, as it does, the obligation upon appellant "to put in order the water pipe and

air compressor." It was necessary to have the water pipe in order, so that it would furnish water power for the air compressor. This air compressor was to be used for some purpose. Such purpose not being specified in the lease, oral evidence was competent to show for what purpose it might be used in prosecuting the work of mining under the lease, provided it was in order. As this was the effect of the evidence introduced, no error was committed by permitting such evidence to go to the jury. Moreover, appellees' right of recovery is clearly shown independently of, and is not affected by, this evidence. It is conceded that it was the duty of the company to put the water pipe and air compressor in order. They were evidently to be put in order to the end that the air compressor might be used so as to aid appellees in the economical and advantageous working of the mine, under the lease. Appellant says that it was for the purpose of running the air drills. Appellees claim that it was to furnish power for hoisting, as well as for drilling. The evidence shows that the water pipe and air compressor were never put in such order that they could be used for either purpose; hence the breach on the part of the company of the contract in this respect must be taken as established. Guanella, one of the plaintiffs, testified upon this branch of the controversy, in part, as follows: "The company never put the compressor in order. We attempted to run the water, but had to shut it off very quick. I notified O'Donnell, the foreman, and I notified Mr. Kearney, [the superintendent and manager,] by letter, that we were waiting for power, and we was ready to work; had our men in town idle. There was a man up there two or three days patching up, the joints. That is all they did. I had O'Donnell, I think, turn the water in twice, when I was there, some time in the latter part of February or first of March, when we was waiting for power and ready to work. It wouldn't turn the machinery at all, and was turned right off. The pipes were leaking so badly that O'Donnell didn't want to take the responsibility of letting it run, because it was injuring Hall's toll road. * * The first day it wasn't full, and wouldn't run then. Then, the second day it didn't do any better; didn't make a pound of air. The wheels started and stopped." The testimony of a number of other witnesses introduced by appellees was to the same effect. Appellant called but two witnesses in its behalf. The first, Stephen W. Kearney, testified that he was superintendent and manager of the Equator Mining Company from 1881 to January 1, 1889, and was acting in that capacity in December, 1886, at the time the lease was made with plaintiffs. In reference to this water pipe and air compressor, the witness testified that the company had a man at work on the water pipe, going over all the joints that were leaking, and repairing them,