(Jortipll Slam ^rlynol IGibtary Cornell University Library KFC1930.W37 History of a Colorado real estate mortoa 3 1924 024 637 484 Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924024637484 THE HISTORY OF A COLORADO REAL ESTATE MORTGAGE MANUAL FOR LAWYERS AND CONVEYANCERS CONTAINING THE LAW OF LAND SECURITIES, INCLUDING REGULAR MORT GAGES WITH AND WITHOUT POWER, TRUST DEEDS AND TITLE BONDS, AS PASSED UPON BY THE APPELLATE COURTS, AND ENACTED BY THE LEGISLATURE, IN COLORADO; A COMPLETE DIGEST, TO AND INCLUDING VOLUMES, 20TH SUPREME COURT REPORT, 5TH COURT OF APPEALS REPORT AND iOTH PACIFIC REPORTER. BY HENRY WILLIAM WEB BER, LL. B. OF THE DENVER BAR. DENVER THE CHAIN & HARDY COMPANY 1895 "" Copyright, iSgs, By Henry William Webber. AN UNFAILING FRIEND AND BENEFACTOR. TABLE OF CASES CITED. PAGE ALLEN T/.TRITCHetal. 93, 94 Angela v. Mills et ux 1 1 1 Anthony et al v. Stebbins. . 6 Armor v. Spalding. .31, 38, 48, 53.99 Ashley v. Denny 56 BAMBERGER v. VAN TROTHA 63 Barnett v. Knight etal. . 12, 13, 14 Barth v. Deuel. .7, 8, 58,93,94, 95, 98, 108 Barth v. Martin 120, 129 Bassick Min. Co. et al. v. Union Wks 124,135 Beckwith z/. Beckwith 45 Bent Co. v. Commissioners Cheyenne Co 44 Beshoar v. Pueblo & Ark. Valley R. R.Co 6,67 Blair v. Bruns 62 Bohm V. Bohm 38, 63 Bradbury et al. v. Davis. .6, 33, 58 Bradford v. Carpenter. .26, 61, 124, 128, 129 Brisbane v. Rittmaster. .56, 57 Brown v. State 56 Brown v. Steck 45 Brown T/. Wilson et al . .118, 124 Brunk v. Smith 60, 61, 1 10 Bruns et al v. Chase 89 Bruns z*. Blair 62 Buck et al v. Fisher et al. .74, 107 Buckingham v. Orr 45 Burbank v. Roots . . 53, 56, 78, 79 PAGE Burke v. Wolf 66 Burns v. O'Reilly 90 Byers v. Hussey 93 CALNAN V. JOHNSON. 43, 63 Campbell v. Clay 78, 79 Campbell v. First Nat. Bank. 23 Carpenter v. Bradford. .26, 61, 124, 125, 129 Carpenter v. Longan. .47, 51, 84, 86, 95, 104, 105, 112 Carpenter v. Williams.... 89 Carr v. Williams 40 Cathcart et al v. Fisk. .76, 114, 130 Caywood v. Wells.. 10, 11, 13, 14, 17, 84, 116, 123, 127 Chandler v. Craig 10 Chase v. Bruns et al 89 Cheever z/. Mintonet al. . . . 29 Chivington v. Colo. Springs Co 52, 56 Church V. Smithea 69, 82 Clark V. Loveland. . . .21, 114, 115, 123, 129 Clay V. Campbell 78, 79 Clay V. Stephens. . . .75, 79, 84, 116, I2C, 124 Clear Creek, etc. Min. Co. v. Root 134 Coffey et al v. Rockwell ... 70 Collins V. Sullivan 62 Colorado Loan & Trust Co. V. The Grand Valley Can. Co 22 Cole V. Martin 87 Coleman v. Davis 88 Colorado Mfg. Co. v. Mc- Donald 129, 13s VI. TABLE OP CASES CITED. PAGE Colorado Mortgage Co. -u. Goodwin 13 Colo. Springs Co. v. Chiv- ington 52, 56 Cooper V. Perot 38 County Com. Arapahoe Co. V. Cutter 9, 47, 67, 95 Commissioners Cheyenne Co. V. Bent Co 44 Cragen et al v. Folsom. ... 82 Craig V. Chandler 10 Crane v. Farmer 2 Crocker v. Thompson 113 Cutter V. County Com. Arap- ahoe Co 9, 47, 67, 95 DAILEY V. HOLLADAY, 53.54 Dallemand v. Mannon. . 15, 16, 58 Davenportz*. Hittson 89 Davis V. Bradbury et al. .6, 33, 58 Davis V. Coleman 88 Davis V. Hopkins 35. 38 Davis z/. Mercantile Co. .. . 14 Denny v. Ashley 56 Denver B. & M. Co. v. Mc- Allister. .7, 30, 45, 46, 51, S2, 60, 84, io6, 108, 118, 135 Deuel V. Barth. .7, 8, sS, 93, 94, 95, 98, 108 Dolores etc. Canal Co. v. Robinson 92 Doom et al v. Shervi^in .... 87 Drake et al v. Root. . 15, 17, 40, 67 Duggan V. Ross.. 35, 36, 84, 121, 122 Dunmeyer v. Kas. Pac. Ry. Co 30 Dunn V. Ghost 87 Dunn V. Wheeler 10, 57, 95 Dusingi/. Nelson. . 107, 124, 132 ELDER V. SCHUMACHER 10.93 Emory v. Keighan 7 PAGE Empire Land 6c Canal Co. V. Engley et al 29 Engley v. Empire Land & Canal Co 29 Everett v. Todd 25 Eyster v. Gaff. 28, 47, 89, 104, 112, 125, 127, 128 FALLON z/.O'DONNELL, 70 Fallon V. Worthington 70 Farmer v. Crane 2 Fassett et al v. Mulock . . 71;, 90, 120, 121 Fechheimer v. Trounstine, 41,42 Fetta V. Vandevier. .33, 39, 40 Filbeck v. Gregorjf 60 Filmore etal v Reithmann, 45,46, 116 First Nat. Bank v. Camp- bell 23 Fisher et al z/. Buck et al . . 74, 107 Fisher v. Kingsbury 105 Fisk V. Cathcart et al. .76, 114, 130 Fisk V. Reser 79, 80 Fitch V. Stallings. .69, 96, iio, 122 Folsom V. Cragen et al . . . . 82 Francis et al v. Wells, 7, i io„ i h GAFF V. EYSTER. .28, 47. 89, 104, 112, 125, 127, 128 Ghost V. Dunn 87 Gold & Silver Mining Co, v. Walker 30 Goodwin v. Colo. Mort. Co. 13 Grady v. Porter in, 122 Gregory v. Filbeck 60 Griffith V. Wright 100 Gully et al v. Stout 29 HALL z/. LINN 34 Hammond v. NippeL.io, 21, 23, 51,55, 119, 135 Hawley v. Laughlin .... 30, 62 TABLE OF CASES CITED. Vll. PAGE Haxet al v. Seaman. .58, 69,71 Hayes et al v. N. Y. Mining Co. of Colo 130 Heisler v. Lyon. .. .51,86, 105 Henderbon v. John 89 Henry v. Travelers' Insur- ance Co 93, 108, 1 19 Hittson V. Davenport 89 Hobson V. Murray n6 Hobson V. Porter 8g Hochmark v. Richler. . .45, 46 Holladay v. Dailey 53. 54 Holten V. Terpening 89 Hopkins v. Davis 35. 36 Huddart v. McClair et al. . 83 Hussev V. Byers 93 Hutchinson v. Hutchinson, 57,58 JOHN V. WILCOX ET AL, 20, 50 John V. Henderson 89 Johnson v. Calnan 43. 63 Johnson z/.Weare. . 12, 13, 14, 15 Jones V. Travelers Ins, Co, 22, 92, 96 KAS. PAC. R'Y CO. v. pUNMEYER 30 Keighan v. Emory 7 Kellogg V. Kellogg 10, 44 Kellogg V. Quinn ... 35, 95, 96, 100, loi Kershow v. Whitsett. . . .6, 33, 38,40 King V. Packard 119, 134 Kingsbury z*. Fisher 105 Knight et al v. Barnett. . 12, 13, 14 Knox et al v. McFarran .... 58 LAUGHLIN V. HAWLEY, 3c, 62 Leet V. Phillippi 81, 91 Lighthall v. Moore 9 Lindsay z'. Lindsay 39 Linn v. Hall 34 PAGE Longan v. Carpenter. .47, 51, 64, 86, 104, 105, 112 Loveland z^. Clark . .21, 114, 115, 123, 129 Lulu & White S. M. Co. v. Nevin 106 Lyon V. Heisler 51, 86, 105 MANNON V. DALLEMAND 15, 16, 58 Martin v. Barth 120, 129 Martin v. Cole 87 McAllister v. Denver B. & M. Co 7, 30, 45 46, 51, 52, 61, 84, 106, 108, 118, 135 McClair et ai v. Huddart. . 83 McClure v. Smith. . . .2, 30, 35, 36, 40 McDonald v. Colorado Mfg. Co 129 McDonald z/. Thompson. . 89, 135 Mctarran z/. Knox et al. . . 58 McLaughlin Z". Stewart. .. . 31 McMeel v. O'Connor 6t McMurtrie v. Riddell. .23, 125 McNeal v. Mitchell 25, 8r McPhee v. O'Rourke. ...11, 13 Mellor V. Valentine. .30, 40, 82 Mercantile Co. v. Davis. . . 14 Mills et ux V. Angela in Milsap et al v. Stone 54 Minton et al v. Cheever. . . 29 Mitchell V. McNeal 25, 81 Moore v. Lighthall 9 Morris v. Wilson 42, 43 Mulock V. Fassett. .7^, 90, 120, 121 Murray v. Hobson 116 NATIONAL BANK v. WALTON 59 Nelson v. Dusing. ... 107, 123, 124 Nevin v. Lulu & White S. M. Co 106 Newton v. Stockgrowers Bank 59 Vlll. TABLE OP CASES CITED. PAGE N. Y. Mining Co. of Colo. v. Hayes et al 130 Nippel V. Hammond. . 10, 21, 23,51,55,119, 135 Norton v. Tritch 24, 82 O'CONNOR V. McMEEL ET AL 6l O'Donnell v. Fallon 70 Olsen V. Scott et al g6 O'Reilly v. Burns go O'Rourke t/. McPhee. . . 11, 13 Orr V. Buckingham 45 PACKARD V. KING. . 119, 134 Peoples Nat. Bank v. Wood- ward 15 Perot V. Cooper 38 Pershing z/. Wolfe et aL.y, g, 20, 23, 60, 71, 73, 92, 93, 94, 108 Peterson z/. Townsend 38 Pettit V. Thalheimer 22 Phillips V. Rhodes 43 Phillippi V. Leet 81, 91 Pipe V. Smith 116 Porter v. Grady in, 122 Porter f . Hobson 89 Powell V, Rhone 52, 64 Pueblo & Ark. Valley R. R. Co. V. Beshoar 6, 67 QUINN V. KELLOGG, 35. 95. 96. 100, loi REDFIELD et al. v. TRAVELERS' INS. CO. 86, 92 Reid et al. z". Sullivan. ..6, 7r, 73, 84, 108 Reithman v. Filmore. .45, 46, 116 Reser z'. Fisk 79, 80 Rhodes v. Phillips 43 Rhodes z/. Wilson (y2,i% Rhone v. Powell 52, 62 Richler v. Hochmark. . .45, 46 PAGE Riddell v. McMurtrie. .23, 125 Rittmaster v. Brisbane. .56, 57 Robinson v. Dolores, etc., Canal Co 92 Robinson v. Shillaber 7 Rockwell V. Coffey et al. . . 70 Rockwell V. Thatcher 80 Root V. Clear Creek, etc., Min. Co 134 Root V. Drake et al. .15, 17,40, 67 Roots V. Burbank . . 53, 56, 78, 79 Ross V. Duggan et al. .35, 36, 84, 121, 122 SCOTT ET ALP. OLSEN.. 96 Schumacher v. Elder. . . 10, 9S Seaman v. Hax et al . . 58, 69, 70 Sherwin v. Doom et al . . . . 87 Shillaber v. Robinson 3 Simonton v. Todd et al. .7, 102 Smith V. Brunk 60, 61, 116 Smith V. McClure..2, 30, 39, 36, 41 Smith V. Pipe no Smith V. Stark. . .24, 58, 98, 97 Smith V. The People 109 Smithea v. Church 6g, 87 Spalding v. Armor. .31, 38, 48, 53. 99 Stallings v. Fitch. .6g, 96, no, 122 Stark V. Smith. . .24, 58, 98, gg State V. Brown 56 Stebbins v. Anthony et al. . 6 Steck V. Brown 45 Stephens v. Clay.. 75, 79, 84, 116, 120, 124 Stewart v. McLaughlin .... 31 Stockgrowers Bank v. New- ton 59 Stone V. Milsap et al 54 Stout V. Gully et al 29 Sullivan v. Collins 62 Sullivan v. Reid et al . . 6, 71 , 73, 84, 108 Sullivan v. Tabor 25 TABLE OF CASES CITED. IX. PAGE TABOR V. SULLIVAN. . . 25 Taylor v. Wallace et al . . . 81 'J'erpening- v. Holten ...... 89 Thalheimer z'. Pettit 22 Thatchei v. Rockwell 80 The Grand Valley Canal Co. V. Colorado Loan & Trust Co 22 The People v. Smith 107 Thompson v. Crocker 113 Thompson z/. McDonald. , 89 Tiffin Mining Co. v. Walker 32 Todd V. Everett 25 Todd et al v. Simonton. .7, 109 Townsend i^. Peterson. .. . 38 Travelers Ins. Co. v. Henry, 93, 108, 119 Travelers Ins. Co. v. Jones, 22, 92, 96 Travelers Ins. Co. v. Red- field et al 86, 92 Tritch et al v. Allen 93, q\ Tritch V. Norton 24, 82 Trounstine v. Fechheimer. . 41, 42 UNION IRON WKS. v. BASSICK MIN. CO. et AL 124, 135 Union Pacific R'y Co. v. Wadsvcorth 3 VALENTINE v. MELLOR, 30, 49. 82 PAGE Vandevier v. Fetta. .33, 39, 40 Von Trotha v. Bomberger. 63 WADSWORTH v. UNION PACIFIC R'y Co 3 Walker v. Gold & Silver Min. Co 30 Walker v. Tiffin Min. Co. . 32 Wallace et al v. Taylor. . . 81 Walton V. National Bank. . 59 Weare z'. Johnson. . 12, 13, 14, 15 Wells w. Caywood. . 10, II, 13, 14, 17, 84, 116, 123, 125, 127 Wells W.Francis et al 7, 1 10, 1 1 1 Wheeler v. Dunn. ... 10, 57, 95 Whitsett V. Kershow. . . .6, 33, 38,40 Whittick V. Wright 13, 17 Wilcox et al v. John. . . 20, 50 Williams w. Carpenter. .. . 89 Williams v. Carr 40 Wilsonet alz/. Brown. , 118, 124 Wilson V. Morris 42, 43 Wilson V. Rhodes 62, 78 Wolf -v. Burke 66 Wolfe et al v. Pershing. . ,7, 9, 20, 23, 60, 71, 73, 92, 93, 94, 108 Woodward v. Peoples Nat. Bank 15 Worthington &. Fallon.... 70 Wright V. Griffith 100 Wright V. Whittick 13. 17 INTRODUCTION. Twenty-five volumes of adjudicated cases, — twenty Supreme Court and five Court of Appeals — lie in the path of the young practitioner as he knocks at the door of the forum of the great State of Colorado. It is unnecessary to emphasize the importance of Domestic Law in the curriculum of modern jurisprudence. As the oak, from its mas- sive trunk, sends forth its fanged branches, so too the twig when transplanted to the soil of a new commonwealth, becomes the centre of a vast and differentiated system, and thus a part of the great genus from which it originally sprung. Nor does this importance suggest itself to the legal "tenderfoot" alone. To those who have gone before, an intimate knowledge of our state decisions, and its application, is of far greater moment. And for weightier reasons. To them is committed the important and delicate task of moulding the potential to that which already exists — of building up from the crude superstruc- ture which the old pioneers have left us as a legacy, a well balanced and symmetrical pandect of adjudications, upon all the manifold issues that time may bring to our tribunals. That this has not always been adhered to is very evident. It has repeatedly given rise to a plaint from the highest court. Justice Elliott, commenting upon the "import- 1 INTRODUCTION. ance of giving attention to our reports," in a case, says: "In the preparation of these briefs on this motion, counsel have been very- diligent in searching for the decisions of other states upon this question, while entirely over- looking our own. This is a common fault, espe- cially among the older attorneys of this bar, whose habits were formed while our reported decisions were exceedingly limited."^ But, in the the face of this seeming apathy, there is every reason to look forward to a sound and equitable adjustment of our jus domesticum, under the guidance of a wise and untiring Supreme Court. Land securities hold a conspicuous place in the phenomena of commercial life. "Westward the star of empire takes its way," and as the tide of population deserts the sea coast and the great waterways, and the centres of interstate and international commerce, for the rich, fertile and vast plains of the West, the importance of land securities is augmented in the business curricula of men; and this augmentation, both in volume and in intricacy, as an inevitable sequence, absorbs a larger share of the learning and attention of our western jurists as well as authors in the adminis- tration of justice, in this particular branch of juris- prudence. Prompted by these considerations, as well as by the value of a complete digest of the adjudged law upon Colorado land securities, the writer has gathered from the reports and decisions up to date (September 9th, A. D. 1895), and put into his- 1 Crane v. Farmer, 14 Colo. 294. McClure v. Smith, 14 Colo. 298. 2 INTRODUCTION. triographical form, all that is pertinent to this important subject, and humbly begs to submit it under the title ' ' The History of a Colorado Real Estate Mortgage. " By ' ' complete " is intended not a mere compilation of the syllabi of the decisions, but means a comprehensive study of the opinion in each case, and therefore includes what is obiter dicta. Though not conclusive, the latter is of much weight, particularly in a youthful state, and should be respected whenever feasible.' For the sake of logical treatment, The History of a Colorado Mortgage will be divided into three great eras. Beginning with its very inception, the production of a perfect mortgage may be within the purview of the iirst part. Secondly, assuming that the relation of mortgagor and mortgagee exists, and that the legal hand has left its last impress upon the white parchment, all the rights and liabilities existing between the parties, the contingencies that may arise to affect their status, and the entire extinction of these relations by the amicable settlement of the parties, will serve to illustrate the second era. And in conclu sion, foreclosure and trustee's sale, or settlement by the aid of the act and sanction of law, followed by the rights of the parties in statu quo, will hap- pily complete the scheme. ^ Wadsworth v. Union Pacific R'y Co., i8 Colo. 600. THE HISTORY OF A COLORADO REAL ESTATE MORTGAGE. PART I. OP THE PRODUCTION OF A PERFECT MORTGAGE. § 1. Litigation in Colorado on Land Securities, Normal. It is a noteworthy fact, and much to the credit of the people of Colorado, that, under all the existing circumstances, courts have not more frequently been called upon to settle disputes aris- ing out of the complicated subject of land securities. This may read like a solecism when taken in con- nection with what is to follow. But when we bear in mind the juniority of our state, the speculative propensities of our people, the jargon of conflicting titles to realty, and the intrinsic wealth of its min- eral lands — which alone is conducive to abnormal litigation, — we may well relieve our minds of any apparent incongruity. § 2. Origin of Colorado Laws of Keal Property in Illinois; Same Construction in Colorado. The origin of most of our laws is traceable to the state of Illinois, and this is particularly so in the case of the law of real property. The provi- sions of our statute relating to conveyances were § 2 HISTORY OP A COLORADO MORTGAGE. largely transcribed and adopted from the statutes of Illinois.^ It follows that in adopting the laws and the policy of another state, it is presumed that it was intended they should receive the same construction put upon them by the courts of the state from which they were taken.'' But in tak- ing a statute from another state, we take the construction only that had at that time been given to it by its courts.^ § 3. Same: Legal Effect of Colorado Mortgage not the Same as in Illinois; Lien in Colorado. But in the legal effect of a mortgage, Colorado has not followed the parental state. In Illinois, the old common law doctrine still prevails, and the legal ownership is vested absolutely and at once in the mortgagee, the same as in an ordinary con- veyance. In our own srate, however, as exists perhaps in the majority of states, we have adopted the equitable theory, which does not give the mortgagee a right of entry until after foreclosure. In other words, it leaves the mortgaged property undisturbed in the hands of the mortgagor where it was, and gives to the mortgagee a lien merely on the property to secure the payment of the debt.* This equity view is declared by statute in words as follows: "A mortgage shall not be deemed a conveyance, whatever its terms, so as to enable ' Stebbins v. Anthony et al. 5 Colo. 348. Bradbury et al. v. Davis, 5 Colo. 269, ^ Bradbury et al. v. Davis, 5 Colo. 269. ' Reid V. Sullivan, 20 Colo. 498. < Pueblo & Arkansas Valley R. R. Co. v. Boshoar, 8 Colo., S2. Whitsett V. Kershow, 4 Colo. 419. 6 PRODUCTION OF A PERFECT MORTGAGE. § 4 the owner of the mortgage to recover possession of the real property without foreclosure and sale. "^ It would seem, therefore, stating this provision affirmatively, that a mortgage shall be deemed a conveyance, and does pass title, but to the extent only that the oiuner of a mortgage under it shall not recover the property without foreclosure and sale, and which procedure, again, is circumscribed, by statute, with certain conditions. In Illinois, too, the old common law theory of a mortgage has suffered material encroachments, and the mortgagor now is regarded as the owner of the property as against all persons except the mortgagee and his assigns.^ § 4. Kinds of Securities in Colorado: Of Title Bonds. Among the different species of mortgages that have been recognized as such in this state, aside from the regular mortgage, may be mentioned the trust deed and the bond for title, or title-bond. Both have been expressly declared as in the nature of mortgages, and to carry with them all the con- comitant attributes of mortgages.' Title-bonds are largely in use in mining transac- tions, being regarded as a convenient mode of securing the vendor. On account of the uncer- > Code 1887, Sect. 261. " Emory v. Keighan, 88 111. 482. ' Trust Deeds: Denver B. & M. Co. v. McAllister, 6 Colo. 261. Shillaber v. Robinson, 97 U. S. 72. Barth v. Deuel, ii Colo. 495. Pershing v. Wolfe et al. (App.), 40 Pac. 856. Title-bonds: Todd V. Simonton, i Colo. 54. Wells V. Francis et al. 7 Colo. 415. 7 § 4 HISTORY OP A COLORADO MORTGAGE. tainty of the investment and the large sums of money involved, it is difficult sometimes to readily procure capital as a loan, and to obviate this a bond is executed by the vendor conditioned to convey the title upon payment of the balance, or the whole of the purchase money. § 5. Same: Of Trust Deeds; Effect of; Contrasted with other Securities. Perhaps two-thirds of the capital loaned out in Colorado, previous to the recent enactment of the trust deed law, was secured by trust deed. The changes made in the law practically put this kind of land security, so far as the legal advan- tages are concerned, upon an equal footing with the ordinary mortgage. In the matter of the effect of a trust deed, the court has construed the similitude to the extent that a mortgage being a mere lien, a trust deed could be nothing but a lien also.^ Although the authorities generally place the two upon substan- tially the same basis, and hold the trust deed to be simply a mortgage, with a power of sale, and therefore the substantial legal equivalent of a mortgage containing a like power, there is, as will be seen post, a very wide difference between the rights and obligations of the grantor, trustee and cestui que trust in a trust deed, and those of the mortgagor and a mortgagee in a mortgage. Previous to the enactment of the new trust deed law, the chief difference m this state, came from the right of redemption, which existed under a ' Barth v. Deuel, 1 1 Colo. 495. 8 PRODUCTION OF A PERFECT MORTGAGE. § 6 regular mortgage without power of sale, but which might be waived under a trust deed.^ A trust deed has been construed a chose in action.^ § 6. Parties to Land Securities: Capacity, of Servants; Duress. There is only one decision in which the capacity •of parties to a mortgage or trust deed was directly raised.' Plaintiff brought an action to cancel a note and a trust deed given as security therefor; both were executed under threats of arrest and punishment. Plaintiff was at the time in the serv- ice of the defendant, and was accused by the latter of the commission of a crime in the course of his ■employment. The court held that although there was no actual coercion, ' 'neither technical fraud nor technical duress," the relation between the parties, of employer and employee, together with the acts of the defendant, was sufficient to constitute a moral, social or domestic force, and thus deprive the plaintiff of the free action of his will. The contract was set aside. The fiduciary relations and the relative capacity of men, are facts too often lost sight of, whether consciously or unconsciously, by contracting parties. And the penalty suffered at times is very severe. To instance: where the grantee is cogni- zant of the mental condition or insanity of his grantor at the time the deed was executed; he is not in a position to require the consideration to be 1 Pershing v. Wolfe et al. (App.), 40 Pac. 856. ^ County Com. Arapahoe Co. v. Cutter, 3 Colo. 350. ^ Lighthallz/. Moore, 2 Colo. App. 554. § 6 HISTORY OP A COLORADO MORTGAGE. refunded as a condition to the setting aside of the instrument.' Courts of Equity are always solic- itous to protect the weak, and look with suspicion upon all contracts executed by parties mentally, physically or morally impaired.^ § 7. Same: Capacity, of Married Women; Married Woman Acts, Effect of upon Wife and upon Husband . The common law disabilities of married women have been entirely abrogated in Colorado, and her rights with reference to both real and personal property are as complete as if a feme sole.' She may convey or mortgage her estate, without join- ing her husband, or she may directly convey or mortgage her property to him as to a stranger.* Husband and wife are strangers to each other's estates, and may deal with each other as such untrammeled, without any qualification or limita- tion as to who shall be the grantee or the grantor. She may also mortgage her realty bo become surety for her husband's individual debt. But if she unites with him, or rather unites him with her, in the execution of the mortgage, and makes due acknowledgment, she is bound as principal and not as surety, although no consideration pa.sses to her.^ ' Elder v. Schumacher, i8 Colo. 433. '^ Kellogg V. Kellogg (Sup.), 40 Pac. 358. ' Mills' Anno. Stat. Sections 3019, 3008, 3007. * Wells 1). Caywood, 3 Colo. 493. Craig V. Chandler, 6 Colo. 549. Kellogg V. Kellogg (Sup.), 40 Pac. 358. * Nippel V. Hammond, 4 Colo. 21 \. Wheeler v. Dunn, 13 Colo. 428. 10 PRODUCTION OF A PERFECT MORTGAGE. § 8 The removal in respect to the wife, of a disa- bility that is mutual and springing from the same source, removes it also as to the husband. The disability of husband and wife to contract with and convey to each other was, at common law, corre- lated and founded mainly upon the same principle, viz : the union of "baron and f emme. The reason, therefore, which is the soul and spirit of the law, cannot apply to the husband, as it no longer applies to the wife. When the reason fails, the law fails. If she may convey to the husband, the husband may convey to the wife.^ These Married Woman Acts have been prolific both in scope and in effect; not alone in asserting her complete individuality and emancipating her from the thraldom in which she so long was placed, but in shaping the future policy of legislation, politi- cally and socially, toward husband and wife. Although under our statutes the married woman never occupied the dwarfed position that aflicted her under the common law, the influence of this later policy can be seen at work even in the judi- cial interpretation of legislation enacted previous to the enabling statutes.^ A notable instance is the Homestead Act, so liberally provided for in accordance with the Constitution.^ § 8. Same: Capacity, of Married Women j Homestead Act,— Purpose of. The purpose of this act is to preserve the home for the family. ' Wells V. Cay wood, 3 Colo. 493; containing a history of Married Woman Acts. ^ McPhee v. O'Rourke, lo Colo. 306. = Colo. Const., Art. XVIII. Section i. Mills' Anno. Stat. Section 2132. 11 § 8 HISTORY OP A COLORADO MORTGAGE. " Two governiBg principles underlie all home- stead legislation: 1. The beneficent design of protecting the cit- izen householder and his family from the dangers and miseries of destitution consequent upon busi- ness reverses or upon calamities from other causes; and, 2. The sound public policy of securing the permanent habitation of the family, and cultivat- ing the local interest, pride and affection of the individual, so essential to the stability and pros- perity of a government."^ § 9. Same : Same; Homestead Act,— May Apply to Husband. In this family relation, the proprietary rights of the paternal and maternal heads are respectively recognized and protected, without prejudice and partiality. This is nicely exemplified in the con struction put upon the first section of the stat- ute, which provides that "every householder in the state of Colorado, being the head of a family, shall be entitled to a homestead," etc.^ Herein the mind's eye of the legislature, the words " householder" and "head of a family " mighthave been intended to apply to the husband alone. But the court has made the application dependent upon the locality of the legal title. As the husband is the head of the family when the title to the home- stead property rests in him, so the statute has been construed to invest the wife with the dignity of "head of the family" whenever the property 1 Barnett v. Knight, 7 Colo. 365, quoted also in Weare v. Johnson, 20 Colo. 363. " Mills' Anno. Stat. Section 2132. 12 PRODUCTION OP A PERFECT MORTGAGE. § 10 occupied by them as a home is her own, and clothes her with the power of designating and affecting such home with the character of a home- stead, so as to exempt it from attachment and execution.' Quaere, in such case would it be necessary to join the husband by the wife in a mortgage executed by her upon the homesteaded property?^ § 10. Same: Samej Homestead Act,— Liberal Construc- tion, — Procedure under. In order to convert property into a homestead, the statutory provisions must be clearly complied with', although they are susceptible to liberal con- struction when they are sought to be applied.* The law requires an entry of the word "home- stead" to be made in the margin of the owner's recorded title, which marginal entry shall be signed by the owner making such entry, and attested by the clerk and recorder of the county in which the premises in question are situated, together with the date and time of day upon which the marginal entry is so made.' ' McPhee v. O'Rourke, lo Colo. 306. 2 See Wright v. Whittick, 18 Colo, 58. ' Goodwin v. Colo. Mort. Co. no U. S. 5. Wells V. Caywood, 3 Colo. 4g8. ' Barnett et al. v. Knight et al., 7 Colo. 365. Wright V. Whittick, 18 Colo. 57. ' Weare v. Johnson, 20 Colo. 363. Mills' Anno. Stat., Sect. 2133. 13 § 11 HISTORY OF A COLORADO MORTGAGE § 11. Same: Same; Homestead Act,— What Property Sub- ject to and by Whom — land of Pre-emptor after final Proof, land before Judgment liens are made Specific upon, land Homesteaded Conyeyed and Re- conyeyed, undivided Interest in Property, equita- ble Title, any Title subject to Levy. Meaning' of "his recorded title" in Statute— Land Receiver's Receipt within latter. Until such entry is made, it is not in contempla- tion of law a homestead.^ Therefore, when land has been filed on in the United States land office and is occupied as a homestead, after final proof made and receiver's receipt issued thereon to the holder, the same is no longer protected by the state statute (Mills' Anno. Stat., Section 2582) and the provisions of the federal statute (Rev. St. U. S. Section 2296) exempting the property from execution and levy for any debt contracted prior to the issuance of the patent. Upon final proof made and a receiver's receipt issued thereon, com- pliance with the provisions of the state homestead act is indispensable, to entitle the property to exemption as a homestead.^ A duplicate receipt from the receiver of the United States land office certifying to the entry and purchase of lands it describes, put on record, has been construed to be its ' ' recorded title, " upon whose margin the word "homestead" might be > Wells V. Caywood, 3 Colo. 498. Barnett et al. v. Knight et al., Supra. '^ Weare v. Johnson, 20 Colo. 363. Mercantile Co. v. Davis, 18 Colo. 93, 14 PRODUCTION OF A PERFECT MORTGAGE. § 11 entered to entitle it to the advantages of the home- stead act.^ The general law relating to judgment liens acquired by the judgment creditor, by transcript and record, upon the real estate of the debtor, must yield to the special law of homesteads. Except when judgment liens are made specific — as by execution and levy — and until then, the debtor may homestead the property in question and come within the cloak of exemption.^ Where a party conveys his homestead in such a manner as to completely extinguish his title, and the property subsequently returns to him by independent conveyance, if he then desires to avail himself of the benefits of the homestead law, "it is questionable " whether he should not use the record of the later conveyance for that purpose.' But it seems that the statute explicitly directs that the entry should be made upon ' ' Ms recorded title. " There ought "to be no doubt that the last acquired title here is intended by the legislature to be the one upon which the homestead entry should be made. Hallett, Chief Justice, in an early case,* says, in relation to this section, ' ' What is meant by the record of title, whether one or all of the conveyances that make out the chain is not pointed out, but probably a reasonable construc- tion would require that the entry should be made in the margin of the deed hy which the claimant of • Dallemand v. Mannon, 4 Colo. App. 264. ^ Woodward v. Peoples Nat. Bank, 2 Colo. App. 369. Weare v. Johnson, 20 Colo. 363. ' Dallemand v. Mannon, 4 Colo. App. 264. ■* Drake et al. v. Root, 2 Colo, 685. 15 § 11 HISTORY OF A COLORADO MORTGAGE the homestead acquired his interest."^ By aliening' his property, the vendor becomes a total stranger' to it, and by a re- acquisition, he stands in the same position as any other purchaser for value. The above contemplates a deed having the effect, of an absolute conveyance. Therefore, a subse- quent mortgage, — or an absolute deed with the- effect of a mortgage as against the parties thereto, — would not constitute a new record of title so as to vitiate the foregoing homestead entry. The owner of an undivided interest in a home- stead is entitled to the benefits of the act. So, in severalty, the owner who sells and retains an undi- vided interest is within the statute. The language- of the statute throughout applies to an undivided as well as to a sole ownership. An ownership in fee is not necessary; an equitable title, a lease for a term of years, or any title which may be the subject of levy or sale, may also be the subject, of a homestead claim. ^ § 12. Same: Same; Homestead,— What constitutes Aban- donment of,— TVife must join in Mortg-age of— In Sale of (?)— Form of Acknowledgment. What may constitute abandonment, is largely a question of intent. The relinquishment of pos- session to a tenant for a definite period, the rever- sion remaining in the lessor, would have no effect on his homestead rights. A lease of a portion of the estate, or even of the whole of it, of itself would not work an abandonment of the home-- stead. ^ ' The italics are mine. ' Dallemand v- Mannon, 4 Colo. App. 264. ' Ibid. 16 PRODUCTION OP A PERFECT MORTGAGE. § 13 Referring to section six,' which provides that the husband may not mortgage homestead prop- erty without joining the wife with her express consent, so as to be binding on her, it seems he may dispose of the property in any of the other recognized forms of conveyance without joining her. It appears that a wife must join in the mortgage of a homestead, but nothing is said as to any other form of conveyance, and, therefore, all others must be governed by the general law regu- lating conveyances of real estate.^ The term "mortgage" used in this section includes trust deeds.' Provision is made, by statute, for the form of acknowledgment to be used where homestead property is mortgaged or conveyed.* § 13. Same: Capacity, of Corporations; Foreign— Restric- tions upon,— Meaning' of " Citizen " in Statute. Foreign corporations are not incapacitated from doing business in this state provided they comply with the statutory requirements. There are restrictions upon the power to mortgage corporate property lying within the state to secure foreign creditors. Their evident purpose is to discriminate against foreign corporations generally, in order to protect ' ' citizen, citizens or corporations of this state" from "injury or exclusion;" and restric- 1 Mills Anno. Stat. Section 2137. ° Drake et al. v. Root, 2 Colo. 689. Wright V. Whittick, 18 Colo. 57. ' Wright 2>. Whittick, Supra. Drake et al. v. Root, 2 Colo. 68$. Wells V. Caywood, 3 Colo. 490. * Mills' Anno. Stat. Section 443. a 17 § 13 HISTORY OP A COLORADO MORTGAGE. tively, to give a right of priority to local claims of any "citizen or corporation" of the state over foreign creditors of foreign corporations not tele- graph or railroad companies. A mortgage upon local corporate property to secure a foreign debt of a foreign corporation, therefore, does not take effect ' ' until all its liabil- ities due to any person^ or corporation in this state at the time of recording such mortgage have been paid and extinguished."^ A proviso has recently been enacted enabling a foreign corporation to encumber after giving notice of its intention by publication for a certain length of time to " citizens and corporations " of this state to file their claims or demands.' It is to be noticed that the terms ' ' citizen " and " person" are used. Whether or not a local cred- itor, in order to get the benefit of the statute, must be a citizen, is open for judicial interpreta- tion. § 14. Same : Capacity, of Minors and Others under Disa- bility, — Protected by Constitution; Property of Minors and Insane may be Mortgaged — When, — Will of Testator Observed. Minors and others under disability are protected by the Constitution from the mortgage and sale of their real estate by virtue of local or special laws enacted by the legislature.* The legislature has recently passed an act' ' Italics are mine. ' Mills' Anno. Stat. Section 499. ^ Session Laws, 1893, page 89. * Colo. Constitution, Mills' Anno. Stat, Section 348. ' Session Laws, 1895, page 188. 18 PRODUCTION OF A PERFECT MORTGAGE. § 14 whereby real estate, or interests therein, belonging to minors and insane persons, may be mortgaged when the personal property and income derived from the estate together are insufficient for the payment of the debts or for the maintenance and education of such person and family; and also " when the interests of such infant or incompe- tent person require or will be substantially promoted by such disposition, on account of such real estate or. interest therein being exposed to waste or dilapidation or being unproductive, or for other peculiar reasons or circumstances. " The District Court is given jurisdiction; the application is by petition, verified, and the infant, if over the age of fourteen years, and the parents, if living, may join in the petition. It is provided in the case of infants, that the mortgage shall not be for a term of years exceeding the minority of the ward. When there is a will or conveyance, the real estate or interests therein shall not be mortgaged contrary to the provisions of such will or convey- ance by which the property was devised or trans- ferred to such infant or incompetent persons; except where the mortgage is necessary for the mainte- nance and education of such persons, or to pay taxes and assessments levied against the real property, or to pay for the repairs necessary to keep such property from being exposed to waste or dilapidation, or to pay the expenses attending the care, management and preservation of such property. 19 § 15 HISTORY OF A COLORADO MORTGAGE. § 16. Same: Capacity, of Executors without PoTver and Administrators; May Mortgage When,— Decree to Mortgage Does Not Cover a Trust Deed. Executors without power and administrators may mortgage the real estate of decedent to pay debts, etc., and the statute is explicit upon this point and upon proceedings proper to accomplish this result.^ The authority given by statute, upon compliance with its provisions, is that the real estate ' ' may be sold, mortgaged and leased" etc. Therefore, an order or decree, by the court, that the adminis- trator shall mortgage any or all of the real estate, etc. , is a power to mortgage generally. Under it a mortgage tvith power or trust deed should not be given. Such a decree, equally, does not authorize a stipulation therein for the payment of attorney.'s fees in case of foreclosure.'' § 16. Same : Capacity, of Pre-emptor before Final Proof; May Mortgage. A pre-emptor, prior to as well as after the time of making final proof in the land office and obtain- ing a receiver's receipt for the same, may mort- gage the property by mortgage or trust deed, and will not thereby come within the prohibition of the statute.^ > Mills' Anno. Stat. Sections 4750-4771; 4776-4779. " Pershing v. Wolfe et al. (App.) 40 Pac. 856. ^ Rev. Stat. U. S. Section 2262. Wilcox et al. v. John (Sup.) 40 Pac. 880. 20 PRODUCTION OF A PERFECT MORTGAGE. § 18 § 17. Same: Joint Tenancy; Construed a Tenancy in Common except wlien declared in Instrument,— Exception in case of Trustees and Executors, — Presumption is that Sliares of Co-tenants are Equal. Joint tenancy is not recognized in our state, unless it is expressly declared in the instrument granting the estate. In its absence the estate is construed a tenancy in common. The statute makes an exception in the case of grants to trus- tees and executors.^ Where a trust deed is made to two or more trus- tees, they are held to be joint tenants, and all must join in the execution of the trust, that is, in the absence of provisions to the contrary.* The pre- sumption of law is that shares of several co- tenants, whether they be tenants in common or joint tenants, are equal.' § 18. Same: Agency 5 Loan and Trust Companies, — In law Ag'ent of Lender, — If negligent Borrower Protected — Illustrations. We have thus far had in mind parties to a mort- gage dealing directly with each other, without the intervention of a third party. As much of the money loaned on securities passes through a conduit before it reaches the hands of the actual borrower, it may be well to notice these agencies briefly. Loan and Trust Companies, in law, are regarded as the agent of the lender and not as the agent of • Mills' Anno. Stat. Section 429. ^ Loveland v. Clark, 11 Colo. 265. " Nippel V. Hammond, 4 Colo. 219. 21 § 18 HISTORY OP A COLORADO MORTGAGE. the borrower.' The relation may shift, of course, under peculiar circumstances. As such represen- tatives they are charged with the duty of a pru- dent and careful execution of the trust, and are responsible to the loser, if by their negligence, the party losing the money is induced to part with it on the strength of invalid or worthless securities." In the case cited, a sub-agent negotiated the loan for the company and supervised the execution of its papers; when the lender sought to collect the first installment, the supposed borrower repudiated the signatures to the note and mortgage as forgeries, the sub- agent or forger having left the country in the meantime. So, where the Trust Company has negotiated a loan for its principal on the strength of worthless securities, as in the above case, it is precluded from attacking their validity afterwards in order to give precedence to its own claim, which it has subsequently acquired. This is founded on the well established rule of law that ' ' if one person is induced to do an act prejudicial to himself in consequence of the acts or declarations of another, on which he had a right to rely, equity will enjoin the latter from asserting his legal rights against the tenor of such acts or declarations." " § 19. Same: Same; General Power to Encumber— Effect,— Exceeding General Power, Effect of. A general power to encumber real estate without 1 Travelers Insurance Co. v. Jones, i6 Colo. 515. 2 Pettit V. Thalheimer, 3 Colo. App. 355. « Colo. Loan & Trust Co. v. The Grand Valley Canal Co. 3 Colo. App. 63. 22 PRODUCTION OP A PERFECT MORTGAGE. § 20 declaring for whose benefit it may be encumbered, will not warrant an attorney in encumbering it for the benefit of himself or any third person. ^ Where an agent authorized to execute a security exceeds his authority with reference to its terms, — as, a mortgage being authorized and the agent executes a mortgage with power or a trust deed, — the instrument may be adjudged valid and the unauthorized condition rejected.^ § 20. Duties of Intending' Parties to a Mortgage: Inno- nocent Purchaser without Notice. The parties having met, either directly or by their agents, and the terms of the contract orally agreed upon, about the first thing that is done, by the mortgagee futurus, is to investigate the title of the party of the first part to the realty to be mortgaged. The record being clear, the former is free to act. Who is and who is not an innocent purchaser for value without notice? An attaching creditor, without notice of an unrecorded deed by the debtor to another, is enti- tled to all the protection afforded an innocent purchaser for value without notice.^ Purchasers with notice of an incumbrance are in no case innocent. A purchaser who claims that the debt for which the incumbrance on record was given has been discharged, is not an innocent purchaser for value without notice; if he desires ' Nippel V. Hammond, 4 Colo. 2ri. '^ Pershing v. Wolfe et al. (App.), 40 Pac. 856. ' First National Bank v. Campbell, 2 Colo. App. 271. McMurtrie v. Riddell, g Colo. 497. 23 § 20 HISTORY OF A COLORADO MORTGAGE. to exempt the property from the obligation of the incumbrance, the burden is upon him to show it.^ § 21. Same: Notice; What is Actual Notice,— Rights of Persons in Possession or Occupancy must be Actual not Potential,— Diligence of Incumbrancer to Inquire, — Incumbrancer Charged with Notice of Parol Agreement between Grantor and Third Party making Real Property Personal, — As Be- tween Record Title and Unrecorded Title, Bur- den of Proof is to Prove Latter. It is an elementary principle, that record notice is notice to the world, and, also, that actual notice may supplant it. What may the latter consist of — what is meant by actual notice? In the absence of record notice, the incumbrancer of land is held in equity to know the rights of all persons in occupancy or possession thereof as fully as he could learn them by inquiry of such persons. These persons in possession must be such, in order to challenge the attention and inquiries of the intending incumbrancer, as have some rights in or to the premises which the law will recognize and enforce. A mere potential right would never do: as, for instance, an agreement by the occupant of the land with the owner to acquire some lien thereon or rights therein, in the future.^ With what diligence the prospective incum- brancer must prosecute his inquiries, depends upon the circumstances in each case. It has been ' Smith V. Stark, 3 Colo. App. 453. " Tritch V. Norton, 10 Colo. 352. 24 PRODUCTION OF A PERFECT MORTGAGE. § 22 held sufficient diligence so as to protect him, in a case where, being informed of the existence of an unrecorded deed, he makes an effort to find out who executed the deed and where it is, but finds no trace of it.^ What seems a hardship upon an intending mortgagee or purchaser is a case where the mortgagor, or grantor, has made a good parol lease, with a lessor, containing a term whereby a structure attached to the realty to be erected by the lessee in consonance with the agreement, shall be regarded personal property, or a chattel, and the grantee or mortgagee takes the same without other notice. The intending mortgagee or pur- chaser must observe caution in such case, for he takes the property with the burden of the agree- ment.^ As between one claiming record title and one claiming under a prior equity or unrecorded instrument, the burden of proof is on the latter to show actual notice to the subsequent purchaser of his rights, or to prove such circumstances as would put a prudent man upon his guard and from which actual notice can be inferred.' § 22. Same: Notice; of Record, — Record of Trust Deed Continues in force After Debt Due— Also After Trustee's Sale. A duly recorded trust deed remains record notice to strangers dealing with the property, although the debt which it secures is past due. And the ' Tabor v. Sullivan, 12 Colo. 136. ' Mitchell V. McNeal, 4 Colo. App. 36. » Everett v. Todd, ig Colo. 322. 25 § 22 HISTORY OF A COLORADO MORTGAGE. protection of the above record is extended to the purchaser at the trustee's sale of the property, although his deed from the trustee is not recorded.^ § 28. Same: Notice; Mechanic's Liens,— Wlien Established relate back to Commencement of Work and are Superior to Intervening Incumbrances, — Extent of Lien. All liens established by virtue of the mechanic's lien act relate back to the time of commencement of work under the contract between the owner and the contractor, or, if said contract be not in writing, then such liens relate back to and take effect as of the time of the commencement of the work upon the structure, and have priority over every lien or incumbrance subsequently inter- vening. "Nothing herein contained, however, shall be construed as impairing any valid incum- brance upon any such land duly made and recorded prior to the signing of such contract, or the com- mencement of work upon such improvement or structure."^ What property of the owner is or may be made subject to a mechanic's lien is also defined, and the intending mortgagee's attention is specially chal- lenged here. The statute provides that it shall ' ' extend to and cover so much of the lands whereon such building, structure or improvement shall be made as may be necessary for the convenient use and occupation of such building, structure or improvement;" where such lands and improve- 1 Bradford v. Carpenter, 13 Colo. 30. '^ Session Laws, 1893, page 319. 26 PRODUCTION OF A PERFECT MORTGAGE. § 24 ments are indivisible, the "whole is made subject to the lien, and the lien may be made to cover also " all machinery and other fixtures used in con- nection with any such lands, buildings or struc- tures." A different or greater interest in any of such property acquired by the owner at any time subsequent to the making of the contract or the commencement of work, and before the establish- ment of the lien by process of law, is within the application of the lien; so, too, any assignable or conveyable interest of his to the land upon which such structure or other improvement is put.^ § 24. Same: Notice; Pendente lite, — Mortgragee during Suit, at Common Law charged with Result of Suit — also Assignee in Banlzruptcy, — Changed by Statute— Incumbrancer without Notice held harm- less — Litigants may charge Incumbrancer by filing Notice, — Mechanic's Lien not within said Statute, but Same as at Common Law — Also Adverse Proceedings in Mining Claims under Acts of Con- gress; Entry of Jndgment, end of Suit — Writ of Error, new Suit. We may now turn our attention for a moment to encumbrancers pendente lite, a subject more or less akin to that of actual or record notice. All persons at common law are bound to take notice, at their peril of suits affecting the title to property; and purchasers or incumbrancers pen- dente lite, either with or without notice, take no better title than their grantors shall be adjudged to have. An assignee in bankruptcy, although an ' Session Laws, 1893, Pages 320 and 321. 27 § 24 HISTORY OF A COLORADO MORTGAGE. officer of the court, is no exception to the rule, and stands on an equality with a purchaser or incum- brancer/ The hardship of this common law rule has been alleviated by statute in our state, and a purchaser or incumbrancer is held harmless now, in the absence of notice of the pending suit." The civil code gives the parties plaintiff and defendant an opportunity to protect each other, and to keep the litigated property intact, by filing, with the recorder of the county in which the property is situated, a notice of the pendency of the action, with the names of the parties, object of the action, description of the property and relief claimed.^ This is constructive notice, and binds the pur- chaser or incumbrancer of the property affected thereby. A nice question has arisen in the application of this statutory provision to the status of a pur- chaser between the entry of a judgment and the suing out of a writ of error in the higher court. The contention was made that the suit is still pending, after final judgment in the lower court; that the statute which allows a certain time for suing out writs of error becomes a part of the decree itself, and thus comes within the protec- tion of the statute lis pendens. But the court held that subsequent proceedings by writ of error are not part of the same suit, but constitute a wholly new and independent action; that neither ' Eyster v. Gaff, 2 Colo. 233; approved 91 U. S. 521. ' Civil Code of Colo. 1887, Section 36. » Ibid. 28 PRODUCTION OF A PERFECT MORTGAGE. § 25 the common law nor the statute applies; that if in the interim between final judgment and pro- ceedings on writ of error, an otherwise bona fide purchaser or incumbrancer intervenes, he is free from any notice lis pendens, and that as to him, a subsequent reversal or affirmance is a matter of no consequence.^ A pending action to enforce a mechanic's lien is not covered by the statute, and therefore an incumbrancer, as at common law, proceeds at his peril. ^ The filing of a notice lis pendens, in order to protect the litigants, would be superflu- ous in such case. Another exception to the statute are adverse proceedings under acts of Congress relating to mining claims, where the incumbrancer or pur- chaser would be bounden by the result.' § 25. Same: Notice; Transcript of Judgment on File lien on Property — Recording and Indexing not Required by Statute. The incumbrancer must also be upon his guard, when investigating title to realty, that no tran- script of judgment is on file in the recorder's office of the county in which the property is situate afflicting the property i with a lien, for the law makes no provision for recording and indexing such an instrument, but merely for filing by the ' Cheever v. Minton et al, 12 Colo. 557. Stout V. Gully et al. 13 Colo. 604. ' Empire Land & Canal Co. -v. Engley et al. 18 Colo. 388. ' People ex rel Darby v. District Court, 19 Colo. 343. 29 § 25 HISTORY OP A COLORADO MORTGAGE. recorder.^ The instruments so entitled are strictly- enumerated by statute.^ § 26. Same: Railway Grants by Congress of 1862, 1864 and 1866. It may be pertinent here, in connection with the examination of title, to mention the railway grants by acts of Congress in 1862, 1864 and 1866, for the construction of a railway from the Missouri River to the Pacific Ocean. The leading case upon the subject involving the status of lands acquired prior and during these acts is what is known as the " Dunmeyer decision," and contains an opinion by Miller J. that is fraught with learning very applicable to titles in Colorado.' § 27. Form of Instrument; Ifo Particular Form Required. Prom parties to form, is an easy transition in the discussion of a mortgage. The law prescribes no absolute or inflexible form for a land security.* It may be in the form of a trust deed — a mortgage with power of sale annexed;" an absolute deed, given in return for a bond to re-convey;' or a common absolute deed, showing on its face only an every-day absolute conveyance of land from grantor to grantee.' ' Civil Code 1887, Sections 232, 234. Mills' Anno. Stat. Section 833. Laughlin v. Hawley, g Colo. 170. 2 Mills' Anno. Stat. Sect. 833. ^ Kas. Pac. R'y Co. v. Dunmeyer, 113 U. S. 629. * McClure v. Smith, 14 Colo. 298. = Denver B. & M. Co. v. McAllister, 6 Colo, 261. K Walker -v. Gold & Silver Mining Co. 2 Colo. 89. Mellor V. Valentine, 3 Colo. 255. ' Civil Code, 1887, Section 261. 30 PRODUCTION OP A PERFECT MORTGAGE. § 28 § 28. Same: Mortgage by Deposit of Title Papers; Another Peculiar Form; InViTum Yadium — Revest- ing Title must be Present. The question has been raised, but not decided, as to whether an enforceable equitable mortgage might be created in Colorado by the mere deposit of title papers of the property with the encum- brancer.' Another peculiar phase in the subject of form arose where the grantor sought to make a mort- gage out of an absolute deed of conveyance by proving the following parol agreement: the grantee to take possession of the property under the deed, hold the same in trust, collect all rents and profits, pay all taxes and expenses, and when the property enhanced enough in value as to leave a surplus, to sell the same, satisfy grantee's indebtedness and then to turn over the balance to the grantor, his heirs or assigns, " on a reasonable request." This oddity might have been a Vivum Vadium — living pledge — according to Coke, had the feature of revesting the title been present. And the court bore out the above in its decision, hold- ing that the absence of an agreement to restore the title in any event to the grantor made it incompatible with the theory of a mortgage or security.^ ' Stewart v. McLaughlin, ii Colo. 4158. ^ Armor v. Spalding, 14 Colo. 302. 31 § 29 HISTORY OF A COLORADO MORTGAGE. § 29. Same: Mortgage by Absolute Deed and Separate Written Bond for Reconveyance Executed To- gether. In the form referred to above where the mort- gage may consist of an absolute deed of convey- ance and a written bond conditioned for the reconveyance of the property upon the perform- ance of certain acts expressed therein, the bond simply takes the place of the defeasance clause in the ordinary mortgage. The two instruments are usually executed together, and the rule of law is that they must be delivered together, as parts of the same transaction. It has been held in this state that a deed exe- cuted April 30th and a bond executed May 1st, a day after, had the effect of a valid mortgage. Whether or not the two instruments were delivered together does not appear.^ § 30. Same: Mortgage by Absolute Deed and Parol Agreement of Reconveyance; At Variance witli Common Law and Statute of Frauds, — Legalized in Equity and by Statute,— Construed a Resulting Trust,— Approved as Against Existing Credit- ors, — History of the Doctrine. We come now to a form of mortgage that seems to have caused more trouble than any other matter in the domain of this subject, namely the absolute written deed of conveyance qualified by a parol agreement to reconvey — in other words, a deed with an unwritten defeasance clause annexed. It took the profession a long time to become recon- ' Walker v. Tiffin Mining Company, 2 Colo. 94. 32 PRODUCTION OF A PERFECT MORTGAGE. § 30 ciled to a doctrine so openly at variance with the' recognized rules of common law and the statute of frauds. The ever recurring attacks made upon: it in our appellate courts have filtered and emas- culated it of all doubt and objection, until now it is no longer open for dispute and has, in addition, become the declared law of the state. ^ It may be interesting to advert to the history of the doctrine in our own state. Although the rule now meets with universal acceptance, both in England and in the United States, the matter came up in Colorado at an early day, at a time when there was a great contrariety of decisions.^ As was stated supra, the provisions of our statute relating to the form, force and effect of instru- ments for the conveyance of real estate were largely transcribed and adopted from the statutes of Illi- nois, a loyal common law state. The peculiar fact develops, however, that these statutes of the mother state, like those in many other states, assumed with their adoption a different policy from that which anciently prevailed in respect to the distinction between the different forms of con- veyance, and made the effect of a deed to depend rather upon the intention of the parties than upon the form of the deed.^ Herein lay the bone of con- tention. The conflict was between the above, the new doctrine, sanctioned by the courts of ' Fetta V. Vandevier, 3 Colo. App. 418; approved, 20 Colo. 368. Civil Code, 1887, Section 261. " Whitsett V. Kershow, 4 Colo. 419. ^ Bradbury at al. v. Davis, 5 Colo. 269. 33 § 30 HISTORY OF A COLORADO MORTGAGE. equity, and on the other hand, principles long supported by the strict observance of the statute of frauds and the well recognized and established rules of law — with the result, as has been indicated, in favor of the former. A deed of conveyance qualified by an oral agreement thus was made an exception to the application of the statute of frauds, which provides that all contracts and sales of lands or hereditaments or any interest in or concerning them must be in writing. And the grounds therefor seem to be most reasonable and just. Large and extensive inter- ests are generally involved in these trans- actions, and, in view of this fact, it is clear how easily the statute might be made a badge or medium of fraud, instead of an instrument to defeat it. It was also a reliance upon the foregoing principle that induced courts of equity to recognize the doctrine of avoidance of the statute, by a part-performance of the contract.^ Another pertinent objection to the doctrine is that it subverts the common rule of law that the the express terms of a contract — evidenced by the deed — cannot be contradicted or varied by any extrinsic evidence. This is very aptly met by the court, in a late case, as follows: "The objection is predicated upon the presumption that the deed" contains the contract between the parties. But such is not the fact. The contract of purchase vested entirely in parol, and the deed has nothing whatever to do with it farther than to carry it out. > Hall V. Linn, 8 Colo. 274. ' The italics are mine. 34 PRODUCTION OF A PERFECT MORTGAGE. § 30 The deed is evidence of the final consummation of some contract previously made; but it is not evi- dence of what the contract was, and has nothing to do with it farther than to carry it out. The effect of this parol evidence is to establish an equity superior to and outside of the deed, and in no sense varies or contradicts its terms."' It is a resulting trust, founded upon the intention which the court presumes the parties had when the trust was created; and it must be repudiated to set the statute of limitations in motion.^ The doctrine has also been approved as against existing creditors. It seems clear that when the mortgagee consents to take an absolute deed, and then agrees by parol to regard it as a mortgage, he makes it possible for the mortgagor to deceive his other creditors. The contention has been made that it is a legal or constructive fraud, even though the transaction contained no element of fraud in fact. But the court holds that although the above method of creating an incumbrance is a conspicu- ous badge of fraud as to existing creditors, it is not conclusive, but a mere indicium of such, and that the bona fides of the transaction may be shown by collateral proofs to dispel it.' " It would, no doubt, be wiser," says the court, " as well as less harmful, if the mortgagee insisted upon having the transaction evidenced by an ordinary mort- gage. But, if there be a bona fide debt for which > Davis V. Hopkins i8 Colo. 153, Quinn v. Kellogg, 4 Colo. App. 160. ^ Quinn v. Kellogg, Supra. " McClure v. Smith, 14 Colo. 298. Ross V. Duggan, 5 Colo. 85. 35 § 30 HISTORY OP A COLORADO MORTGAGE. the security is given; if there be no understanding with the mortgagee to hold the overplus, or to hold the property after payment of his debt, secretly, for the benefit of the mortgagor; if there be no collusion on the part of the mortgagee with the mortgagor, in keeping the defeasance unre- corded, or in keeping secret the exact nature of the transaction, for the purpose of deceiving cred- itors; in short, if the mortgagee is simply endeavoring, in good faith, to obtain that preced- ence in the security of his debt which the law permits, the mere isolated fact that he takes an absolute deed, instead of a mortgage, will not, in and of itself alone, render his lien nugatory." The view that legal fraud should not be imputed to such transactions receives countenance from a statute, which declares that the question of fraud- ulent intent, in all cases relating to the convey- ance and assignment of any estate or interest in lands, shall be a question of fact and not of law.^ ' Mills' Anno. Stat. Section 2033. McClure v. Smith, 14 Colo. 298. Ross V. Duggan, 5 Colo. 85. 36 PRODUCTION OF A PERFECT MORTGAGE. § 31 § 31. Same: Mortg'ag'e, by Absolute Deed and Parol Agreement of Reconveyance; Kind, Quality and Quantum of Proof to Establish the Latter, — Kind— documentary, circumstantial or parol, — Quality — clear, certain, unequivocal and trust- worthy, dependent upon circumstances in each case. Fiduciary relations of parties will affect, Proof beyond reasonable doubt not necessary, — Quantity — mere preponderance not sufficient, — Effect of Death of Grantee or Grantor upon Proof. The difficulty in all of these cases that come up for trial, to prove a deed a mortgage, seems to lie in the kind, quality and quantum of proof neces- sary to imbue a cold, rigid and unambiguous doc- ument, with the life and dignity of a form that will truly express the agreement of the parties. The impression may be abroad that any kind of parol evidence is sufficient to accomplish this result. But the courts of equity compromised on the statute of frauds, and accepted its surrender shackled with a condition — that the parol proof be of a certain kind, quality and degree. This kind, quality and degree has been expressed in variant orthology, to-wit: "Clear, certain and conclusive proof, unequivocal in terms," "clear, certain, une- quivocal and trustworthy," "precise, clear and unequivocal," clear, definite, conclusive and satis- factory." They all, substantially, express the same meaning and define the essence of the rule 37 § 31 HISTORY OF A COLORADO .MORTGAGE. in all the decisions so as to take the deed out of the operation of the statute of frauds.^ That the proof must establish the agreement absolutely "beyond a reasonable doubt," is not really essential. If there is evidence, clear, cer- tain, unequivocal and trustworthy, to show that the instrument was executed, delivered, accepted and intended by the parties merely as collateral to secure the payment of a debt, such kind of evi- dence,, whether documentary, circumstantial or from the mouths of credible witnesses, may well be convincing in the presence of evidence to the contrary that is unreliable and meagre. But where there is a substantial conflict in the evidence a mere preponderance is not suiflcient to warrant a change in the character of the deed.^ The rule, of course, is not ready made, to fit every case. Though inflexible in the abstract, the dignity of evidence sufficient to make ' ' clear, cer- tain, unequivocal and trustworthy" a parol agree- ment to transform a deed into a mortgage, is contingent upon the peculiar conditions and cir- cumstances in each case. It is difficult to lay down what the evidence must consist of so as to bring it within the rule. Such high grade testi- mony as that of the real estate agent who drew up ' Davis V. Hopkins, i8 Colo. 153. Whittsett V. Kershow, 4 Colo. 423. Bohm V. Bohm, g Colo. 423. Townsend v. Peterson, 12 Colo. 491. Armor v. Spalding, 14 Colo. 305. Perot V. Cooper, 17 Colo. 80. 2 Perot V. Cooper, Supra. 38 PRODUCTION OF A PERFECT MORTGAGE. § 31 the deed at the time of the conveyance, and of the vendor who sold the property to the litigants, both present at the time of the transaction, and v?ho both testified to statements and declarations made by the parties, tending in a way to support the theory that the deed was intended a security merely, was held insufficient.^ So, too, where the transaction is between parties whose relations are of a close fiduciary character, the fiduciary com- plainant is not held to the same exactitude and strength of proof, nor is the testimony offered in support of the bill to be viewed with the same scrutiny as in those cases where the parties deal with each other at arms-length.^ The death of the grantee of the deed may often prove a stumbling block in the way of introduc- ing testimony to show that the deed was intended a mortgage, or may materially affect the strength or preponderance of evidence required by the rule. In most cases, the complaining party who seeks to establish the mortgage is the principal witness and the only one wholly familiar with the terms of the parol agreement. A statute on our books, may prevent him from testifying in his own case, at the pleasure of the defendant. It provides that no party to any civil action shall be allowed to testify therein, of his motion or in his own behalf, when any adverse party sues or defends as the ^ Fetta V. Vandevier, 3 Colo. App. 423; approved, 20 Colo. 368. '^ Lindsay v. Lindsay, i Colo. no. (-nc>rr-.l.L UNIVERSITY OCT a9^ 1902 l^iij.v.->. § 31 HISTORY OF A COLORADO MORTGAGE. executor or administrator, heir, legatee or devisee of the deceased.' § 32. Same: Mortgage, by Absolute Deed and Parol Agree- ment of Reconveyance; Will not affect bona fide ■Pnrcliaser from Grantee without Notice of Parol Agreement, — Where Written Agreement of Recon- veyance lost Same may be Proved by Parol. The doctrine that a deed may be proved a mortgage in effect, does not affect the title of a bona fide purchaser from the grantee or mortga- gee, for a good consideration, without notice of the parol agreement.^ Where the agreement to reconvey is contained in a bond which has been lost or destroyed, the grantor of the deed may nevertheless take advan- tage of the doctrine by first offering proof of the execution and the loss or destruction of the bond, before introducing parol evidence of its contents.' § 33. Form of Instrument: Consideration, Purpose of; Formerly to Prevent Resulting Trust. As a second subdivision under Form, following the different kinds of form, we take up Considera- tion. The usual consideration expressed in mort- gages is a bond or a certain promissory note, or -whatever form the indebtedness may assume, "and » Mills' Anno. Stat. Section 4816. Whitsett V. Kershow, 4 Colo. 419. Fetta V. Vandevier, 3 Colo. App. 423; approved, 20 Colo. 368. Williams v. Carr, 4 Colo. 363. 2 McClure v. Smith, 14 Colo. 298. Mellor V. Valentine, 3 Colo. 255. ' Drake et al v. Roct, 2 Colo. 691, 40 PRODUCTION OF A PERFECT MORTGAGE. § 33 a further consideration of one dollar in hand paid." It is said the object of the consideration clause in a deed is to prevent a resulting trust in the grantor, and to estop him forever from denying a deed for the uses therein mentioned.^ This applies with equal force to a mortgage, whether in form of trust deed or of a regular mortgage. But when the principle is to be applied to the equitable mortgage, to-wit, an absolute deed qualified by a parol agree- ment, there is hopeless confusion and inconsis- tency. In the trust deed or regular mortgage there is an additional term added to the terms of an ordi- nary deed, namely, the defeasance clause, which quickly off-sets and obviates contradiction with the object of the consideration clause above alluded to. Whereas, in the equitable mortgage, the written instrument — an ordinary deed — stands upon its own cognizance, and the rule that its terms may be qualified by proof of a parol agree- ment is in direct violation of the spirit of the con- sideration clause, and does permit the grantor or mortgagor to set up a resulting trust. The courts negative a contradiction, and reconcile the two by holding that the grantor or mortgagor does not "deny the deed for the uses therein men- tioned," but by the parol agreement simply estab- lishes that part of the contract which the deed fails to evidence. ' Fechheimer z/. Trounstine, 15 Colo. 386. 41 § 34 HISTORY OP A COLORADO MORTGAGE. § 34. Same: Consideration; Recitals Now Prima Facie Evidence of, Against Party— May be Explained or entirely Rebutted by Parol— (Jiiality of Proof, clearest, most satisfactory and indubitable. But it is now clearly established by the great weight of authority that, as a general rule, the consideration of any instrument under seal, and its receipt, may be explained or entirely rebutted in equity, by parol evidence.^ Such recitals in a deed are regarded as merely prima facie evidence against the party making them, and the real con- sideration, or no consideration, may be orally proven. It was settled very early in the history of courts of equity that whenever they acquired juris- diction of a controversy, they were possessed of ample powers to either reform or cancel instru- ments procured by mistake or fraud, 07' where it was manifest from the proof that it luould he inequi- table for the plaintiff to enjoy the fruits of deeds or other written instruments procured under these circumstances or for a grossly inadequate consid- eration. At first the power seems to have been more generally exercised in cases where the com- plainant sought to modify the consideration expressed — to insert what was essential to the expression of the true agreement according to his contention, rather than cancellation by reason of no consideration or otherwise; but now, according to the authorities, there is no difference between the two classes of cases, and courts of equity ' Fechheimer v. Trounstine, 15 Colo. 386. Wilson V. Morris, 4 Colo. App. 242. 42 PRODUCTION OF A PERFECT MORTGAGE. § 35 exercise the power indiscriminately. ' The former rigid common law rule with reference to written instruments has been materially relaxed in the large majority of states. The quality of proof requisite to discharge the burden of a signed and sealed instrument, by the complainant, on the ground of no consideration, must be of the clearest, most satisfactory and in- dubitable kind; a task always of not inconsiderable difficulty. ' ' Courts of equity do not grant the high remedy of reformation " or cancellation, "upon a probability, nor even upon a mere preponder- ance of evidence, but only upon a certainty of the § 35. Same : Consideration ; Love and Affection Sufficient Consideration — Insufficient if in Fraud of Exist- ing' Creditors, — Sucli Transactions Closely Scru- tinized by Courts of Equity. Love and affection are a sufficient consideration as between husband and wife, but does not pass title in a deed when in fraud of existing creditors." In the event of the latter, it is not in and of itself con- clusive fraud. The statute of frauds provides ' ' nor shall any conveyance or charge be adjudged fraudu- lent against creditors or purchasers solely on the ground that it was not founded on a valuable con- sideration. '" Such transactions, however, are ^ Wilson V. Morris, 4 Colo. App. 342. Johnson v. Calnan, 19 Colo. 177. ' Wilson V. Morris, 4 Colo. App. 245. " Phillips V. Rhodes, 2 Colo. App. 70. * Mills' Anno. Stat. Section 2033. 43 § 35 HISTORY OP A COLORADO MORTGAGE. generally scrutinized by the courts with great care.' § 36. Same: Consideration; Interest,— In Absence of Agreement legally Eight per cent— Judgment not an Agreement— Judgment fixing higher rate Erro- neous, — Tfo Usury Law in Colorado, — Interest must he Compensation for Use of Money, not Penalty for Default — Rate Stipulated prima facie Value of Money hut may be Behutted by Proof of Going Kate— Compound Interest Prohibited — Exceptions, Promise made After accruing of Original Interest to pay Interest on Same as Principal, Also where Defendant has been Delinquent in a Duty. Where the consideration is a note, a number of valuable adjudications have been made upon the question of interest. The legal rate of interest in Colorado is eight per cent, in the absence of a spe- cial agreementf a judgment at law is not an agree- ment in order to bring it within the operation of the statute, and therefore a judgment fixing a higher rate than the legal rate of interest is erro- neous.'' As there is no statute on the subject of usury in this state, parties may contract for any rate of interest they choose; that is, always within this pro- viso: that such interest must be intended as com- pensation for the use of the money by the borrower after default, and not as a penalty imposed for non payment when the money was 1 Kellogg V. Kellogg, (Sup.) 40 Pac. 358. ^ Mills' Anno. Stat. Section 2251. " Commissioners Cheyenne Co. v. Bent Co. 15 Colo. 320. 44 PRODUCTION OP A PERFECT MORTGAGE. § 36 due; if the latter, it will be enforced only as pen- alties in bonds are enforced.' This doctrine is an outgrowth of the rule that the defaulting clause of a note or contract is not a part of the contract, but merely an attempt of the parties prematurely to liquidate the damages for breach of the contract, which the law forbids them to do. But the rate of interest stipulated will now be regarded the prima facie real and just rule of damages so long as the stipulated rate does not exceed the real value of the money defaulted. To ascertain this, evidence is admissible to show the going rate of interest or value of the money.'' Compound interest is not allowable in this state. ^ Not even wh en contracted for. * This is well settled. The cases indicate a difficulty to compre- hend what is and what is not compound interest; in other words, when has compound interest ceased to be such, to become a part of the principal? The statute provides that creditors, in the absence of an agreed rate, shall be allowed eight per cent interest on all moneys "after they come due," etc.^ It is true that interest, when it has become payable, is ' ' money become due, " but our courts have construed it in an equitable light and allow the language to cover interest only on the ' Buckingham v. Orr, 6 Colo. 587. 2 Brown v. Steck, 2 Colo. 78. Buckingham v. Orr, 6 Colo. 587. ' Denver B. & M. Co. v. McAllister, 6 Colo. 261. * Filmore et al. v. Reithman, 6 Colo. 132. Beckwith v. Beckwith, n Colo. 568. Hockmark v. Richler, 16 Colo. 263. '• Mills' Anno. Stat. Section 2252. 45 § 36 HISTORY OP A COLORADO MORTGAGE. original principal, especially in view of the provi- sion allowing any rate to be agreed upon. It is emphatically stated that "to compute interest upon interest after its maturity, has by all courts, whether exercising equity or common law juris- diction, been held to be compound interest and in violation of law."^ So, too, where the interest is computed in advance and amalgamated with the principal, the principal sum thus formed, on the face of the note, to draw interest at a rate specified after the maturity of the note, recognizes compound inter- est. Such a provision would not vitiate the entire contract; courts would simply decline to enforce payment of the interest upon interest. It seems, though, that when the promise to pay compound interest, or, rather, interest upon the principal and interest, is made after the original interest has accrued and been added to the prin- cipal in the note, it might be enforcible, and regarded as equivalent to an original principal.^ There are exceptions where compound interest has been allowed, as, for instance, where the defendant was guilty of conduct grossly delinquent or intentionally contrary to his duty.^ 1 Denver B. & M. Co, v. McAllister, 6 Colo. 261. ^ Hochmark v. Richler, 16 Colo. 263. ' Filmore et al. v. Reithmann, 6 Colo. 120. Hochmark v. Richler, Supra. 46 PHODTJCTlON OP A PERFECT MORTGAGE. § 37 § 37. Form of Instrument: Covenant for Payment of Debt; Production of Instrument Prima Facie Et- idence of Debt, — Wliere Debt is in Separate Note or Bond latter Is Evidence of Debt, tlie Mort- gage being Evidence of Lien. Sometimes a covenant for the payment of the debt is inserted in the mortgage, but usually a bond, note or other separate instrument is exe- cuted for the purpose of showing the amount of the indebtedness. In the former case, where the instrument con- tains the evidence of indebtedness, the production of the mortgage is sufficient, prima facie, to estab- lish the continued existence of the debt, without producing the note, if there be one.^ In the latter, ' ' the note is evidence of the amount of the indebt- edness, just as the mortgage is evidence of a lien upon certain property for the payment of that indebtedness," "and each according to its office determines the rights of the parties." "It is impossible to say that there is anything due upon the mortgage disconnected from the note, for the reason that the note alone determines the amount of the indebtedness. " ^ ' Eyster v. Gaff, 2 Colo. 225; s. c. 91 U. b. 52. ^ Longan v. Carpenter, [ Colo. 224, dissenting opinion, Hal- lett, C. J.; reversed in 16 Wallace 271. Com. of Arapahoe County v. Cutter, 3 Colo. 346. 47 S 38 HISTORY OP A COLORADO MORTGAGE. § 38. Form of Instrument: Defeasance Clause in Mort- gage; Power of Sale in Trust Deed; Legal title Passes under both Mortgage and Trust Deed- Both a Grant or Conveyance at Law, not so under Rev. Stat. U. S. 2262 prohibiting Pre-emp. tor to convey before final proof in certain cases. In mortgages proper the defeasance clause ordi- narily declares that upon payment of the debt, title to the premises encumbered shall revert to the mortgagor/ In deeds of trust there is iio such provision. We find here the trust and power of sale clause instead, with different effect. In the former, the condition is a payment of the debt, to defeat the instrument; that is, all the rights acquired by the grantee, both legal and equitable. In the latter, provision is merely made as to what shall be done to make grantee's title more complete — in other words, to defeat the equi- table title that the grantor still retains; the legal title already vests in the grantee or trustee; the clause provides that in case of default or non-pay- ment of a certain debt by the grantor, the grantee or trustee may sell and dispose of the premises, thus defeating the grantor's last vestige of title. There seems to be a deplorable conflict in the language and expressions used ia text books and reports as to when the title does and does not pass in the different forms of mortgages. In picking up the formula of an ordinary mortgage or trust deed, in a "lien" state, we find the words "and the party of the first part has and hereby does ' Armor v. Spalding, 14 Colo. 302. 48 PRODUCTION OF A PERFECT MORTGAGE. § 38 grant, bargain, sell and convey unto the party of the second part, his heirs, assigns," etc., "forever all the premises," etc. We are told that these words are cold form merely, and that whatever the form, the title does not revert to the mortgagor upon payment of the debt, for the simple reason that it never vested in the mortgagee, — and words to that effect. It is elementary, that these forms are executed according to law, and enforced according to the tenets in equity, e. g. , in states where the equitable doctrine prevails. And it seems that the safest and most logical conclusion would be, in all mortgages where the above words of bargain and sale are used, to assume that the legal title vests in the mortgagee, until defeated by virtue either of contingencies ex- pressed in the mortgage itself or by the operation of the familiar doctrine in equity. The fact, that a mort- gage at common law vests the title in the mort- gagee — that, subsequently, courts of equity came in and tacked on the equity of redemption — and, lastly, that mortgages are still executed as at common law in states that have adopted the equitable the- ory of enforcement, ought, inevitably, to lead to this conclusion. Colorado has passed no law to the contrary; its statute simply provides that a mortgage of real property shall not be deemed a conveyance so as to enable the owner of a mortgage to recover possession of iihe real property witliout foreclosure and sale} It simply aims at the posses- sion and disposition of the property upon default, and adopts the equitable theory of carrying it out. ' Civil Code, Session Laws, 1887, Section 261. ' 49 § 38 HISTORY OP A COLORADO MORTGAGE. What, on its face, seems to controvert this the- ory is a recent decision by our Supreme Court, to the effect that a mortgage or trust deed is not ' ' a grant or conveyance. " But on closer perusal it may be found that the construction put upon these terms is with special reference to the interpretation of a federal statute, to wit, that ' ' a mortgage or a trust deed of land by a pre-emptor, prior to the time of making his final proof thereon, is not a grant or conveyance, within Rev. St. U. S., Sec- tion 2262, providing that ' ' any grantor conveyance which he may have made, except in the hands of a bona fide purchaser for valuable consideration, is null and void, except as provided in section 2288;" and, secondly, the construction is superinduced by a desire to favor ' ' settlers in negotiating loans to carry them over periods of drought or of business depression." The Court says, in criticising the contention of appellants that a mortgage or trust deed is within the statute, that theirs is founded, in this particular case, upon a somewhat forced construction of the words "grant" and "convey- ance."' Within this meaning, though, at law, a mortgage and trust deed would certainly come.^ § 39, Form of Instrument: Defaulting Clause; Does Not Apply to Note if not contained therein — Liability on Note postponed Until Maturity. The defaulting clause in a trust deed generally contains the provision ' ' that in case of default in payment of the principal and interest, or any part 1 Wilcox et al. v. John (Sup.) 40 Pac. 880. "^ Mills' Anno. Stat. Section 2036. 50 PRODUCTION OF A PERFECT MORTGAGE. § 40 of it, the whole of the principal sum secured by the trust deed should, or might, become at once due, anything in the notes to the contrary notwithstand- ing. " The question then arises which of the two agreements is conclusive. In a recent case, in the Court of Appeals, the contention was made that the above clause in a trust deed executed concur- rently with the note must be taken as incorporated into and a part of the promise in the note. But the court ruled, obiter dicta, that a stipulation concern- ing the maturity of the paper contained alone in the trust deed and not in the note, must be taken as determinative only of the rights of the parties with reference to the enforcement of the security, and not as determinating the maturity of the note, and that any liability on the note itself — as for a deficiency upon foreclosure of security — is post- poned to its maturity as appears by the terms on its face.^ § 40. Form of Instrument: Equity of Redemption; Waiver of Redemption,— Guaranteed under New Trust Deed Act. In a trust deed (previous to the new act) the parties thereto generally stipulated that there should be no equity of redemption. By their stip- ulation they are bound. ^ Quaere, is this not in ' Heisler v. Lyon, 4 Colo. App. 11. Longan v. Carpenter, i Colo. 224, dissenting opinion by Hallett, C. J.; reversed in 16 Wallace 271. See Section 37 ante. 2 Nippel V. Hammond, 4 Colo. 211. Denver B. & M. Co. v. McAllister, 6 Colo. 261. 51 § 40 HISTORY OF A COLORADO MORTGAGE. violation of the fundamental principle that one may not contract away his legal rights? The late trust deed act specially provides for an equity of redemption practically the same as in regular mortgages. § 41. Form of Instrument: Signature; By Officers and Directors Individually instead of Corporate Name may be Reformed, — "Agent" added prima facie Instrument of Signer — May be Rebutted by Parol Evidence,— Fraudulent Signature cured by Ac- knowledgment and Delivery, — Grrantee's Signa- ture Not Necessary in Instruments. Officers and directors of a corporation who erro- neously sign securities in their individual names, merely describing themselves as such officers, but not in the corporate name of the company, may have a reformation of the papers, by producing evidence clearly showing that the officers acted on behalf of the company.^ The word ' ' agent " added to the name of one signing a contract is prima facie descriptio per- sons, and in the absence of proof changing its prima facie character, the instrument is to be con- strued as the individual act of the party executing it. This evidence may be by parol or in writing.^ Where a fraudulent signature to a conveyance is claimed, if the grantor duly acknowledges the the instrument and authorizes its delivery, he thereby recognizes the signature and seal, making the same his own for the purpose of the con- veyance.'' 1 Denver B. & M. Co. v. McAllister, 6 Colo, 261. ' Rhone v. Powell, 20 Colo. 41. ^ Chivington v. Colo. Springs Co. 6 Colo. 261. 52 PRODUCTION OP A PERFECT MORTGAGE. § 43 The grantee's signature is not necessary, and, generally, is left off in the execution of instru- ments.^ § 43. Form of Instrument: Seals Unnecessary in this State; Attestation Unnecessary — latter's presence obviates Necessity of Calling Witness in Court in Absence of Acknowledg'ment in Instrument. Seals opposite the name of the grantor are not necessary to the proper execution of instruments affecting real property in this state. ^ So, too, attestation is not made an essential for- mality in the execution of a deed in Colorado — with this qualification, perhaps, that in the case of an unacknowledged deed, such instrument whether recorded or not, may not be read in evi- dence;^ but in such case a subsequent acknowledg- ment or proof by a single attesting witness, in compliance with the statute in such case made and provided, will remove the defect.' § 43. Form of Instrument: Acknowledgment; Not Neces- sary to Validity or Record, — Purpose, to prore Execution and authenticate Record. Acknowledgment is not necessary to give valid- ity to a deed or mortgage,' nor does its omission disentitle it to record; when so recorded, it has the full effect of notice, to future purchasers and ' Burbank v. Roots, 4 Colo. App. 199. 2 Mills' Anno. Stat. SectioQ 441. * Mills' Anno. Stat. Section 448. * Mills' Anno. Stat. Section 444. ' Armor v. Spalding, 14 Colo. 302. HoUaday v. Dailey, i Colo. 466. 53 § 43 HISTORY OP A COLORADO MORTGAGE. encumbrancers.^ The statute providing for ac- knowledgment is in the affirmative and does not negative the common law. It is but a means of proving the execution and to give authenticity to the record, when the instrument shall be there- after recorded. Its object is to do away with the burden of proving the execution of the instrument by additional evidence or witnesses, making the acknowledgment prima facie evidence of its proper execution. The fact that the execution of a deed is attested by witnesses, in addition to the regular acknowl- edgment, does not alter the situation, and a com- pliance with the acknowledgment as provided by statute is sufficient without additional proof. ^ § 44. Same: Acknowledgment; Proof of Identity of Acknowledger to Notary Unnecessary — Excep- tion,— Unnecessary to state Knowledge of Identity in Certificate — Except in Mortgage of Homestead. Proof of the identity of one making the acknowledgment of the execution of a deed is unnecessary when the officer has knowledge of the identity from a source that satisfies his conscience — as, through a mutual friend. "When an intro- duction does not proceed from a source as to sat- isfy the officer's conscience, undoubtedly he should not certify that he knows the party, but should require 'evidence,' which, of course, must be on ^ Mills' Anno. Stat. Section 448. 2 Holladay v. Dailey, i Colo. 466. Milsap et al. v. Stone, 2 Colo. 140. Mills' Anno. Stat. Sect. 443. 54 PRODUCTION OP A PERFECT MORTGAGE. § 45 oath; but when the character of the introducer — whom the officer knows — conveys knowledge to the satisfaction of the officer's conscience, he may well be satisfied and may properly give the certificate."^ It is not necessary to state this fact or facts of knowledge of identity by the officer in his certifi- cate, except in cases of mortgages or conveyances of homesteads, when it is imperative, and the form therefor is prescribed by statute.^ § 45. Same: Acknowledgment; Certificate may be Im- peached — For fraud, duress, concurrent mistake, — Proof— clear, strong, couTincing, by Disinterested Witnesses, — Notary's Name. The certificate of the acknowledging officer may, in some cases, be impeached for fraud, duress or gross concurrent mistake, but the proof must be clear, strong, of the most convincing character and by disinterested witnesses. They will not be lightly inferred. The reason for this rule is of the most obvious and satisfactory kind. It is essential to the security of titles. " If the solemn deed of a party to real estate, duly attested by a public officer and recorded according to law, may be avoided by the grantor's individual oath or by anything short of clear and convincing evidence, the efficacy of recording statutes is largely destroyed, and the title to such property is preca- rious indeed. Public policy, as well as individual • Nippel V. Hammond, 4 Colo. ill. ^ Session Laws, 1887, Section 6, Page 228; or Mills' Anno. Stat. Section 443. 55 § 45 HISTORY OP A GOIjORADO MORTGAGE. security, require that the ownership and peaceful possession of land shoald be subjected to no such hazard."' A foreign notary — in the acknowledgment, of a deed, signed his initials, instead of his Christian names, to wit, " W. P. Bill;" his full name was given in the copy of his notarial commission, and also in the certificate, namely, " William P. Bill;" held, to be sufficient.'' § 46. Delivery and Acceptance of Instrument : Absolutely Essential to Validity of Deed; Possession and Record by Grantee prima facie Evidence of, — Delivery and Acceptance Alone Sufllcient as to Grantee. A deed must be delivered before it becomes operative as a conveyance, and, in general, accept ance is essential to complete the delivery and to pass the title. ^ Possession of a deed and its record are prima facie evidence of its delivery and acceptance.* The recording of a deed by the grantor without the direction or knowledge of the grantee is not in itself evidence of acceptance.^ Signing the deed or any obligation whatever, by the grantee, is not essential, and, therefore, delivery and acceptance of a deed imposing upon the grantee the obliga- tion of discharging the mortgage, alone is suffi- cient to bind him." ' Chivington v. Colorado Springs Co. 9 Colo. 597. ^ Denny v. Ashley, 12 Colo. 165. ^ Rittmaster v. Brisbane, 19 Colo. 371. < Brown v. State, 5 Colo., 496. ' Rittmaster v. Brisbane, 19 Colo, 371. " Burbank v. Roots, 4 Colo. App. 199, 56 PRODUCTION OF A PERFECT MORTGAGE. § 48 § 47. Same: As to Persons Sui Juris a Matter of Inten- tion— prored by Acts, Declarations, Circum- stances; Wife may testify to Delivery of Deed to Her by Husband. As to persons sui juris, acceptance as well as delivery, always is a matter of intention, express or implied, to be proved by some act or declara- tion, or to be presumed from circumstances; it may be added, that it will not lightly be presumed where the grant imposes some burden or obliga- tion upon the grantee.' A wife may testify as to the delivery of a deed to her by her husband, although such delivery took place during the existence of the marital relations. The rules of evidence at common law are modified by the married woman acts to the extent of accom- plishing the purposes of their enactment.^ § 48. Filing and Recording' of Instrument: Not Indis- pensable to Validity; Recording — Constructive Notice of Lien. The culminating step in the completion of a model mortgage is the placing of it upon record by the grantee. This subject has already been touched upon in the early part of Part I.' Record- ing is not indispensable to give the instrument the effect of a good mortgage; a deed duly executed and delivered, though unrecorded, can be enforced against a subsequent purchaser for value who buys ' Rittniaster v. Brisbane, ig Colo. 371. ^ Hutchinson v, Hutchinson, 16 Colo. 371. Wheeler v. Dunn, 13 Colo. 448. • ' Section 20, et seq. ante. 57 § 48 HISTORY OF A COLORADO MORTGAGE. with actual notice of its existence.' It is simply- constructive notice to the world by the mortgagee that he has a lien upon the property described in the instrument on file. '^ % 49. Same: What Instrnments Entitled to Record j Statute does not enumerate, — Held: Mortgages, Trust Deeds, Assignment of Bond to Conyey Realty, Duplicate Receipt of Land Office Receiver. Record made in County where Land lay. The statute providing for the recording of instru- ments that affect the title to real estate, may be found in Section 446, Mills' Annotated Statutes. It declares that record is to be made in the county where the land lay.' The statute does not enumer ate the instruments that are entitled to record, and, therefore, courts have been called upon to inter- pret the application of this provision. Deeds of trust, as a matter of course, are covered by the statute;* so, too, the assignment of a bond to con- vey realty;^ a duplicate receipt of the United States land office receiver, certifying to the entry and purchase of lands it describes, is made evi- dence of title by statute," and, therefore, is held to be subject to record as an instrument affecting title to realty.' ' Hutchinson v. Hutchinson, i6 Colo. 389. ' Seaman v. Hax et al. 14 Colo. 536. Smith V. Stark, 3 Colo. App. 453. ' Bradbury et al. v. Davis, 5 Colo. 269. * Barth v. Deuel, 1 1 Colo. 495. ' McFarran v. Knox et al. 5 Colo. 217. « Mills' Anno. Stat. Section 1748. ' Dallemand v. Mannon, 4 Colo. App. 264. 58 PRODUCTION OF A PERFECT MORTGAGE. § 51 § 50. Same: Mortgage Kept from Record Considerable Time Voidable. A mortgage is invalid when it is kept from the record a considerable time, for the express pur- pose of procuring credit for a firm in known fail- ing circumstances.^ § 51. Execution of Mortgage: Good Faith PreTail; Stat- ute of Frauds— Protects Subsequent Creditors as well as Existing Creditors. In closing the first part of this work, it may be remarked, incidentally, that in the execution of mortgages, like that of all other contracts, the utmost good faith must prevail. Any surreptitious attempt to dispose of property with the intent to ' ' hinder, delay or defraud creditors, or other per- sons," will be declared of no effect. And the stat- ute of frauds does not confine its protection to existing creditors, or existing causes of action at the time the conveyance was made, but also to subsequent creditors. To illustrate: A party secured his promissory note for |5,000 by a trust deed on March 8th. On the 21st day of June fol- lowing, he conveyed the said premises to the grantee by warranty deed, and the trust deed was released. On the 26th day of September, of the same year, plaintiff got a decree of divorce and alimony against the grantor, in the sum of f5,000. This decree was supplemented by one declaring the wife a creditor, within the operation of the ' Stockgrowers Bank v. Newton, 13 Colo. 247. Walton ^i.' National Bank, 13 Colo. 265. 59 § 51 HISTORY OP A COLORADO MORTGAGE. statute of frauds, and set aside the release of the trust deed to the grantee and the warranty deed on the ground of fraud. The action for divorce had not been commenced, nor did the cause there- for exist, when the transaction took place. ^ § 52. Mistake and Omission: Courts of Equity Will Always Reform if Possible. As a corollary, we introduce here the subject of Mistake. We have assumed the production of a faultless paper. But the fallibility of the human mind — above whose infirmity is not even the vigi- lant and experienced draughtsman, and the haste and economy in a busy age, make mistakes and omissions imperative, though avoidable in theory. Courts of equity will always reform a mortgage so as to conform to the intention of the parties, even if the rights of third persons have intervened if they have notice of the. rights of the original parties.^ The policy of the law is to sustain con- tracts, not to destroy them.' § 53. Same : Must be Mutual to Warrant Reformation, — Illustrations; Assignment does not destroy Mutu- ality; Courts of Equity Supply Omitted Words. A mistake, to warrant reformation, must be mutual; for, if the grantor agreed to one thing and the grantee to another, there never was an agreement ab initio — in other words, it must appear that both parties have done what neither ' Gregory v. Filbeck, I2 Colo. 379. 2 Smith V. Brunk, 14 Colo. 75. ' Pershing v. Wolfe et al. (App.), 40 Pac. 856. 60 PRODUCTION OF A PERFECT MORTGAGE. § 53 party intended/ An instance of this is a mistake by the scrivener, which would be susceptible to cure by parol evidence.^ Another, and a peculiar case, where the parties in a trust deed are reversed, making the beneficiary the trustee, and the intended trustee the beneficiary; the property, in this case, might not be disposed of according to the real intention of the parties until a reforma- tion of the deed is had.' If the instrument containing the error that is mutual be assigned, this fact would not destroy its mutuality; a transfer carries all the equities with it, and the assignee stands in the shoes of his grantor.* So, too, a court of equity will supply the neces- sary words in an instrument where they have been accidentally omitted, to make the intention of the parties clear; a case in point is the following: A title bond, after describing the property, con- tained a special condition in words as follows: "this bond shall be, and remain, a special lien upon, and for the payment" of the note. It is self- evident that the words "the said property above described" were inadvertently omitted after the words "lien upon," and the court supplied the omission.^ 1 Denver B. & M. Co. v. McAllister, 6 Colo. 261. ^ Bradford v. Carpenter, 13 Colo. 30. = McMeel et al. v. O'Connor, 3 Colo. App. 113. < Denver B. & M. Co. C. McAllister, 6 Colo. 261. * Smith V. Brunk, 14 Colo. 75. 61 § 54 HISTORY OF A COLORADO MORTGAGE. § 54. Same: latent Ambiguity, Cured by Parol— Aliter, Patent Ambiguity,— Illustrations; Description of Property. A latent ambiguity may be cured by parol evi- dence — a patent ambiguity may not. A deed in general terms conveying a certain interest in land remaining m the hands of a custodian, or omitting to specifically enumerate the lots or parcels of land not conveyed by him, is not void for uncertainty, but may be supplied by extrinsic proofs. ' The purpose of the rule is to explain and effectuate the intent of the contracting parties not appearing upon the face of the instrument itself. So, in a bond for a deed conditioned to execute a warranty deed on "premises subject to encum- brance of $2,500 to Joseph Mason, deceased," on the completion of certain payments, — parol evi- dence was held admissible to explain what kind of incumbrance was meant — a deed, a trust deed, a mortgage or a mechanic's lien — and when it was made due and payable.^ It is a fundamental principle of the law of re^-l property that parol evidence is admissible for the purpose of showing that a description used in a conveyance as commonly understood in the vicin- ity, clearly designates the property.'' ' Blair v. Bruns, 8 Colo. 397. ' Rhodes v. Wilson, 12 Colo, 65. ' Laughlin et al. v. Hanley, 9 Colo. 170, Sullivan v. Collins, 20 Colo. 528. 62 PRODUCTION OF A PERFECT MORTGAGE. § 55 § 55. Same: Effect of Word "Trustee" Added to Signa- ture; More than Deseriptio Personas, — Written Evidence of Direct Trust— therefore Exception to Statute of Frauds and Parol Evidence admissible to Estahlish Direct Trust . The question has arisen whether the word " trustee " following the name of the grantee in an absolute deed conveying land, no trust condi- tions whatever or cestui que trust being mentioned therein, would open the door for the admission of parol evidence to establish an express trust? The statute of frauds provides, that the existence of a direct or express trust in lands cannot be established by parol evidence. ^ But where there IS some written evidence, it has been held, that parol evidence may be introduced to show the truth of the transaction.^ Reverting, then, to the question propounded above, the answer would be in the affirmative. The authority is a recent case, which holds that the word "trustee" indicates something more than a mere deseriptio personse and constitutes ' ' some written evidence" so as to bring it within the excep- tion and to take it out of the statute of frauds.' • Von Trotha v. Bamberger, 15 Colo. i. ' Bohm V. Bohm, 9 Colo. 106. ' Johnson v. Calnan, 19 Colo. 168. 63 56 HISTORY OF A COLORADO MORTGAGE. § 56. Same: Effect of Word "Agent" Added to Signa- ture; Prima Facie Descriptio Personse— May be Rebutted by Parol,— In Absence of proof Instru- ment Individual Act of Signer. But the word "agent" added to tlie name of one signing a contract is prima facie descriptio per- sonse, and in the absence of proof changing its prima facie character, the instrument is to be con- strued as the individual act of the party executing it. This evidence may be by parol or in writing. ' § 57. Same: Mistake of Expression Discussed Above instead of Mistake in Intention; The latter Fatal. The particular phase of the subject of mistake we are concerned with here is mistake of expres- sion in the formation of a contract, as distin- guished from mistake of intention. A failure in expression by the parties is susceptible to correc- tion in equity; not so with mistake in intention, of a material fact, — which nullifies the entire agree ment. ^ Rhone v. Powell, 20 Colo. 41. 64 PART 11. OF THE RIGHTS AND LIABILITIES OP PARTIES AND HOW AFFECTED OR DESTROYED EXCEPT BY FORECLOSURE AND TRUSTEE'S SALE. § 58. Second Era: Its Scope and DiTisions. The second era in the history of a mortgage is intended to compass the contingencies and vicissi- tudes that time may evoke during the natural existence of a mortgage as bearing upon its legal status. The parties having assumed their respect- ive relations — vrhatever name the particular form of mortgage may accord to them individually — the purpose of this Part is to devote the mate- rial allotted to it in an effort to demonstrate : (a) What the rights and liabilities of these parties are; and how they may be affected by ele- ments and circumstances foreign to those which emanate from the parties themselves, as, by execu- tion, or by the death of a party. (b) The effect and results, if the parties them- selves are the actors, and, (c) How the life of a mortgage itself may be curtailed or may expire, otherwise than by fore- closure and trustee's sale. 65 § 59 HISTORY OF A COLORADO MORTGAGE. CHAPTER T. OP THE RIGHTS AND LIABILITIES OF PARTIES AND HOW AFFECTED BY EXTRANEOUS CIRCUM- STANCES. § 59. Contract, Validity Determined by Law of Place of Execution; Rig:ht8 and Title to Realty under Same by Law of Situs — Also Law of ETidence of Situs governs. Ordinarily the validity of a contract involving real estate is to be determined by the law of the place where made. But the rights, liabilities and titles, of parties, to real property under it, are governed by the law of the situs, and the law of evidence of the situs respecting such rights, liabil- ities and titles should also govern.' § 60. Eights and Liabilities of Mortgagee: Note of Non- resident Executed and Secured by Trust Deed on Local Property in Colorado, Not Taxable; Note Property of Mortgagee or Beneficiary. The Board of County Commissioners of Arap- ahoe County undertook to collect taxes on a note executed, and secured by trust deed on property, in this state, by a resident, to a resident of Cali- fornia. Held, that such a debt in a legitimate sense, is not the property of the debtor — the resi- dent of Colorado, but that of the creditor, and follows the latter's domicile; and wherever that ' Wolf V. Burke, i8 Colo. 264. 66 RIGHTS AND LIABILITIES OF PARTIES. § 61 may be, is within the reach of its taxing power. Although the situs of the real estate by which the notes are secured is within the jurisdiction of the taxing power, the debts evidenced by the notes are the principal things, and the trust deeds securing them are mere incidents, depending for their very existence upon what they secure.' § 61. Same: No Right of Entry Before or After Condi- tion Broken; Nor Remedies of Ejectment, Tres- pass, Etc. A mortgagee, in the absence of special provi- sions to the contrary, has no right of entry or possession, either 'before or after condition broken, and cannot maintain trespass.'* The language in an early decision seems to indi- cate a doubt as to whether a mortgagee may enter after condition broken.' But this doubt is now entirely removed; the statute, following out the equitable doctrine, has been construed to take away all rights of possession in the mortgagee, at all times, except by means of foreclosure, and in consequence, also all remedies to acquire and enjoy it, as, ejectment and trespass.* ' Com. of Arapahoe Co. v. Cutter, 3 Colo, 346. Mills' Anno. Stat. Section 3765. • Pueblo & Ark. Valley R. R. Co. v. Beshoar, 8 Colo. 32. • Drake et al. v. Root, 2 Colo. 691. • Pueblo & Ark. R. R. Co. v. Beshoar, 8 Colo. 32. 67 § 62 HISTORY OF A COLORADO MORTGAGE. § 62. Same: May Protect Legal Title,— Statutes Declara- tory of Common Law; May have Action for Waste, — Written Permission from Mortgagee to Remove Improvements by Statute; Improvements Subsequently Erected Subject to Incumbrance in Absence of Statutory Sights of Tliird Parties. The mortgagee, as at common law, still retains the right to protect the legal title, which is in him, whenever it may be threatened with danger. The statutes now on our books relating to this subject are simply declaratory of his rights at common law. He may bring an action for waste. A recent statute provides, that "it shall be unlawful to remove any building, shed or other improvement off and from real property upon which there is an unsatisfied mortgage, trust deed, or other lien properly recorded," "without first obtaining from the mortgagee, or beneficiary under a deed of trust, or their assignees, written notice for such removal. " ' In the absence of express legislation clearly depriving him of his rights at common law, the mortgagee is entitled to buildings and improve- ments put upon the land subsequent to the execu- tion of his mortgage as an added security upon the land; by their erection, they become a part of the realty and in turn subject to the incumbrance upon the latter. Such legislation, as described ' Session Laws, 1891, page 262. 68 RIGHTS AND LIABILITIES OF PARTIES. § 64 above, has been enacted in this state — for exam- ple, the mechanic's lien law.' § 63. Same: May Pay Off Prior Incumbrance 5 Mechan- ic's Lien an Incumbrance. The right of a mortgagee to pay off a prior incumbrance upon the mortgaged premises for the purpose of protecting his security, and, upon fore- closure, to a reimbursement, from the proceeds of the sale, is established by a continuous and uni- form line of authority. A mechanic's lien acquired in conformity with the statute is an incumbrance, and within the principle; it remains an incum- brance until its removal by payment, or until it is lost by delay to prosecute it to a judgment.'' § 64. Eights and Liabilities of Parties Affected by Ex- traneous Circumstances : By Levy and Execution, — Mortgagor's Interest Subject to,— Mortgagee or Beneflciary's Interest Not, — When Mortgagee's In- terest may become Subject to,— Mortgagee May Leyy on Mortgagor's Interest for Separate Debt — not Waiver or Estoppel to Foreclose Secured Debt. By statute, the mortgagor's interest in lands, otherwise known as the equity of redemption, is expressly made subject to levy and execution, for a debt.' In such cases, the judgment creditor takes the mortgagor's interest, subject to the mort- gage lien.* ' Church V. Smithea, 4 Colo. App. 176. * Fitch V. Stallings et al., (App.) 38 Pac. 393. » Mills' Anno. Stat. Section 2529. * Seaman v. Hax et al. 14 Colo. 536. 69 § 64 HISTORY OF A COLORADO MORTGAGE. There was a time, in the history of this act, when the mortgagee's interest also could be levied upon.* But the law is now, and for some time has been, in conformity with the established principle that to be susceptible to levy and execution, an ' ' interest in real estate " must be a vested interest, legal or equitable; '' that it must be such an interest as attaches to the body of the land itself, containing at least one element of possession. Liens, there- fore, — and this includes mortgages and trust deeds, for they are regarded as equitable liens arising by express contract' — are not susceptible to levy and execution, and a mortgagee or cestui que trust is excepted from its burden; liens are " not founded on property, but necessarily suppose the property to be in some other person." The doctrine of estoppel, however, may operate to make such a levy, upon a lien interest in real estate, a good and valid one. And in this wise: where both the lien-holder and the purchasers at such sale, being fully aware of their legal rights, the former attends the sale, consents to the appli- cation of the proceeds to the satisfaction of the judgment, and receives the surplus; he is thereby estopped from denying the validity of the sale, and the transaction constitutes an equitable assign- ment or transfer, to the purchaser, of the mort- gagee's interest in the property.* The mortgagee himself may take advantage of ' Laws, 1861, page 264, Section i. ' Fallon V. Worthington, Fallon v. O'Donnell; 13 Colo. 55Q. • Jones on Liens, Section 28. * Fallon V. Worthington, etc.; Supra. Rockwell V. Coffey et al. (Sup.) 38 Pac. 376. 70 RIGHTS AND LIABILITIES OF PARTIES. § 65 the statute making the mortgagor's interest attach- able, by levying upon the security to satisfy a separate debt, existing independent of the debt for -which the security was given; and this -will not constitute an equitable estoppel or waiver of the enforcement by foreclosure of the secured debt.i § 65. Same: By Death, of Mortgagor or Trustor 5 Statute of Ifon-claim Does Not Include Demands Secured by Mortgages and Trust Deeds^ Recent Statute Re- quires Presentation and Allowance in Summary Foreclosure under Instrument within One Tear after Death if Letters Issue within One Fear, — Presentation and Allowance Not Necessary in Other Cases. The statute of non-claim, in relation to the administration of estates (Mills' Anno. Stat. Sec- tion 4780), provides that all demands not exhib- ited within one year from the granting of letters, shall be forever barred, etc. The question arises as to whether demands secured by mortgages or trust deeds are within the statute, or does non- compliance with the statute by the mortgagee, or by the beneficiary, bar the remedies secured to them under their respective instruments? Demands secured by mortgages and trust deeds are not within the above statute.^ A compliance with the statute, however, would not afEect or prejudice the rights of the parties to enforce their security, if otherwise this privilege remains unim- paired.' The law that is applicable to debts of de- ' Seaman v. Hax et al., 14 Colo. 536. ' Reid et al. v. Sullivan, 20 Colo. 498 " Pershing v. Wolfe et al. (App.), 40 Pac. 858. 71 § 65 HISTORY OP A COLORADO MORTGAGE. ceased persons secured by mortgages, trust deeds or other securities, is an act very recently passed, by the Tenth General Assembly, modifying the act of 1885 as amended in 1889, and, in particular. Section 8 of the same/ This law, as it now stands, in substance pro- vides: That "no mortgage, deed of trust or other security, real or personal, securing the payment of claims against the estates of deceased persons, shall be foreclosed within one year from the death of the debtor, except upon order of court, "'^ etc. What is meant by "except upon order of court," is elucidated by what follows, namely: Where letters testmentary or of administration issue within one year from the death of the debtor, from the county court having jurisdiction over the estate, ' ' no such mortgage, deed of trust or other security shall be foreclosed, otherwise than by suit in court,^ unless the claim secured shall first be proved and allowed by such county court." The words "otherwise than by suit in court" have reference to a regular foreclosure by bill in equity, which in turn comes within ' ' except upon order of court " above. So that where letters have issued, a mortgage, trust deed or other security may be foreclosed before the lapse of one year if the security is regularly foreclosed by a bill in equity without the debt first being proved and allowed, in the county court; but if — after the iden- ' Session Laws, i8q5, page 253, amending Section 4783, Mills' Anno. Stat. ' The italics are mine. » Ibid. 72 RIGHTS AND LIABILITIES OF PARTIES. § 65 tical formalities — a mortgage, trust deed or other security be foreclosed ' ' otherwise than by suit in court," to wit, under a trust deed, by trustee, public or private, ' ' the claim secured shall first be proved and allowed by such county court," and such presentation and allowance is a condition precedent for the enforcement of the security by summary foreclosure under the instrument within one year from the death of the debtor. Where letters testamentary or of administra- tion do not issue within one year from the death of the debtor, ' ' such mortgage, trust deed or other security may be foreclosed in the same manner and with the same effect as if such debtor were living." Here no discrimination is made, and if letters do not issue within one year, foreclosure may be made either under the instrument or by bill in equity, without presentation and allowance of the claim.' The passage of the amended law, we are told, was prompted by a recent adverse decision of the Supreme Court^ which made presentation and allowance imperative and a condition precedent for the summary foreclosure under the instrument at any time — either before or after the expiration of one year from the death of the debtor. The above statute further provides that ' ' the lien of the mortgage, trust deed or other security affected by this act shall not be impaired by the suspension of the remedy herein provided for." ' ' Session Laws, 1895, Pages 253 and 254. '^ Reid at al. v. Sullivan, 20 Colo. 498. Pershing v. Wolfe et al. (App.) 40 Pac. 858 (obiter dicta). ' Session Laws, 1895, pages 253 and 254. 73 66 HISTORY OP A COLORADO MORTGAGE. § 66. Same: By Death, of Mortgagee, Trustee or Cestui Que Trust; Interest Passes to Representative— Is Personal Property; Provision Made in Deed for Successor of Trustee. Upon the death of mortgagee, his interest passes to his personal representative and is personal property in the hands of the executor or adminis- trator.' Provision is generally made in trust deeds, exe- cuted before the new act, for the appointment of a successor in case of removal or disability of the trustee, by death or for other causes. ' Buck et al v. Fisher et al. 2 Colo. 182. 74 RIGHTS AND LIABILITIES OF PARTIES. § 67 CHAPTER II. OF THE RIGHTS AND LIABILITIES OF PARTIES AFFECTED BY THEIR OWN ACTS. § 67. By Mortgagor or Trustor: Conveyance of Mort- gagor's Interest; Conveyed in Parcels, Parcel Kemaining in Mortgagor Amenable to Mortgage, tlien Parcels in Inverse Order of Alienation. The mortgagor is free to dispose of his property by absolute deed, or otherwise. Where the entire estate is conveyed, in the absence of specifications in the deed or of proofs aliunde to the contrary his grantee simply takes the equity of redemp- tion, that is, the estate subject to the existing mortgage or mortgages. But where he conveys in parcels, at different times, though in such case the title to each parcel is still shackled with the bur- den of the mortgage, yet the respective parcels become amenable to it only, first, after the por- ion of the estate still in the hands of the mort- gagor has been exhausted, and, second, then in the inverse order of their alienation. This rule, how- ever, may be modified by recitals contained in the deed itself.^ ' Fassett v. Mulock, 5 Colo. 466. Stevens v. Clay, 17 Colo. 489. 75 § 68 HISTORY OP A COLORADO MORTGAGE. § 68. Same: ConTeyance of Mortgagor's Interest; Cov- enant Against Incumbrances— In Praesenti and Broken Immediately— Does Not Run with Land,— Brea«li of Covenant Kare, — Incumbrances Gener- ally Excepted Therefrom in Conveyances. If the conveyance contains a covenant against incumbrances, being one in praesenti, it is broken immediately upon execution of the deed if then there be outstanding a valid lien which the gran tee is compelled to discharge.' This covenant is generally regarded a personal one, in the United States, and as not running with the land.^ There is no decision directly in point in Colorado, but the Court of Appeals in a recent case alludes to it incidentally, in words as follows: ' ' The authorities are not absolutely uniform * * * nor entirely harmonious on the inquiry whether if a more remote grantee be compelled to discharge the lien, he may not recover therefor." ' Cases of breach of covenant against encum- brances, we may say, are very rare. Deeds of conveyances of lands burdened with a mortgage generally contain recitals which either except it from the operation of the covenant or make dispo- sition of it in some way agreeable to the parties. In the latter case, many qestions arise as to the intent of the parties or the construction to be put upon the words used in the recitals relating to the assumption of the mortgage debt. We will con- sider them now. ' Fisk V. Cathcart, 3 Colo. App. 374. ^ Rawle on Covenants, 89. ' Fisk V. Cathcart, Supra. 76 RIGHTS AND LIABILITIES OP PARTIES. § 69 § 69. Same; Conveyance of Mortgagor's Interest; Cove- nant to Pay Incumbrance Distinguished From Promise to Indemnify,— Promise to Pay, in Per- sonam— Promise to Indemnify, in Bem, to Extent only of Property Conveyed,— Distinction Illus- trated in Pleading. What do the words purport— an agreement to pay, or, an agreement to indemnify, is the kernel of the proposition which courts are generally called upon to decide. In the one case it is a lia- bility on the part of the grantee in personam, in the other a liability in rem directed against the mortgaged property alone, to satisfy the mortgage debt. The distinction is based, on the one hand, upon the fact that the debt was part of the con- sideration money paid by the grantee to the mort- gagor, but retained by the grantee until the mort- gage debt becomes due, thus constituting payment of the same by the mortgagor to the grantee; and on the other hand, in an agreement to indemnify, upon the fact that the grantee takes upon himself the responsibilities and risks of the mortgage with all its equities as a consideration — to the extent only, however, of the value of the mort- gaged property, upon whose exhaustion in satis- faction of the debt, in part or in whole, his liability ceases, the property itself being the primary fund for the liquidation of the mortgage debt. The distinction between the effect of the two agreements is well illustrated in the pleadings. Where the defendant assumed and agreed to pay the debt of the plaintiff in an obligation, the 77 § 69 HISTORY OF A COLORADO MORTGAGE. defendant may not plead non damnificatus — has not been damaged, because the payment of the debt by the plaintiff, or mortgagor, already exists in contemplation of law; but where the condition simply was to indemnify or hold harm- less, the plaintiff must first show payment, and in its absence, a plea non damificatus is well taken.' § 70. Same: Same; Covenant to Pay Incumbrance Dis- tinguished from Covenant to Indemnify, — Words Construed and Effect of Each, — Mortgagee not Af- fected by Covenant unless Agreed to, — Promise to Pay May Become Promise to Indemnify . By accepting a deed containing a recital "that the land conveyed is subject to mortgage which the grantee assumes or assumes and agrees to pay," or where the conveyance is made "subject to the payment of an outstanding mortgage, " " or where parol evidence is admitted "to explain the provision in a bond to convey and the testimony of the grantee is "J was to fix up f2,600 of the indebted- ness," referring to the incumbaance,' in all these cases the agreement is a covenant to pay, and imposes upon the grantes a personal liability for the debt, irrespective of the mortgage property. As between himself and the mortgagor, he becomes the principal debtor and the mortgagor a surety. The promise implied by law in such case is to pay ' Burbank v. Roots, 4 Colo. App. 199. ' Burbank v. Roots, Supra. Campbell v. Clay, 4 Colo. App. 551. ' Rhodes v. Wilson, 12 Colo. 65. 78 RIGHTS AND LIABILITIES OP PARTIES. § 70 the mortgage debt when due; if due, to pay it forth- with or within a reasonable time. ^ Where the mortgage indebtedness is evidenced by a note, a bond, or other independent promise of the mortgagor, and the mortgagee has not agreed with the mortgagor to look to the property only, the transaction between the mortgagor and the grantee in no way affects the mortgagee, unless he agrees to release the mortgagor and to look solely to the purchaser for the payment of the debt; with- out such an agreement he may treat both as prin- cipal debtors.^ But a recital in a deed that the property con- veyed is subject to a mortgage, and stops there, is an agreement to indemnify and creates no personal liability on the part of the grantee. The grantee simply takes the equity of redemption in such case,' and the mortgagor and mortgagee can look only to the property as against the grantee.* A promise to indemnify for the mortgage debt may become a promise to pay it, by the subsequent acts of the grantee. As where purchaser acquired property subject to an incumbrance and upon default of the payment of said incumbrance, in considera- tion of forbearance from foreclosure for a consid- erable time and a substantial reduction of the incumbrance upon the land, he by word of mouth ' 'gu aranteed the note and agreed to pay the same " ' Burbank v. Roots, 4 Colo. App. 199. ' Campbell v. Clay, 4 Colo. App. 551. II Jones on Mortg. Section I7i5;74i. ' Stephens v. Clay, 17 Colo. 495. * Burbank v. Roots, 4 Colo. App. igg. Fisk V. Reser, 19 Colo. 96th page. 79 § 70 HISTORY OF A COI^ORADO MORTGAGE. and then and there indorsed his name on the back of said note: these acts were deemed sufficient in the minds of the court to constitute a promise to pay and a personal liability for the note by the purchaser to the mortgagee. The question whether the above agreement is enforceable under the statute of frauds, was answered in the affirmative by the Court: "An agreement, if it be not collat- eral, but in the nature of an original agreement to pay- the debt of another, founded on a sufficient consideration received by the promisor himself, is not within the provisions of the statute, and, therefore, need not be in writing; but if the agree- ment to answer for the debt of another be wholly collateral, it must be in writing." ' Parol evidence was held admissible in this case to show the cir- cumstances under which persons other than the payee and apparently not otherwise connected with the promissory note had indorsed the same.' § 71. Same:Conveyanceof Mortgagor's Interest; Covenants for Quiet Enjoyment and Warranty of Title Run With Land, — Breach of, R covery Value of Land Conveyed — How Determined, — When Title Subse- quently Acquired by Covenantor Inures to Benefit of Covenantee. Covenants for quiet enjoyment and warranty of title, by the grantor, run with the land. And in an actisn upon a warranty of title, where the assignee of the covenantee sues the original cove- nantor, the recovery is the value of the land ' P'isk V. Reser, 19 Colo. 88. Thatcher v. Rockwell, 4 Colo. 409. ^ Fisk V. Reser, Supra. 80 RIGHTS AND LIABILITIES OF PARTIES. § 72 conveyed determined by the price paid by him to his immediate grantor, with interest, not exceed- ing the consideration — the value of the land deter- mined by the price paid, with interest, for the original conveyance. * When grantor conveys lands in fee with warranty, without possessing title, an after- acquired title works an estoppel and passes an estate to his grantee] the instant the grantor becomes vested with the -good title. The latter must be an a6so- lute titl6;l a trust estate subsequently acquired by the grantor would not inure to, the benefit of tho grantee.^ § 72. Same: ConTeyance of Mortgagor's Interest; Grantee takes Property charged with Parol Agreement between Orantor and Third Parties, When. A grantee or purchaser^ takes the property charged with the burden of an agreement between grantor and third parties whereby property other- wise real becomes personal in its character, and this burden may have been created by parol agreement.' To illustrate : an existing parol lease between grantor and a lessee containing a term whereby a structure to be erected upon the leased premises by the lessee shall be regarded as chat- tel or personal property.* 1 Taylor v. Wallace et al. 20 Colo. 211. ' Mills' Anno. Stat. Section 430. Phillippi f. Leet, 19 Colo. 246. » Mitchell V. McNeal, 4 Colo. App. 36. * Ibid. 81 § 73 HISTORY OP A COLORADO MORTGAGE. § 73. Same: Liens Put Upon Mortgaged Property; Re- corded Incumbrance Superior to Subsequent Mechanic's Lien— Aliter, Prior Unrecorded Incum- brance,— Meclianic's Lien on Building Prior to In- cumbrance on Land,— Cestui Qiie Trust Indispensa- ble Party to Foreclosure of Meclianic's Lien wliere Priority is Sought. A mechanic's lien is subordinate to a mortgage and to a trust deed, and does not take precedence when the latter have been recorded prior to the existence of such liens.' When the recorded incumbrance is upon the land, liens for derangements of tJie land contradistinguished from improvements, erections and structures upon the land, are subordinate to the former; where the recorded incumbrance is upon the building, mechanic's liens put upon the struc- ture similarly yield to the prior incumbrance upon the building.^ But unrecorded incumbrances created prior to mechanic's liens do not take precedence over the latter. In a case where Jones granted premises to Young by recorded deed, taking back from the latter a bond for reconveyance which was not recorded, he shall not be permitted, in an action to charge the estate with a mechanic's lien, to defeat the lien by the production of the unrecorded bond.' A mechanic's lien takes priority also in the fol- ' Tritch V. Norton, lo Colo. 337. Session Laws 1893, page 319. '^ Church V. Smithea et al, 20 Colo. 175. ^ Session Laws 1893, page 319. Mellor V. Valentine, 3 Colo. 255. Folsom V. Cragen etal. n Colo. 205. 82 RIGHTS AND LIABILITIES OP PARTIES. § 74 lowing case : ' ' When the lien is for work done or material furnished for any structure, erection or improvement, such lien shall attach to the build- ing, erection or improvement for or upon which such work was done, or materials furnished, in preference to any prior lien, incumbrance or mortgage upon the land upon which the same is erected." ^ Where the lienor in the foreclosure of a mechanic's lien, seeks a decree establishing the priority of his right as against a title repre- sented by a trust deed or mortgage, it is pretty clearly settled by the authorities that in cases of this sort the cestui que trust as well as the trus- tee, or the mortgagee in a mortgage, is an indis- pensable party.'* § 74. By Mortgagep, Cesitni Que Trust or Trustee : May Con- vey his Eespective Interest; Trustee conveys Legal Title only, — Mortgagee or Cestui Que Trust's Nego- tiation of Note carries Security with it-Mortgage or Trust Deed alone Not Assignable unless by Deed, — Assignee without Notice takes Free of Equities,— History of Assignments of Notes secured by Mort- gages and Trust Deeds. The transfer or negotiation of a promissory note secured by a mortgage, by the mortgagee to another, for a valuable consideration, is in equity an assignment of the mortgage. The note is made assignable by statute,^ but the mortgage is not, ' Session Laws 1893, page 319. = McClair et al. v. Huddart, (App.) 41 Pac. 832. ^ Statute of Anne. Mills' Anno. Stat., Section 244. 83 § 74 HISTORY OP A COLORADO MORTGAGE. nor is the latter assignable by the common law; it is assignable only, in effect, in equity. The assignee of a mortgage has no remedy upon it at law, except it be treated as an absolute convey- ance and the mortgagee convey the premises by deed.' The trustee, in a trust deed, may convey or sell the property in him, but it passes the legal estate only, and is of no effect whatsoever as to the equita- ble estate resting in the grantor; the power to convey the latter arises only upon the happening of certain contingencies expressed in the deed.^ While it has always been an unquestionable doc- trine in our state that the assignment of the debt by the mortgagee carries the security — a mere incident of the debt — with it, vesting in the assignee the same rights and powers as were pos sessed by the mortgagee toward the security,' the status of the law with regard to assignee's liability for equities existing between mortgagor and mort- gagee at the date of the assignment has not gone uncontroverted. Early in the history of our jurisprudence, the Supreme Court of the Territory of Colorado, in Longan v. Carpenter,* held that the assignee of the note takes the mortgage subject to equities existing between the mortgagor and mortgagee, at ' Longan v. Carpenter, [ Colo. 205. ^ Wells V. Caywood, 3 Colo. 487. Stevens v. Clay, 17 Colo. 489. Reid et al. v. Sullivan, 20 Colo. 498. ^ Ross V. Duggan et al. 5 Colo. 85. Denver B. & M. Co. v. McAllister, 6 Colo. 261. * I Colo. 205. 84 RIGHTS AND LIABILITIES OF PARTIES. § 74 the time of the assignment, loith or loithout notice. The equity in this case was a part payment of the indebtedness by the mortgagor to the mortgagee, but which was not indorsed on the back of the note and of whose payment the assignee had no notice. The grounds for the decision given are that although the bona flde holder of a note is relieved of all equities by virtue of the statute which makes it negotiable, yet the mortgage still remains unnegotiable, a mere chose in action, as at com- mon law, assignable in equity and subject to exist- ing equities; in other words the statute was construed to stop at the note and not to apply to the mortgage given to secure the note or boad. Hallett, C. J., delivered a vigorous dissenting opinion in the case, and among other things said: "Tlie note and mortgage are inseparable; the former is an essential, the latter is an incident. An assignment of the note carries the mort- gage with it, while an assignment of the latter alone is a nullity. The transfer of the note car- ries with it the security, without any formal assignment or delivery, or even mention of the latter." " It is a truism of the law that a mortgage is a security for indebtedness, accompanying the latter through all hands, and ultimately sharing the same fate. This rule which identifies the secur- ity with the indebtedness, in my opinion, requires that the remedy upon the security shall be co- extensive with the demand." "I am not able to perceive that the former " (mortgagor) "occupies 85 § 74 HISTORY OF A COLORADO MORTGAGE. a higher position in a court of equity than the latter" (an innocent holder of negotiable paper), " or that there is any reason for setting aside the rules of law applicable to commercial paper in cases of this kind." The case went up to the Supreme Court of the United States, opinion by Mr. Justice Swayne. As this decision forms the foundation of the rule in Colorado and since has unswervingly been fol- lowed,^ we take the liberty of quoting the court briefly : ' ' The assignment of a note underdue raises the presumption of want of notice. The case is a different one from what it would be if the mortgage stood alone, or the note was non-negotiable, or had been assigned after maturity. The question pre- sented for our determination is whether an assignee, under the circumstances of this case, takes the mortgage as he takes the note, free from objections to which it was liable in the hands of the mortgagee. We hold the affirmative. On the ground — if one of two purchasers must suffer by a deceit, it is more consonant to reason that he who puts trust and confidence in a deceiver should be a loser rather than a stranger."^ The liability of an indorser of a commercial paper is to be measured solely by the note to which his name is affixed.'' ' Travelers Ins. Co. t/..Redfield et al. (Sup.) 40 Pac. igj. Heisler v. Lyon, 4 Colo. App. 11. ' Carpenter v. Longan, 16 Wall 271. Travelers Ins, Co. v. Redfield, et al. (Sup.) 40 Pac. 195. " Heisler v. Lyon, 4 Colo. App. 11. Longan v. Carpenter, i Colo. 222, dissenting opinion by Hallett, C. J. 86 RIGHTS AND LIABILITIES OP PARTIES. § 75 § 75. Same: Same; Negotiation of Note, — Indorsement by Payee Necessary, by Transferee not Necessary, — Indorsement by Latter guarantees genuineness of Note and Payment,— Liability of Indorser in Blank defined by Statute, — Indorsement " without re- course" Not Available to Subsequent Indorsers in Blank. The indorsement of the payee's signature upon a promissory note is necessary to transfer title to the note, but such indorsement by the transferee is not required, as he can pass his title by delivery.' Although transfer by delivery passes title in such case, a transfer by indorsement guarantees the genuineness of the note and its payment, and the presumption is that the indorsement was made for this purpose. The liability of indorsers who have signed in blank is fixed by law and cannot be changed by parol proof. ^ When a promissory note is iadorsed "without recourse" by the payee and afterwards indorsed in blank by the transferee, and in like manner by subsequent transferees, the contract of indorse- ment, expressed by the words ' ' without recourse " is available only to the payee, whose individual contract it is, and not to the subsequent trans- feree or transferees.^ ^ Doom et al. v. Sherwin, 20 Colo. 234. 2 Ibid. Martin v. Cole, 3 Colo. 113. Dunn V. Ghost, 3 Colo. 134. ' Doom et al. v. Sherwin, 20 Colo. 234. 87 § 76 HISTORY OP A COLORADO MORTGAGE. § 76. Same: Lossof Instrument; Proof of Loss or Destruc- tion before Evidence of Contents; Certified Copy from Record prima facie evidence of Contents, — Unrecorded Instrument clear proof of Existence, Execution and Contents essential; Remedy to Re- cover Instrument from Stranger; Ji,Production of Mortgage Containing Indebtedness prima facie evidence of Note witliout production of latter. The contingency of the loss of a mortgage or trust deed may arise during the existence of a mortgage. In such case, if the deed is recorded, a certified copy from such record is made prima facie evidence of such instrument,^ but the same cannot be introduced in evidence until satisfactory proof has been made of the loss or destruction of the original.^ There seems to be some question about the latter part of this proposition — whether proof of loss or destruction of deed is or is not done avpay with by Section 356 of the Civil Code of 1887?=' In the case of the loss of an unrecorded deed, the statute similarly provides that ' ' the party so rely- ing on the same as evidence in his behalf in the trial of the cause shall not be permitted to give evidence of the contents thereof by a competent witness or witnesses, until said party, his agent or attorney, shall first make oath to the loss or destruction thereof, and to the substance of the 1 Mills' Anno. Stat. Sections S38 and 922. Civil Code, 1887, Section 356. ^ Mills' Anno. Stat. Sections 444, 447, 1759; compare with Civil Code 1887, Section 355. ' But see Coleman v. Davis, 13 Colo. 102 (iS 88 RIGHTS AND LIABILITIES OP PARTIES. § 76 same.'" Upon sufficient proof of its loss being made, there must be clear proof of its execution -existence and enough of its contents to enable the court to determine the character of the instru- ment. ' ' Where the evidence fails to show its date, manner of execution or a definite description of the property," and it does not appear that the alleged grantee ever claimed title to the property in ques- tion, an action to restore the alleged lost deed will not lie.^ If the lost deed be found, and in this or in any other contingency, is withheld from the rightful owner by one of the parties or a stranger, its recov- ery would be a fit subject for an equitable action. A writ of replevin, or remedy at law, is not adequate in all cases, and therefore courts of equity will, at the suit of a person or persons legally entitled, decree the delivering up of deeds and other instru- ments in writing, since the value of such writings cannot with any reasonable degree of certainty be ■estimated in money.' The production of the mortgage reciting an indebtedness, is sufficient prima facie to establish the continued existence of such indebtedness, though the accompanying note or bond is not produced.* ' Mills' Anno, Stat. Sections 1759. See Hobson v. Porter, 2 Colo. 28, and Bruns et al v. Chase , 9 Colo. 227, as to what is sufficient proof of loss. Terpening v. Holten, g Colo. 313. Hittson V. Davenport, 4 Colo. 173. ' McDonald v. Thompson, 16 Colo. 13. • Henderson v. John, 13 Colo. 280. Williams v. Carpenter, 14 Colo. 481. -* Eyster v. Gaff, 2 Colo. 228. 89 § 77 HISTORY OP A COLORADO MORTGAGE. CHAPTER III. OP HOW A MORTGAGE MAY BE CURTAILED OR. EXPIRE EXCEPT BY PORECLOSURE OR TRUSTEE'S SALE. § 77. By Merger: Conveyance by Mortgagor and Mort- gagee to Stranger or to One Another constitutes, — Rule Not Inflexible; Absolute Title acquired by Grantor after Conyeyance of Defectiye Title to his Grantee Inures to Benefit of Latter by Stat- ute — Title of Trustee not within Statute. When the mortgagor and mortgagee convey and assign to a third person all their rights of prop- erty, claims and unadjusted equities existing- between them at the time against the said prop- erty, all the rights, title and claims of the par- ties thereto are thereby merged in the purchaser, and neither has any right of action against the other in respect thereto..^ So, too, if the mort- gagor conveys and assigns all his interest in the property to the mortgagee. But the rule that when the equitable and legal estates unite in the same person, they are both merged in one estate, is not inflexible. Courts of equity will treat them as separate or as merged, relatively as justice may require.^ Section 430 (Mills' Annotated Statutes) of the Statute of Conveyances in effect provides that ' O'Reilly v. Burns, 14 Colo. 7. = Fassett et al. v. Mulock, 5 Colo. 466. 90 RIGHTS AND LIABILITIES OF PARTIES. § 78 when one conveys lands in fees with warranty, but without title, and afterwards acquires one, his first deed works an estoppel and passes an estate to the grantee the instant the grantor acquires his title, thus merging in the grantee both good and bad titles. But the statute has been construed not to apply to cases where, after having made a conveyance with warranty without possessing title, the estate with good title comes to original grantor as a mere conduit, the title passing through him simply from the owner on its way to another person. To wit, a trust estate does not, like an absolute estate, inure to the benefit of the original grantee if the grantor who is now trustee made the origi- nal conveyance in his individual capacity.^ § 78. By Cancellation: Invalidity in Execution of In- strument or Failure or Want of Consideration Necessary to warrant; In Absence of Bad Faith of Grantee Plaintiff must Offer to do Equity,— Grantee cognizant of Disability of Grantor can- not Insist upon Offer to Refund Consideration. A suit to annul or cancel a mortgage is by no means an attempt for its extinguishment ' ' by the amicable settlement of the parties," to bring it within Part II as designed in the Introduction of this work.^ But the topic under discussion retains its chronological order in the present era of our history, and in the succession of events, during the contemplated existence of a mortgage, innu- merable cases arise that are brought into the • Philippi V. Leet, ig Colo. 246. , , . ,:: " ^«/^ Page 3. „,'i,y;'b'^> .91 § 78 HISTORY OF A COLORADO MORTGAGE. courts of equity seeking the cancellation of an instrument, on account of the violation of its terms, on account of fraud or mistake, or to remove it, for some reason or other, as a cloud upon title. The subject of cancellation has already been touched upon in the discussion of the questions of failure of consideration^ and of uncertainty and mistake.^ The jurisdiction of courts of equity in the above enumerated cases is undoubted.^ To enable the court to decree a nullification there must at least be some invalidity or illegality in the execution of the mortgage, or a failure or want of considera- tion.* Misapplication and waste of the money received in exchange for a security would not afford a court adequate ground for invalidating the security given. ^ Where the plaintiff has enjoyed the free undis- turbed use and enjoyment of the property or money given by the grantee in good faith as the consid- eration for the note and mortgage or trust deed, there can be no decree for cancellation or rescis- sion if the complaint contains no offer to account or pay for the use which the plaintiff has had of the said property or money;" unless, perhaps, there ' A»ie Section 33, et seq. " Anie Section 52, et seq. ' Travellers Insurance Co. v. Jones, 16 Colo. 515. * Robinson v. Dolores etc. Canal Co, 2 Colo. App. 17. Travelers Ins. Co. v. Redfield et al, (App.) 40 Pac. 195. Pershing v. Wolfe et al. (App.), 40 Pac. 856. " Robinson v. Dolores, etc. Canal Co, 2 Colo. App. 17. « Travelers Ins. Co. v. Redfield et al, (App.) 40 Pac. 195. Pershing v. Wolfe et al. (App.), 40 Pac. 856. 92 RIGHTS AND LIABILITIES OF PARTIES. § 80 is an averment of the misuse or misapplication of the money, or its diversion from the legitimate uses for which it was procured — as by an admin- istrator, to pay debts. ^ He who seeks equity must do equity. Where the grantee is cognizant of the mental condition or insanity of his grantor at the time the deed was executed, he is not in a position to require the consideration to be refunded as a con- dition to the setting aside of the instrument.'' § 80. Same: Parties to an Action to Rescind j Persons Interested in or Afltected by Result of Suit,— Same Rule applies to Cross-complaint — Neces- sary Party Omitted in Complaint Joined in Cross- complaint, — Who are Indispensable or Necessary and Proper Parties— When Trustee, Wife and Ad- ministrator are not a Necessary Party respec- tively, — Decree of Cancellation may be Recorded. The parties to an action to rescind are generally those who are interested or affected by the result of the suit. To annul a trust deed the grantor, trustee and cestui que trust are indispensable parties;^ in a suit to annul a mortgage by cred- itors, the mortgagor and mortgagee must be joined.* Where the action is brought by an heir, all the other heirs must be made parties plaintiff or defendant. And if the action is to set aside a > Pershing v. Wolfe et al, (App.) 40 Pac. 856. ^ Elder v. Schumacher, 18 Colo. 433. " Barth v. Deuel, 1 1 Colo. 494. Henry v. Insurance Co, 16 Colo. 179. Byers v. Hussey, 4 Colo. 524. * Allen V. Tritch et al, 5 Colo. 222. 93 § 80 HISTORY OF A COLORADO MORTGAGE. trust deed and note executed by an administrator, the latter's successor is not an indispensable, nor a proper, party plaintiff to the suit, especially where the estate is solvent and where the funds have not been misappropriated.^ The above applies to a cross- complaint as well as to the original complaint or bill; and if an indis- pensable party to a cross-complaint was not a party to the original complaint, he must neverthe- les be joined in the cross-complaint. The legisla- ture intended by a cross-complaint the equivalent of the cross-bill as known to equity practice, and under that practice, it was competent to make a person not a party to the original bill, a party to the cross-bill.^ It may happen that the trustee, although mate- rially affected by the result of the suit, is not an indispensable party; as where the action is brought to cancel the contract of indebtedness secured by trust deed. A suit to cancel the trust deed could not be maintained without joining the trustee, yet that result, and record evidence thereof, is accom- plished by a decree cancelling the indebtedness.^ Neither does the mere fact that a balance of the purchase money paid by the husband for property purchased in his own name is secured by the notes and trust deed of his wife, make the wife an indispensable or necessary party to a suit brought ' Pershing v. Wolfe et al, (App.) 40 Pac.856. ' Allen V. Tritch et al, 5 Colo. 222. Pershing v. Wolfe et al, (App.) 40 Pac. 856. ' Barth v. Deuel, ii Colo. 495. 94 RIGHTS AND LIABILITIES OF PARTIES. § 81 "by the husband against the vendor to rescind the contract on the ground of fraudulent representa- tions.^ The decree annulling a mortgage may be made matter of record, just as payment of the mortgage debt may be, by complying with the formalities required by statute.^ ^ 81. By Payment: Of Indebtedness Vitiates Security— Mortgagor may have Action for Surrender or Cancellation of Papers or for Deed of EeconTey- ence, — Trustee eiceedingf Powers to Accept Pay- ment, Beneficiary may have Action to Set Aside,— Executors or Administrators may accept Pay- ment for Minors and execute Release; Second Mortgagee may Pay Prior Incumbrance — Latter includes Mechanic's Lien. Payment is the natural death or expiration of a mortgage, and forms the climax in the closing events of this work. Whatever may follow is but a deviation from the pre -resolved finale of the contract, and originally not within the contempla- tion of the parties. When the note is paid, the mortgage expires. The mortgage can have no separate existence aside from the indebtedness.' The mortgagor is entitled to have the papers canceled and the cloud • Wheeler v. Dunn, 13 Colo. 428. ^ Mills' Anno. Stat. Sect. 469. Barth v. Deuel, 11 Colo. 495. • Carpenter v. Longan, 16 Wall. 271, reversing Longan v. Carpenter, i Colo. 224— dissenting opinion Hallett, C. J. Com. of Arapaho Co. v. Cutter, 3 Colo. 346. Quinn v. Kellogg. 4 Colo. App. 157. 95 § 81 HISTORY OF A COLORADO MORTGAGE. removed from his title. To accomplish this, he- may go into a court of equity and compel the mortgagee to cancel or surrender the evidences- of his debt/ or to reconvey, by deed, the property to him.^ A second mortgagee may pay off a prior incum- brance — which includes a mechanic's lien — to pro- tect his own security, and upon foreclosure, he is, entitled to a reimbursement therefor from the- proceeds of the sale.^ If the trustee in a trust deed, in excess of his powers, accepts securities in discharge of the debt, thus postponing the day of payment of the indebt- edness, the cestui que trust may have a decree- setting aside the release and commanding immediate payment.* When the mortgagee of any lands or tenements shall die leaving minor heirs, the executors or ad- ministrators of such mortgagee are ' 'authorized, on, receiving the amount due the estate of such de- ceased mortgagee, to release to the mortgagor the legal title of the said mortgaged premises, ani such deed of release shall be valid " ^ 1 Travelers Ins. Co. i/. Jones, 16 Colo. 515. ' Quinn v. Kellogg, App. 157. ' Fitch V. Stallings et al, (App.) 38 Pac. 393. * Olsen V. Scott et al, i Colo. App. 94. ' Mills' Anno. Stat. Sect. 4777. RIGHTS AND LiIABILITIES OP PARTIES. § 82 § 82. Satisfaction May Be Evidenced; By Deed of Re- lease or Reconveyance ; May be Executed before or after Maturity of Indebtednesg— Subsequent Pur- chasers and Incumbrancers Protected tliereby. Satisf actton may be made to appear either in the old way, by a legally executed and recorded deed of release or of reconveyance, or by an entry of the receipt of payment of the mortgage indebted- ness, on the mortgage or on the record of the mortgage, by the mortgagee.^ A statute has recently been enacted under which a release or partial release executed by the trustee before maturity of the note or indebtedness for which the deed of trust was given to secure shall be evidence of such payment or part payment and will protect subsequent purchasers or incum- brancers of the property to the same extent and with the same force as the release of any trust deed executed after the maturity of the said note or indebtedness.^ § 83. Same : By Entry of Receipt of Indebtedness on Mort- gage or Record of Mortgage — Equivalent to Deed of Release and Reconveyance, — Decree of Satisfaction of Debt may be Evidenced on Record; Recorded Satisfaction of Indebtedness not Conclusive and may be Rebutted— How. "It is the policy of legislation in this state to make record evidence of the payment of the debt equivalent to a release of the security, executed 1 Mills' Anno. Stat. Section 46g. ' Session Laws 1893, page 473. 97 § 83 HISTORY OF A COLORADO MORTGAGE. under the formalities prescribed by the law reg- ulating conveyances," and it is expressly so declared in Section 234 of the General Statutes.' " It is notice to the world of its release, having the same effect as notice by recorded reconveyance. " And a decree satisfying the debt may be recorded with the same effect.^ It seems, however, that recorded receipt and satisfaction, in compliance with the statute, is not conclusive evidence of payment or satisfaction of the note and does not invalidate a new mortgage entered into by the parties securing the identical note. The presumption of payment in such case arising from the record may be overcome by the produc- tion of the note, showing — in this particular case — payment of interest months after the date of its alleged payment.' The court decided here that the new mortgage was on record prior to the time of the subsequent conveyance to the purchasers by the mortgagor and that they were charged with notice that the property was covered by this in- cumbrance executed to secure the identical note; and were, therefore, in no sense innocent pur- chasers. > Mills' Anno. Stat, Section 469. ' Barth v. Deuel, 1 1 Colo, 495. Mills' Anno. Stat, Supra. • Smith V. Stark, 3 Colo. App. 453. 98 RIGHTS AND LIABILITIES OF PARTIES. § 84 § 84. Same: By Actual Satisfaction Not of Record; Bur- den of Proof upon Subsequent Purchaser to show — Simply Cloud upon Title,— Statute of Limitations does not apply to Remedy to Remove Cloud hy Mortgagor; Extensionof Time of Payment on former Trust Deeds after New Act, may be Enforced as formerly. Inasmuch as this convenient mode of canceling a mortgage, by indorsing payment in the margin of its record, has been created by the legislature, it ought to be taken advantage of to the utmost extent. An unpardonable practice is to allow securities to remain on record when the notes or bonds which they were given to secure have long been paid or canceled. Helm, C. J., remarks in a case that " though the notes were canceled, it was imprudent to permit the seeming cloud to remain of record."^ Such neglect often leads to much annoyance and may lead to serious consequences. A purchaser, under these conditions, is obligated to show that the debt for which the mortgage was given to secure has been paid or satisfied.^ The purchaser or incumbrancer should always see to it, as a precautionary measure, that either the mortgage deed is released or that the mortgage debt is canceled as of record. The cancellation of the paper evidencing the debt, may be erroneous or fraudulent. A good case in point is where the cestui que trust sent the note upon maturity to an ' 'out ' Armor v. Spalding', 14 Colo. 302. ' Smith V. Stark, 3 Colo. App. 453. 99 § 84 HISTORY OF A COLORADO MORTGAGE. of town" bank for collection. The clerk errone- ously canceled the same as having been fully paid when only a part payment had been made at the time. The grantor, or trustor, refused to allow the correction to be made. When the cestui que trust, or rather the trustee, sought to enforce the security, for the unpaid principal, a purchaser from the grantor set up the plea of estoppel by conduct. It so happened in this case that all the essential elements of estoppel were not present, and the purchaser became the sufferer by an adverse decision." Of course, cases of injury resalting from omission to cancel mortgages and to make record notice of it are rare, and third parties are generally affected by the omission. ' ' When the debt is fully paid the mortgage is defunct; it becomes null and void; it is "useless in the hands of the mortgagee for any purpose; and as long as it is unreleased upon the record, it remains a mere cloud upon the title of the mortgagor, to be removed, if necessary, in a proper proceeding for that purpose. " ^ The statute of limitations cannot be made to apply to the case in hand. "It is immaterial -whether the effect of the mortgage is to vest the legal title in the mortgagee, or to leave it in the mortgagor. In either case, when the debt is paid, the mortgage is, in equity, extinguished; and a reconveyance is necessary only for the purpose of making the record title of the mortgagor completed ' Griffith V. Wright, 6 Colo. 248. " Quinn v. Kellogg, 4 Colo. App. 158. ' The Italics are mine. 100 RIGHTS AND LIABILITIES OF PARTIES. § 84 We have no statute which limits the time within which a party in possession shall proceed to remove a cloud from his title, and as no lapse of time can restore vitality to a mortgage which has- been paid and extinguished, so no lapse of time will bar a mortgagor from proceeding to cause the fact of its extinguishment to appear upon the record." Therefore, a bill to cancel a mortgage which had been satisfied is not such a "bill of relief" as to bring it within Section 13 of the statute of limitations.^ Before proceeding to Part III, mention may be made of the fact that the new trust deed act does not affect in any way, form or manner, "the exten- sion of any indebtedness secured by deed of trust made, executed and recorded prior to the taking effect of this act, but such deed of trust so recorded may be foreclosed as therein provided, whether to secure the original indebtedness or an extension thereof."^ • Quinn v. Kellogg, 4 Colo. App. 158. '^ Session Laws 1894, Page 58, Section 16. 101 PART III. OF THE FORECLOSURE OF A MORTGAGE AND TRUSTEE'S SALE UNDER A TRUST DEED AND OF THE EQUITY OF REDEMPTION. § 85. Closing Era: Its Scope and Divisions; Foreclosure or Trustee's Sale Defined. Foreclosure, or its equivalent — trustee's sale, presents an anomaly in the history of our subject. Payment is the pre-resolved extinguishment of the mortgage; foreclosure, the alternative or enforced liquidation of the debt and mortgage. The former is the act of the mortgagor, while in the latter case, the mortgagee or trustee takes the initiative. Foreclosure, including trustee's sale, really, is a penalty, put into execution either according to the rules of law, or in obeyance to the terms of the agreement. If according to the latter, the terms must not contravene the declared law. Payment concluded the preceding book. Its counterpart yet remains; and it may be conve- niently discussed under the following heads: I. Foreclosure of a Mortgage and Trustee's Sale under a Deed of Trust; and II. Equity of Re- demption. 103 § 86 HISTORY OP A COLORADO MORTGAGE CHAPTEE I. OP PORECLOSURE AND TRUSTEE'S SALE § 86. Optional and Concurrent trith Action at Law on Indebtedness : Latter barred by Statute of Limita- tions does not bar Remedy under Security, — Refusal of Tender of Indebtedness bars Remedy under Security but not for Debt, — Action on Note postponed until Maturity nottrithstandingr Provi- sion of Immediate Maturity Upon Default contained in Mortgage alone,— In Mortgage by Absolute Deed reconveyance not necessary to Action on Debt. The mortgagee or cestui que trust may disregard the security, and the benefits arising from its enforcement, and bring a suit at law upon the indebtedness. The satisfaction of the judgment in such case would necessarily cancel the mortgage. But as long as the debt remains unpaid, the creditor has recourse to his security,^ even though the debt is barred by the statute of limitations — if the statute has not run against the mortgage.^ 1 Belford J. in Eyster v. Gaff, 2 Colo. 237. ' Longan v. Carpenter, (1870) i Colo. 214; reversed in 16 Wallace 271. 104 OP FORECLOSURE AND TRUSTEE'S SALE. § 86 The mortgagee will lose his remedy on the mort- gage and will be confined to his action on the debt, if he refuses a legal tender of the money due; the effect of such refusal is to discharge the land from the mortgage.^ A stipulation ' ' that in case of default in the pay- ment of the principal and interest, or any part of it, the whole of the principal sum secured by the trust deed shall or might become at once due, any- thing in the notes to the contrary notwithstanding, " contained in the trust deed alone, must be taken as determinative only of the rights of the parties with reference to the enforcement of the security, and not as determining the maturity of the note; and the liability of an indorser of commercial paper is to be measured solely by the note to which his name is afiixed, unless varied by some collateral agreement to which the makers were a party and which by necessary intendment became a part of the promise to pay.^ It is the debt which gives character to the mortgage and fixes the rights and remedies of the parties under it, and not the mortgage which determines the nature of the debt.* One who holds as security for the payment of an indebtedness a deed in form of an absolute convey- ance — in effect a mortgage, is not required to reconvey as a condition precedent to the recovery of judgment for the amount of the indebtedness.* 1 Ibid. ' Heisler v. Lyon, 4 Colo. App. 11. ■ Longan v. Carpenter, i Colo. 222, dissenting opinion by Hallett, C. J.; reversed in 16 Wallace 271, * Kingsbury v. Fisher, 4 Colo. App. 431. 105 § 87 HISTORY OF A COLORADO MORTGAGE. § 87. The Action, Bill and Snit of Foreclosure: Action of Foreclosurej Must conform to Code— Strict Fore- closure not permitted,— Situs of Land controls Place of, — Death of Mortgagee, personal represen- tative brings Action— Death of Mortgagor, mort- gagee or trustee may Foreclose at any time without Presentation and Allowance of Claim, — What Seenrities Subject to Action— Trust Deed (Waiver of Redemption therein not Noticed) — Trust Deed after New Act not naming Public Trustee as Trustee— Title Bond, when and when not. Foreclosure was an equitable proceeding under the practice before the code and it is so treated now, under the latter.^ In proceeding to foreclose, the declared practice must be followed. This is found in Sections 252 and 261 of the code,^ which in sub- stance provide that a mortgage cannot be foreclosed without a sale under a decree of foreclosure; Section 261 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 real property, without foreclosure and sale," excepting trust deeds with power of sale, and as a necessary intendment, the ' 'foreclosure and sale" referred to must be a fore closure and sale provided for in Section 252 of the code.^ Therefore, strict foreclosure, which gives the property after the period of redemption to the mortgagee, is not permitted in our state.* ' Denver B. & M. Co. v. McAllister, 6 Colo. 261. ' Civil Code of 1887. ' Nevin v. Lulu & White S. M. Co, 10 Colo. 357. * Ibid. 106 OF FORECLOSURE AND TRUSTEE'S SALE. § 87 The county in which the land or the greater portion thereof is situated, regulates the place where the action of foreclosure shall be brought.' Under ordinary conditions, the mortgagee, or his assignee, is the proper person to control mortgage proceedings. Upon his death, the right to file a bill of foreclosure devolves upon the personal representative, and not upon the devisee or legatee.^ Mortgagees or trustees may not foreclose prop- erty securing debts or claims against the estate by summary foreclosure under the instrument within one year from the death of the mortgagor if letters testamentary or of administration have issued within the year, unless by permission of the County Court, upon due presentation and allowance of the debt. Foreclosure by suit in equity may be had at any and all times without presentation and allowance, irre- spective of the death of debtor and the issuance or non-issuance of letters testamentary or of admin- istration. So, too, summary foreclosure under the instrument may be had without presentation and allowance where no letters issue within one year from the death of the debtor, and a reasonable construction of the statute would indicate that where letters issue within the year, summary foreclosure may be had without presentation and allowance, after the expiration of one year from the death of the debtor.' ' Smith V. The People, 2 Colo. App. 99. Civil Code, 1887, Section 25. « Buck et al v. Fisher et al. 2 Colo. 182. Dusing V. Nelson, 7 Colo. 184. ' Session Laws, 1895, Page 253. See Section 65 anie. 107 § 87 HISTORY OF A COLORADO MORTGAGE. The statute of non-claim does not apply to debts secured by mortgages or trust deeds.^ A com- pliance -with the statute, however, would not affect or prejudice the rights of the parties to enforce their security, if otherwise this privilege remains unimpaired.^ The next question that presents itself here is what securities, other than the regular mortgage, maybe made the subject of a bill of foreclosure? 1. It has been held that a bill of foreclosure may be filed to foreclose a trust deed. And where a trust deed is so treated, the decree of foreclosure is made to embody the right of redemption, thus superseding the usual stipulation contained therein waiving the equity of redemption. In such case the trustee is the proper party to control the fore- closure proceeding.' 2. According to the new trust deed act "any deed of trust that shall name any other person" than the public trustee ' 'as trustee therein, shall be deemed and taken to be a mortgage and fore- closed only as mortgages are now foreclosed in and through the courts. " * 3. What is the proper remedy to enforce a title > Reid et al. v. Sullivan, 20 Colo. 498. « Pershing v. Wolfe et al. (App.) 40 Pac. 858. » Denver B. & M. Co. v. McAllister, 6 Colo. 266. Henry v. Travelers Ins. Co, 16 Colo, 180. Barth v. Deuel, 1 1 Colo. 502 Pershing v. Wolfe et al, (App.) 40 Pac. 856. * Session Laws, 1894, page 50, Sec. i. 108 OF FORECLOSURE AND TRUSTEE'S SALE. § 87 bond?^ A title bond is an ordinary case of contract for the sale and conveyance of real estate, posses- sion having been taken, but the title withheld as security for the purchase money. ' ' The relation of the parties to this contract is analagous to that of equitable mortgagor and mortgagee, and there can be no doubt that a court of chancery has jurisdiction to relieve the vendor as vrell as the vendee. In a contract of this nature the lien which the vendor has is in the nature of a mortgage. " But the remedy given for default in payment under a title bond differs somewhat from that upon an equitable mortgage strictly ■ so denominated. The vendor is not entitled to the identical fore- closure given to a regular mortgagee under the code. In the latter case the remedy of the mort- gagee, after default, is by suit in equity upon the securities for the establishment of the lien and for a sale in case the mortgagor neglects to pay the principal, interest and costs, at a given day. Whereas in the former, under a title bond, the proper decree is "that the vendee pay the money due upon the contract in some time to be specified in the decree, or, in default thereof, that he be fore- closed of all equity of redemption in the premises." This, properly, assumes the title to be still in the vendor, and a regular foreclosure and sale would be of no avail in the premises, for there is really nothing to sell and a purchaser at the sale would obtain nothing.'' If the vendor conveys the title in obeyance to his title bond and the purchase money ' Section 4 ante. ' Todd et al v. Simonton, i Colo. 54; also 5 Wis. 598, cited herein. 109 § 87 HISTORY OF A COLORADO MORTGAGE. is still due, then his remedy might be the regular foreclosure, and sale provided in the code for mort- gages proper. The procedure referred to, under a title bond, practically amounts to a strict foreclosure, al- though the policy of our practice is to forbid strict foreclosure of a mortgage.^ § 88. Same: Bill of Foreclosure; Parties,— Mortgagor, Mortgagee and Subsequent Mortgagors of Record Necessary, — Prior Incumbrancers may be brought in, — Subsequent Incumbrancer not of Record not Necessary,— Adverse Claimant to Title Not— Joinder bad on Demurrer, — Bill need not be under Oath nor Signed by Plaintiff— Signature of Counsel suffl- cient,— Mortgagor bankrupt during trial Assignee substituted as Party. "The equitable doctrine may be considered thoroughly established, that the only necessary parties to a bill of foreclosure are the mortgagor, mortgagee and persons who have acquired rights or interests through them in the mortgaged premises; sometimes, also, prior incumbrancers may be brought in for the purpose of liquidating their demands. " ^ But persons holding a convey- ance from or under the mortgagor or of the property mortgaged, or having a lien thereon, which conveyance or lien does not appear of record at the time of the commencement of the 1 See Section 87 ante. ' Wells V. Francis et al, 7 Colo. 415. Smith V. Brunk, 14 Colo. 78. Fitch V. Stallings et al, (App.) 38 Pac. 393. 110 OF FORECLOSURE AND TRUSTEE'S SALE. § 88 action, need not be made parties to such action and their rights are concluded to the same extent as if they had been joined.' A person claiming adversely to the title mort- gaged should not be made a party to the foreclosure suit. The rights of such person cannot, except by consent, be litigated and settled in such a proceed- ing. A bill which undertakes to accomplish this, is bad on demurrer, for misjoinder and multifari- ousness.^ Where a second mortgagee, made a party to the foreclosure proceedings, files a cross-complaint, — in this case, setting up that his lien was superior and anterior to plaintiff's mortgage — it is error to dismiss the cross-complaint, for failure of the grounds on which it is based. The second mort- gagee is entitled thereon to relief against his co- defendant (mortgagor), and to have his own mort- gage adjudged a second lien upon the real estate in question and the surplus, if any, derived from the sale after satisfying the prior lien of plain- tiff, applied to the satisfaction of his owu claim.' A bill for foreclosure need not be put in under oath or signed by the complainant. The signa- ture of counsel furnishes sufficient authentica- tion.* If during the pendency of foreclosure proceed- ings an assignee in bankruptcy of the mortgagor is appointed, his position is deemed to be the same as that of any purchaser from or successor to the 1 Civil Code 1887, Section 252. ' Wells V. Francis et al, Supra. ' Porter v. Grady, (Sup.) 39 Pac. 1091. * Mills et ux. V. Angela, i Colo. 334. Ill § 88 HISTORY OF A COLORADO MORTGAGE. mortgagor, upon whom the title has fallen after the commencement of the suit. If there be reason for interposing, the assignee should have himself substituted for the bankrupt or be made a defen- dant on petition.^ §89 Same: Suit or Procedure: Account Taken — Amount on face of note Conclusive as to Assignee without Notice, — Sale Directed — Judgment for Deficiency- Error in Decree of Sale cured Wlien. Upon a bill of foreclosure being filed, an account is taken by the court to ascertain the amount due upon the instrument secured by the mort- gage. If the note has been assigned to a bona flde holder without notice of equities between mort- gagor and mortgagee, the amount due is that which appears on the face of the note and interest added. ^ The court is empowered then, "by its judgment, to direct the sale of the encumbered property, or as much as may be necessary, and the application of the proceeds of the sale to the payment of the costs of the court and expenses of the sale, and the amount due to the plaintiff; and if it appears from the sheriff's return that the proceeds are insuffi- cient and a balance still remains due, judgment shall be docketed for such balance against the defendant or defendants personally liable for the debt, and shall then become a lien on the real estate of such judgment debtor, as in other cases in which execution may be issued. " ' ' Eyster v. Gaff, 2 Colo. 523; approved in 91 U. S. 521. ' Carpenter v. Longan, 16 Wallace 271. • Civil Code, 1887, Section 252. 112 OF FORECLOSURE AND TRUSTEE'S SALE. § 90 Where the premises foreclosed are fully and correctly described in. the bill of foreclosure, master's report, certificate of sale, deed and in the final decree, an error in the interlocutory decree ordering the sale of the premises — in the de- scription of the premises under a videlicet, after referring to the property "as mentioned in com- plainant's bill," is not fatal.^ The subject of sale under a decree of foreclosure will be considered in conjunction with trustee's sale under a trust deed, to follow." § 90. Proceedings Under Trust Deed Upon Default : Before and After New Act discussed together; Trustee and Beneflciar;f must act within Reasonable Time, — Beneficiary must notify Public Trustee of Default and Election, — Where Two or more Trustees all must Act, — Duties of Public Trus- tee, — In Notice of Sale only Seasonable Certainty required,— Trustee Tiolatingr Trust Conditions conveys Legal Title only — Observance of Same essential to pass Equitable Title in Trustor— Semedies where Trustee violates Trust Conditions. The new trust deed act, approved March 5th, 1894, entirely revolutionizes the effect of a trust deed executed after this event. It has been shorn of all its salient advantages to the cestui que trust and now stands practically upon an equal footing with the regular mortgage. One of its objects is to take away from the contracting parties the freedom of chosing as trustee one who is their own confident, and substitutes for him a creature ' Thompson v. Crocker, i8 Colo. 328. ' Section 91 et seq. post. ' 113 § 90 HISTORY OF A COLORADO MORTGAGE. of the law — a complete stranger to the parties. It gives, among other things, to the grantor the right to redeem the property from the trustee's sale, within six months thereafter, by paying the selling price and interest at the rate of eight per cent per annum, instead of ten per cent as under a regular mortgage.' As there are still a large number of trust deeds in existence that derive their force and effect under the old law, and in view of the additional fact that the adjudicated law upon trust deeds under the old law applies, with but few exceptions, to the new, we will retain the trust deed executed prior to the recent enactment as the proper subject for discussion, and make such deductions as the pro- visions of the new act may seem to require. The exercise of the trust powers contained in a trust deed to sell the property after due advertise- ment, cutting off all equity of redemption, undoubt edly is the exact legal equivalent of the foreclosure of a mortgage at common law." And it may be added that now, by virtue of the new act, it is its equitable equivalent also. The new law makes provision for but one public trustee. But when the grant is to two or more trustees — under former trust deeds — all must join in the execution of the trust; a sale by one only is void.' The general rule is that no particular form of notice of sale under a trust deed is required by law. It is sufficient if the description of the land ^ Session Laws i8g4, Page 50. ' Fisk V. Cathcart, 3 Colo. App. 378. • Loveland v. Clark, 11 Colo. 265. 114 OP FORECLOSURE AND TRUSTEE'S SALE. § 90 is reasonably certain, so as to inform the public of the property to be sold. Reasonable certainty is all that is required; and where the terms of the power to sell is general, "to sell and dispose of said property," a failure to advertise the laud in parcels will not invalidate the sale.' Section five of the recent trust deed act provides that "all deeds of trust shall prescribe a period of advertising notice of sale, weekly, in some newspaper of gen- eral circulation which publication shall not in any case be for less than four weeks." ^ The grant in a trust deed to the trustee vests in him the legal title to the estate, and it is within his power to convey or divest himself of this estate — the legal title. Such is the effect, invariably, where he conveys failing to comply with the pro- visions contained in the deed of trust, as well as when he disregards the trust conditions in toto. The legal title being in him, how and where does he acquire the right to dispose of trustor's equitable title? The object of the "power of sale" in a trust deed is not to enable him to convey the legal title already vested in him, but to clothe the trustee with authority to sell and convey the equi- table title remaining in the trustor. The right to exercise this power is dependent upon his posses sion of the legal title. So that whenever the trustee, in disobedience to trust conditions, by deed transfers the title to the property, his grantee takes only the former's interest, to wit, the legal ' Loveland v. Clark, ii Colo. 272. ^ Session Laws 1894, page 53. 115 § 90 HISTORY OF A COLORADO MORTGAGE. title. Courts of law, and courts of equity, do not regard this deed executed to the grantee or pur- chaser as spurious and void; the difference in the attitude of the two courts, respectively, is that at law, the grantee's title cannot be challenged, while equity treats him merely as a successor to the trust and protects the trustor's estate.^ Our Supreme Court has announced a similar doc- trine touching deeds executed by trustees holding title to town sites under government patent in dis- regard of the conditions of the trust. ^ How do the parties extricate themselves from the peculiar situation that the law regards them in when the eifect of the trustee's deed is to convey the legal title only to the grantee or purchaser? The court indicates three modes of relief: 1. The cumulative remedy of a regular judicial fore- closure and sale; which would practically amount to a resale, though this time by the purchaser or grantee as trustee by succession — for, upon deliv- ery of his deed, the original trustee ceases both at law and in equity to have any further interest in the property. 2. A decree requiring the grantee or purchaser to execute the power in accordance with the terms of the trust deed as the trustee should have done. 3. A decree devolving upon a new trustee appointed for that purpose the execu- tion of the power. ^ ' Wells V. Caywood, 3 Colo. 487. Stephens v. Clay, 17 Colo. 489. '^ Smith V. Pipe, 3 Colo. 187. Filmore v. Reithman, 6 Colo. 120. Murray v. Hobson, 10 Colo. 66. ' Stephens v. Clay, 17 Colo. 489. 116 OF FORECLOSURE AND TRUSTEE'S SALE. § 90 According to the new trust deed act, the cestui que trust, or his assignee, must notify the public trustee, m writing, whenever he desires to enforce the security, for conditions broken. The public trustee is empowered then to ' 'advertise the prem- ises named in such deed for sale in accordance with the terms of sale specified in such deed, and there- upon the trustee shall securely paste such notice of election and a printed copy of the notice of sale in a book to be kept by him for that purpose, which book shall be open to the inspection of the public at all reasonable hours. The trustee shall mail a copy of the printed notice, to the grantor and all subsequent encumbrances'"- (encumbrancers) "at the address given in the trust deed without extra charge."^ The trustee and beneficiary must use reasonable diligence to enforce the security, or they will be barred by laches. They are allowed a reasonable time after default of a term in the agreement. What "reasonable time" is depends upon the cir- cumstances in each case. For instance, in cases involving the title to mines, where the property has been developed and its value established by the enterprise of others, "courts will look with disfavor upon the claims of those who have lain idle while awaiting the results of this develop- ment, " and will require a prompt assertion of rights ' The italics are mine. • Session Laws 1894, Page 52, Section 4. 117 § 90 HISTORY OP A COLORADO MORTGAGE. guaranteed in such agreement on the part of those interested.' " Reasonable time" begins to run from the period of default, and not from the time the principal of the bonds or notes falls due.^ § 91. Sales Under Decree of Foreclosure And Trust Deed: Discretion of Court to fix time of Foreclosure Sale; Where no Equity of Redemption Ninety Days Allowed by Court before Sale,— Court may arrest Trustee's Sale, — Person interested may Intervene if Proceedings in Bad Faith— Inter- Tenor's Interest must he Directly afiected. Sales under a decree of foreclosure and sales under a trust deed are so intimately connected in their effect that it is deemed wise to consider them conjointly. In ordering the sale of the mortgaged premises in foreclosure proceedings, it is within the discre- tion of the court to fix the time within which the amount found due shall be paid before the order for the sale takes effect; and the equities of the cases furnish the proper guide for such a discre- tionary period.'' This does not apply to decrees ordering the sale of land where the legislature has made no provision for redemption. In these cases equity follows the law, and the rule is that the time in which payment is to be made should in no ' Brown v. Wilson et al, (Sup.) 40 Pac. 688. » Ibid. • Denver B. & M. Co. v. McAllister, 6 Colo. 361. 118 OF FORECLOSURE AND TRUSTEE'S SALE. § 92 case be limited to a shorter period than ninety- days, the lifetime of an execution at law.^ The court may, in the exercise of its equity dis- cretion, arrest a trustee's sale for a short space of time." A person owning an interest in the property sought to be subjected to sale may intervene for the protection of such interest when it is shown that the mortgagee or trustee is not acting in good faith or that the litigation is being conducted upon a false and fraudulent basis prejudicial to his rights. What the interest must be to entitle a person to intervene has been variantly expressed. It is aptly stated to be "an interest in the matter in litigation and of such a direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment. " ' § 92. Same: Conductors of Sale; Must Observe Powers in Decree or Instrument,— Technical Variance not Prejudicial,— Where Power Greneral, Discretion to sell in Bulk or Parcels, — Must subject Parcel of Mortgagor, then other Parcels InTersed accord- ing to dates of Alienation,— Marshaling Assets applies to Sales under Securities^Junior Mort- gagor notify Senior to make Election; Duties of Public Trustee. "When according to the terms of a trust deed the trustee is empowered 1io sell the property at the ' Packard v. King, 3 Colo. 311. " Nippel V. Hammond, 4 Colo. 211. ' Henry v. Travelers Insurance Co. 16 Colo. 179. 119 § 92 HISTORY OP A COLORADO MORTGAGE. front door of the court house, a sale fairly made at a door of a building on the side named and in full view of every other door on that side, although not at the door leading to the court room, is suffi- cient. ' Where the power authorizes the trustee "to sell and dispose of said premises," it leaves to him the exercise of a sound discretion to sell the lands either as a whole or in parcels; and the failure to advertise the land in parcels will not invalidate the sale. Something has already been said, in the preced- ing Part, upon the rule of subjecting, first, the remaining portion in the hands of the mortgagor, and then the aliened parcels of the estate in the inverse order of their alienation, to the satisfac- tion of the mortgage debt on foreclosure.^ It may be added that this doctrine applies equally to cases where the mortgagor has mortgaged or given thereon mortgages at different dates subsequent to the senior mortgage.^ This follows the rule in the majority of states. Closely related to the foregoing principle, is the doctrine of marshaling assets, sometimes called the doctrine of substitution. Under it, a mortgagee having two funds out of which to satisfy his demands shall not in equity, by his election, dis- appoint a party with equal equity who has only one fund. ^ Martin v. Barth, 4 Colo. App. 346. ^ Section 67, ante. Stephens v. Clay, 17 Colo. 489. Fassett at al. v. Mulock, 5 Colo. 466. ' Fassett et al. v. Mulock, 5 Colo. 466. 120 OF FORECLOSURE AND TRUSTEE'S SALE. § 92 The assertion of the principle is not affected by the nature of the property that constitutes the double fund; it may be either real or personal property. But as a collateral fund the latter is generally regarded an imperfect one. It is pecul- iarly liable to loss or dissipation, and largely at the mercy of the debtor. A mortgagee of real property would take it as a contingent, not as a certain security. In such case, he is not accounta- ble as for a perfect security, even after notice by the junior mortgagee. Otherwise, it would be substituting the junior to the first and not to the second fund before the prior encumbrancer had been put in default. The rights of the junior creditor to the admin- istration of the principle are ordinarily enforced by a decree of subrogation. He cannot administer this right himself.^ The prior incurmbrancer is entitled to notice of the junior claim and of the intention of the junior mortgagee to compel the former to make his elec- tion. While the effect of notice is to make the prior encumbrancer responsible for any affirmative or collusive acts on his part which directly result in the loss of the fund to the prejudice of the junior, "it would not impose upon the senior any additional care or expense touching the preserva- tion of the second fund. Gross negligence will not charge him; it would not be mala fides; but only ' Ross V. Duggan et al. 5 Colo. 85. Fassett et al v. Mulock, 5 Colo. 466. 121 § 92 HISTORY OF A COLORADO MORTGAGE. evidence of it. His negligence must be wanton; it must amount to constructive fraud. He must be a wilful party to the dissipation or loss of the fund."i Subsequent encumbrancers are entitled to have the surplus, if any, derived from the sale, after satisfying the prior lien, applied towards the sat- isfaction of their claims.^ Whenever the public trustee, under the new act, makes a sale, he is commanded to "enter in a book to be kept by him for that purpose, a record of the name of the person or persons, executing such deed of trust, the date thereof, a brief description of the property therein described, the date of the sale," etc., and "to give to the purchaser or pur- chasers of such lands and tenements a certificate in writing, describing the lands and tenements purchased and the sum paid therefor and the time when the purchaser shall be entitled to a deed for such lands and tenements;" "such trustee shall within ten days from the date of such sale, file for record in the office of the recorder of the county where said lands and tenements are situate, a duplicate of such certificate signed by him, and such certificate or certified copy thereof, shall be taken and deemed evidence of the facts therein con- tained. " ^ ' Ross v. Duggan et al, 5 Colo. 81;. ^ Porter v. Grady, (Sup.) 39 Pac. 1091. Fitch 7/. Stallings et al, (App.) 38 Pac. 393. « Session Laws, 1894, Page 53, Section 6. 122 OF FORECLOSURE AND TRUSTEE'S SALE. § 93 § 93. Same: Purchasers at Sale; Mortgagee and Cestui Que Trust may Purchase,— As to whether Trustee may or may not,— CaTeat Emptor applifs to Pur- chasers,- Charged with laches of Trustee and Beneficiary, — Purchaser protected by Record of Trust Deed— Record of Sherifl"'s Deed relates hack to Record of Certificate. Who may purchase at the sale? In macy states there is an inhibition upon the cestui que trust, mortgagee and trustee to buy or bid in the prop- erty. The reasons upon which this rule of law is founded are self-evident and need not be annun- ciated here. In Colorado, there seems to be nothing to pre- vent the mortgagee or beneficiary, acting in good faith, from exercising this right, whether the power is expressed in the trust deed or not, though it is usually inserted.' As to whether a trustee may purchase at his own sale or not, the rule is laid down in an early case that "only in the ab- sence of an express agreement, the law will not permit a trustee to become either directly or indi- rectly a purchaser at bis own sale. Where the right to purchase is clearly conferred by the instrument appointing him, the law imposes no impediment to the validity of a sale so made."* It seems, however, in a later case, a sale conducted by the trustee where the latter bid in the property by virtue of a power of attorney held by him for that • Loveland v. Clark, ii Colo. 265. Wells V. Caywood, 3 Colo. 487. Dusing V. Nelson, 7 Colo. 184. ^ Wells V. Caywood, Supra. 123 § 93 HISTORY OF A COLORADO MORTGAGE. purpose from the executors of the cestui que trust, ' was sustained as good and valid. ^ The purchaser at the sheriff's sale is bound at his peril to inquire -whether it sufficiently appears on the face of the record that the court had jurisdic- tion in the premises. Whatever hard ship this rule of law entails upon the purchaser, it cannot be made the ground for equitable relief.^ The doctrine of caveat emptor applies to trustee's sales. The purchaser, whether he be the beneficiary or a stranger, is, in proceedings by a party injured, conclusively charged with notice of irregularities by the trustee in executing the powers of sale.^ So, too, is the purchaser charged with the laches of trustee and beneficiary — and the dangers conse- quent thereon, entailed by them upon the property in failing to promptly assert their rights and in removing clouds to and from the same.* The sale of the property under a recorded trust deed is notice to one acquiring the same property by quit-claim from the delinquent grantor, although the trustee's deed of sale to the purchaser is not yet recorded.'' The recording of the t7~ust deed gives and remains notice of its existence to subse- quent claimants of the equity of redemption, and points out the source of information of what might be done in pursuance thereto. The sale, or subse- quent proceedings, simply follows out the provisions contained in the deed, upon the happening of a > Dusing V. Nelson, 7 Colo. 184. ' Union Iron Wks. v. Bassick M. Co. 10 Colo. 24. ' Stephens v. Clay, 17 Colo. 489. * Brown v. Wilson et al, (Sup.) 40 Pac. 688. ' Bradford v. Carpenter, 13 Colo. 30. 124 OF FORECLOSURE AND TRUSTEE'S SALE. § 94 contingency, and constitutes record notice thereof to purchasers from trustor.^ In an execution sale, it has been held that the recording of the sheriff's certificate of sale has the effect of a recorded deed ; the subsequent recording of the sheriff's deed to the purchaser upon the expiration of the period allowed for redemption, simply relates back to the record of the certificate of sale.^ § 94. Same: Purchasers at Sale; May have Ejectment- Actions prescribed by Code,— Forcible Entry and Detainer, — In Ejectment at common lai? Caveat Emptor does not apply to Purchaser at Trustee's Sale— Production of Mortgage Alone Necessary to sustain Ejectment (2). The purchaser, having procured his certificate or deed from the trustee, sheriff or master in chan- cery, may maintain ejectment, in order to get possession of the property.^ The action and procedure in such cases is pre- scribed .by the code. Section 265* provides: ' 'An action to recover the possession of real property may be brought in any case where an ejectment or a tvrit of right might have been brought at common law,^ and in any case where the plaintiff claims a legal estate in real property or lands, in fee, or for life, or for years, or claims the legal ' Bradford v. Carpenter, 13 Colo. 30. ' McMurtrie v. Riddell, 9 Colo. 497. " Wells V. Caywood, 3 Colo. 487. Eyster v. Gaff, 228 Colo.; approved in 91 U. S. 523. * Civil Code of 1887. ' The italics are mine. 125 § 94 HISTORY OP A COLORADO MORTGAGE. right to occupy and possess the same; Provided, however, In all actions relating to the possession of real estate, those of forcible entry or unlawful detainer shall be deemed and held concurrent remedies herewith," etc. The right of possession to real property acquired by virtue of foreclosure and trustee's sales is specially brought within the application of the remedy of forcible entry and detainer.^ With the enactment of the Civil Code of Proced- ure in 1877, Colorado ceased to be a common law state. The adjudicated law upon the remedy for the recovery of possession of real estate, i. e. the writ of ejectment, existing prior to that time, is retained here and may tend to illumine the applica- tion of remedies existing under the code. In order to entitle a purchaser at trustee's sale to maintain ejectment, it does not devolve upon him to show that his grantor, the trustee, has complied with the conditions prescribed in the trust. We have said supra' that the doctrine of caveat emptor applies to purchasers at trustee's sales; but this burden rests upon them in equity only — as, in an action to cancel the trustee's deed to purchaser brought by a party injured. If a trustee — the legal title already being in him by virtue of the trust deed — under a power in a deed of trust makes a conveyance of the premises without complying with the trust provisions in the trust deed, the legal estate nevertheless passes to the pur- chaser, and the deed to him cannot be impeached 1 Mills' Anno. Stat. Sect. 1973, Paragraphs 5 and 6. ' Page 124. 126 OP FORECLOSURE AND TRUSTEE'S SALE. § 94 by defendant in ejectment for trust violations. It is a proper subject of inquiry in a court of equity. A legal, though a defeasible, title was by the trust deed vested in the purchaser.' It was held by the territorial Supreme Court of Colorado that the production of the mortgage alone by the purchaser, is sufficient to sustain his action in ejectment against the mortgagor.^ This was assigned as one of the errors on an appeal to the United States Supreme Court, but the federal court, in approving the same, rests its decision upon another ground.* A lengthy dissenting opinion was rendered in the territorial court, in which the above proposi- tion was controverted. It is here contended, first, that inasmuch as the laws of Colorado give to a mortgage the effect of an equitable lien only, and not that of conveying a legal title; and, second, that a decree of foreclosure and sale of the mort- gaged premises merges and extinguishes the lien; that, therefore, the mortgage, as evidence of title, is no longer available as a foundation upon which an action in ejectment may be maintained. The opinion lays down further propositions not directly in the case, but pertinent to the subject, to wit: 1. "That a mortgagee does not divest himself of the right to maintain an action of eject- ment by filing a bill to foreclose, procuring an order of sale, and accepting the sheriff's deed for the premises; if the sheriff's sale is valid, the " Wells V. Cay wood, 3 Colo. 487. ' Eyster v. Ga£E et al, 2 Colo. 225. • Eyster v. Gaffet al, 2 Colo. 225; 91 U. S. 523. 127 § 94 HISTORY OF A COLORADO MORTGAGE. mortgagee, having become the purchaser, has a right to recover by virtue of the purchase and con- veyance." 2. "That the title acquired by the sale is carried back, by relation, to the date of the exe- cution of the mortgage;" "that in an action of ejectment for the recovery of mortgaged premises against the mortgagor, or one entering under him subsequent to the date of the mortgage, the plaintiff need not trace his title back of the mort- gage." ' § 95. Same: Cancellation of Purchaser's Deed of Pur- chase; Same Kules Apply as in other Conveyances; Sheriff or Conductor of Sale may be made Party; Inadequacy of Price— Difficult of proof— Must shock Conscience of Chancellor— Market Price determines Talue. It may occur here, as it does in other forms of contract, that the sheriff's deed, or rather the pur- chaser's deed of purchase, does not express the agreement of the parties. The rules of reforma- tion and cancellation in other contracts apply to the case in hand. So, where a trustee's deed of sale recited that the purchaser, being the highest bidder, ' ' bid for the tract first hereinafter men- tioned the sum of $50," and the same deed then conveyed, in consideration of $50, several distinct tracts — all the land covered by the trust deed, it was held, that as against a grantee from the grantor in the trust deed, with knowledge of the latter and constructive notice of the proceedings under it, the purchaser could show that all the ^ Dissenting opinion of Belford, J, in Eyster v. Gaff, 3 Colo. 234. 128 OP FORECLOSURE AND TRUSTEE'S SALE. § 95 tracts were bid for, and that by mistake the scrivener allowed the word ' 'first " to remain when it should have been stricken out.' In an action against the purchaser for the cancellation of the sheriff's deed, the sheriff who made the sale and executed the deed may, upon application by the plaintiff, at the discretion of the court, be made a party to the suit, and the pur- chaser cannot be heard to complain.' The resolution of the question of inadequacy of price, upon which an action to cancel may be based, "is sometimes very difficult, for the reason that the authorities on the subject are exceedingly scarce, and the cases are very rare in which courts have set aside sales of this sort because the con- sideration paid was inadequate. The basis of the rule is well understood, and all the decisions on the subject are gathered in works of equity under the general head of constructive fraud. The gen- eral doctrine is, that where there are no other inequitable incidents which furnish a basis for the decree, it will not be entered because the price is inadeqiiate, unless the case very clearly demon- strates that the difference between the value of the property and the price that it brought is such as to shock the judgment and conscience of the chan- cellor." "In ordinary cases, the market price of property in any vicinity, and the use to which it may be put, very easily determines the value.'" ' Bradford v. Carpenter, 13 Colo. 30. ' Colorado Mfg. Co. v. McDonald, 15 Colo. 516. » Martin z/. Barth, 4 Colo. App. 346; see also Loveland v. Clark, II Colo. 265. 129 96 HISTORY OP A COLORADO MORTGAGE. § 96. Same; Purchaser May Enforce CoTenaiits Running with Land. The right, by succession, to enforce covenants running with the land, extends to purchasers at sales under legal process properly running against the estate.^ ' Fisk V. Cathcart et al, 3 Colo. App. 377. Hayes et al. v. N. Y. Mining Co. of Colo, 2 Colo. 273. 130 OF THE EQUITY OF REDEMPTION. CHAPTER II. OF THE EQUITY OF REDEMPTION. § 97. Statutory: Redemption Six Months After Sale on Payment of Purcliase Money and 10 per cent interest Added— Executor or Administrator may Redeem by Order of Court, — Under Trust Deed Act, Grantor Redeem within Six Montlis on Pay- ment of Purcliase Money, 8 per cent interest Added — Judgment Creditors, Nine Months, — Redemption allowed only from Executions on Judgments not- on Decrees, unless declared by Statute— Sale under Decree, Ninety Days allowed for Payment. The right to redeem foreclosed premises marks the closing chapter of our subject, and with a cursory examination of it, the somewhat protracted History of a Colorado Real Estate Mortgage is concluded. The statutory authority for and the manner in which the equity of redemption in the case of sales of mortgaged landvS shall be exercised, may be found in section 2556 of Mills' Anno- tated Statutes; which provides that "it shall be lawful for the mortgagor of such lands, his heirs, executors or administrators, to redeem the 131 § 97 HISTORY OP A COLORADO MORTGAGE. same in the manner prescribed in this act for the redemption of lands sold by virtue of executions issued upon judgments at common law," to wit: redemption within six months after sale, by paying to the purchaser thereof, or his successors, etc., or to the sheriff or other officer who sold the same for the benefit of such purchaser, the money paid on the purchase of the land, together with interest thereon at ten per cent from the time of such sale, upon whose payment the sale and the certificate thereupon granted shall be null and void.' The section following, in this act,^ provides for the certificate evidencing such redemption, its filing and recording, etc. In case of the death of the mortgagor, — and this probably applies to the trustor under the new act — • it is specially provided that if the decedent shall not have devised the encumbered lands or shall not have provided by will for the redemption thereof, the County Court is given power, if it shall ap- pear to be to the interest of the heirs, legatees and creditors, to order the executor or admin- istrator to redeem the same.^ Under the new trust deed act, redemption from . trustee's sales is now permitted in all cases of trust deeds executed subsequent to the date of the enact- ment of the said law; and the grantor, within six months from the sale by the public trustee, may redeem the lands and tenements, by paying to the trustee the purchase price, together with in- terest at eight per cent, from the time of such sale, ' Mills' Anno. Statutes, Section 2547. ^ Section 2448. » Mills' Anno. Statutes, Section 4775. 132 OF THE EQUITY OF REDEMPTION. § 97 when, upon rendering a certificate of redemption to the grantor, the sale and the certificate thereof shall become null and void. Provision is also made in this act for redemption by subsequent incumbrancers and by judgment creditors. The sum paid by the subsequent incum- brancer to the trustee, for redemption, "shall be added to the sum represented in the subsequent encumbrance held by the person so redeeming and shall be deemed to be secured thereby, and shall bear interest at the rate of eight per cent per annum." But nothing shall prevent the grantor from redeeming the lands within six months from the date of sale, "and he may pay the trustee in the same manner as though the holder of the sub- sequent encumbrance had made no redemption thereof, the redemption money to be paid to the person formerly redeeming the same with the accrued interest thereon. " ^ Judgment creditors, after the expiration of six months, and at any time before the expiration of nine months from the sale, may redeem the premises by complying with the requirements set out in sections 9 and 10 of the act. Where the land has been re- deemed by a subsequent incumbrancer, the judgment creditor "shall be required to pay in redeeming the same, the sum for which said prem- ises were sold, together with the amount of such subsequent encumbrance, which aggregate may be paid to the trustee selling the same, and his ' Session Laws 1894, Page 54, Section 7. 133 § 97 HISTORY OV A COLORADO MORTGAGE release shall operate as a cancellation of such sub- sequent encumbrance." The redemption statutes,^ excepting, of course, redemption from trustee's sales under the new trust deed law, confine the right of redemption to exe- cution sales by virtue of judgments at common law, and not to decrees in equity for the sale of land. There is one exception, however, — decrees in equity for the foreclosure of lands, which is specially de- clared by statute.^ "Why there should not be a right of redemption provided in the case of sales under a decree as in the case of sales under a judgment, is difficult to see; but our statute pro- vides for redemption only where real estate is sold under a decree of foreclosure. In other cases the right does not exist."' The decree in the citation given was upon a partition suit in equity. In decrees for the sale of land where there is no equity of redemption, the time allowed for the payment of the debt before the order of sale goes into effect should be governed in a degree by the amount to be paid, but in no case should the time limited be less than ninety days, the lifetime of an execution at law.' 1 Mills' Anno. Stat, Sections 2547 and 2556. ' Mills' Anno. Stat, Section 2556. * Packard v. King, 3 Colo. 215. '* Clear Creek, etc. Min. Co. v. Root, i Colo. 374. Packard z/. King, 4 Colo. 2r I ; compare with this decision 4 Colo. 220 and 6 Colo. 265. 134 OF THE EQUITY OF REDEMPTION. § 98 § 98. Cancellation of Purchaser's Certificate of Sale and Execution and Record of Certificate of RedemptioK upon Payment, not Mandatory: Enacted for Pro- tection of Rederaptioner; Simple payment of money to Proper Person nullifies Salf,— Redemp- ■ tioner charged with Notice of Want of Juris- diction of Court, — After period of Redemption , Public Trustee issue Deed upon Demand. While section 2557 ' contemplates the cancella- tion of the certificate of sale of the purchaser, and directs the execution of a certificate of redemption and its recording, these subsequent statutory pro- visions were enacted apparently for the protection, of the redemptioner as against third parties or in- nocent purchasers, "and to provide a way to furnish him with complete and satisfactory evi- dence of the release of his title from the burden and the cloud of the sale." But the payment of the money to the proper person for redemption, with the intention to redeem, and the receipt of it without objection, alone serves to accomplish the full purpose of the statute — to nullify and abrogate the sale, notwithstanding that the sheriff has subse- quently executed an absolute deed to the purchaser. "^ As in the case of the purchaser at sheriff's sale, so, too, the party redeeming is bound at his peril to inquire whether it sufficiently appears ou the face of the record that the court had juris- diction.^ ' Mills' Anno. Statutes. 2 Colorado Mfg. Co. v. McDonald, 15 Colo. 516. » Union Iron Wks. v. Bassick Min. Co. et al. 10 Colo. 24. - \ \ ' 1^< ' f 135 § 98 HISTORY OP A COLORADO MORTGAGE. The public trustee, under the new act, shall, upon demand by the person holding the certificate of purchase, ' 'when said demand is made and time for redemption has expired, make and execute to him a deed of the lands and tenements sold, which deed shall be in form as is provided in the trust deed granting the power to make such sale." ' § 99. Statute of Limitations: Possession and Title Seren Years bars KecoTery. Possession of seven years based upon a title at law or equity precludes an action for the recov- ery of property; where title is acquired after possession taken, the limitation runs from the time of acquiring title. ^ ' Session Laws 1894, Page 57, Section 13. ' Session Laws 1893, Page 328, Sections 4 and 5. 136 NDEX, The References are to Sections. Absolute Deed Made for Security— a mortgage, 29. agreement to reconvey title essential, 28. does not require re-homesteading, 11. reconveyance, in writing, 29; substitute for defeasance clause in mort- gage; must be executed and delivered with deed; loss of, may be supplied by parol evidence, 32. reconveyance, in parol, 30; at variance with common law and statute of frauds; history of doctrine in Colorado; policy, making effect of deed depend upon intention of parties, instead of form; declared by statute; does not impair rule of evidence that terms of contract cannot be varied; a resulting trust; must be repudiated to set statute of limitations in motion; approved against existing creditors, kind, quality and quantity of proof to establish, 31; beyond "reason- able doubt" not necessary; clear, certain, unequivocal and trustworthy sufficient; documentary, circumstantial andparol; where evidence conflicts, preponderance not sufficient; dependent upon circumstances— illustrations; death of grantor may affect, does not affect innocent purchasers, 32; in case of loss of written recon- veyance—first prove loss; exception to rule of purpose of consideration clause, 33. reconveyance by deed not necessary to recover judgment on debt, 86. Acceptance— essential to execution. 46; completes delivery; possession and record, prima facie evidence of; record by grantor without consent not evidence of; signature of grantee not essential to; question of intention, 47— proved by acts, declarations and circumstances— not lightly inferred when burden imposed. Accessions— See After-acquired Property. Accident or mistake — See Mistake. Accounting-- upon filing bill of foreclosure, 89. Acknowledgment- See Notary. to validity of instrument, not necessary, 42; nor to record, 43; statute does not neg-ative common law. a means of proving execution and authenticating record, 43; prima facie evidence of proper execution, additional attestation does not affect, 43. unacknowledged deed may be subsequently acknowledged, 42. Action— See Foreclosure, Foreclosure by Equitable Suit, Pendente Lite. entry of judgment, end of, 24; writ of error, new. replevin and equitable, for recovery of instrument, 76. Actual Notice — See Notice. Administrator— See Executor. Adverse Claimants — in proceedings under Acts of Congress protected against purchasers pendente lite, 24. not parties to foreclosure suit, except by consent, 88. Adverse Possession— See Possession. After-acquired Property— by mortgagor, inures to mortgagee, 62; subordinate to mechanics* lien when, 23, 62. After-acquired Title— by grantor with warranty without title, inures to grantee, 71, 77; mast be absolute title. 138 INDEX. Agent— See Power to Mortgage, Power of Attorney, Attorney. loan and trust companies, of lender, 18; charged with negligence to lender; estopped from attacking validity of security, "agent" to signature, descriptio personae, 41, 56; prima facie, may be rebutted by parol. Agreement — judgment not an, 36, 72. between lessor and lessee to make real property, personal, 21. Agreement to Reconvey— See Absolute Deed Made for Security, Reconveyance. Alien— note of, secured by mortgage on local property, not taxable, 60. Ambiguity— See Mistake. Assignee— of bankrupt mortgagor takes property with notice pendente lite, 24, 88; may be substituted as party in foreclosure suit. Assignment— does not destroy mutuality of error of original parties, 53. of mortgage, assignee takes free of equities, 74, 89; not charged with notice pendente lite, unless litigants have recorded notice, 24; equitable assignment of mortgagee's interest, by estoppel, 64; assignee con rols foreclosure suit, 87. of bond, entitled to record, 49. of note, by transfer — equitable, 74; underdue, raises presumption of want of notice; amount in note, prima facie evidence of debt, on foreclosure, 74, 89. Attacliment- See Levy and Execution, Creditor. Attestation— not necessary to validity of deed, 42; in unacknowledged deed obviates necessity of calling witnesses— subsequent acknowl- edgment will obviate. Attorney— See Power of Attorney. Power to Mortgage, Agent. fees on foreclosure not authorized in decree "to mortgage," 15. Bankruptcy- assignee in, of mortgagor, charged with notice pendente lite, 24. Bill— See Complaint, Foreclosure by Equitable Suit. Bond for Reconveyance— See Absolute Deed Made for Security, Reconveyance, Agreement to Reconvey. Building— See Improvements, Mechanic's Lien. removal of, written permission from mortgagee, etc., 62. Burden of Proof— See Evidence. upon holder of unrecorded deed against recorded deed, claiming priority or discharge, 20, 21; upon one claiming absolute deed a mortgage, 30 et seq. Cancellation and Reformation— See Void and Voidable Mortgages, Fraud, Mistake. courts of equity have jurisdiction over actions for, 34. 52, 78. actions for, of satisfied mortgage, not a "bill for relief," 84. grounds for actions ot, mistake, fraud and want of consideration, 34, 78; proof, clear, preponderance not sufficient, 34. mistake, to warrant reformation— must be mutual, 53; must be in expression, not intention, 57; plaintiff offer to do equity, 78. fraud, duress, 6; insanity, 6, 14; minors and others, 14; plaintiff need not offer to do equity, 78; misapplication of money secured not ground for, 78. inadequacy of price, 95; alone not conclusive to warrant; must shock conscience; market price determines, trustee's deed to purchaser, violation of trust must be shown, 94. parties to an action for, persons interested or affected by, 80; to cancel, mortgage, mortgagor and mortgagee; trust deed— trustor, trustee and cestui que trust; trustee not necessary in action to cancel note; brought by heir, all heirs joined; wife securing husband for purchase money; rules apply to cross-complaint, decree of, matter for record, 80. payment of debt or judgment for debt operates as, of security, 81, 85, 98; mortgagor may have papers canceled payment of redemption money operates as, of certificate of purchaser, 98; execution ot redemption certificate not mandatory. Capacity of Parties to Mortgage -general, 6; master and servant, 6; married woman, 7etseq.; corporations, 13; minors, 14; insane, 6, 14; executors without power and administrators, 15; pre-emptor before final proof, 16; agents, 18; attorneys. INDEX. 139 Caveat Emptor— applies to purchasers at foreclosure and trustee's sales. 93; to redemptions, 98. Certificate or Purchase, of Bede inp tic n— public trustee authorized to execute, 92. of purchase, record of deed relates back to record of certificate, 93; cancellation ot, by redemptioner not mandatory, 98. of redemption, execution not mandatory, 98; statute enacted for protection of redemptioner. Cestui Que Trust— See Mortgagor. mayconvey his interest, 74; may have action on debt— concurrent and optional with foreclosure, 86; recourse to security, if debt barred, 86; may purchase at trustee's sale, 93; may have action to annul release of trustee, when, 81; rig^hts prejudiced by new act, 90; consent of, necessary to remove improvements, 62. subsequent, entitled to notice of sale from public trustee, 90; may redeem, 97. duties of, use reasonable diligence to enforce security, 90; filing debt on death of trustor, when and when not, 65, 87, —see Death; debt not within statue of non-claim, 65— compliance will not affect remedy of foreclosure ; on default, must notify public trustee in writing, 90; refusal of tender ol debt, discharges property of lien, 86; confined to action on debt;. purchaser charged witn negligenc ■ of, 93. party, to foreclosure of mechanic's lien, when, 73; to action to rescind, 80. Chose in Action— trust deed construed, 5. Colorado— importance of citing' local cases, 2 page, litigation in, on land securities, normal, 1. orifi^in of law of land securities, in Illinois, 2. foreign corporations may do business in, 13. Complaint— See Foreclosure by Equitable Suit. rules ot, apply to cross-complaint, 80; necessary party omitted in, joined in cross-complaint; cross-bill in equity equivalent to cross- complaint; dismissal of cross-complaint of subsequent mortgagee, error, 87. Compound Interest— See Interest. Computation of Interest— See Interest. Condition in Mortgage— See Defeasance. Consideration— purpose ot clause in instrument, to prevent resulting trust and to estop denial of execution, 33— defeasance in mortgage obviates contradiction with rule; recitals, prima facie evidence against grantor, 34— mav be explained or rebutted by parol proof, love and affection sufficient, if not in fraud of creditors, 35— not con- clusive fraud; wife uniting husband in mortgage as his surety liable, although absence of, 7. debt, part of, in promise to pay, 69; risks and responsibilities of mortgage part of, in promise to indemnify, 69. forbearance to foreclose, reduction of debt, extension of payment, constitute, 69. inadequate or absence of, instrument set aside, 34; proof, clearest, most satisfactory and indubitable, where fraud, not restored, 6, 79. Constitution— prohibits special laws to mortgage minor's etc. estate, 14. Construction- of local laws same as in place where taken from, 2. homestead act, liberal, 10; joint tenancy, construed tenancy in com- mon, 17. ConstFuctiie Notire— See Notice. Conveyance— See Deed, Title Deed, Absolute Conveyance Made for Security. mortgage construed a, 3, 38; mortgage and trust deed held not a, within pre-emption law, 38. minors holding property by, provisions of deed control mortgage of same, 14. of homestead, who must join in, 12; property reconveyed by deed must be re-homesteaded, 11. Corporate Property— of foreign corporation, may be mortgaged, 13. 140 INDEX. Corporation— capacity of, to mortgage, 13; foreign, may; statute discrim- inates in favor of local creditors; mortgage of foreign creditor on local corporateproperty.postponeduntillocal claims satisfied —exception, telegraph and railroad companies; may avoid local creditors by notice to encumber, by publication; statute construed— whether local creditors must be citizens. officers and directors, executing mortgage erroneously in individual names, may have reformation, 41. Co-tenants— presumption that shares of, are equal, 17. Counsel Fees- See Attorney. County— record of mortgage, where land situate, 49; foreclosure, same, 87 Courts of Equity -See Equity Courts, Jurisdiction. Covenant — running with land, purchasers at sales may enforce, 96. for payment of mortgage debt, contained in mortgage, 37; production of mortgage prima facie evidence of debt, 37, 76. against incumbrances, 68; broken immediately; does not run with land; breach of, rare. for quiet enjoyment and warranty of title, 71; runs with land; measure of recovery upon breach: after-acquired title by grantor in breach, inures to grantee, 72. 77— must be absolute title, 71. for promise to pay and to indemnify, in mortgage, 69, 70; see Promise,Etc. Creditor — See Judgment Creditor. local, has priority over foreign creditor of foreign corporation, 13. attaching, without notice of imrecorded deed, protected same as purchaser, 36. mortgage by absolute deed and parol reconveyance, approved against existing, 30; love and affection sufficient consideration as against, 35; mortgage kept from record considerable time void, as against, 51. existing as well as subsequent, protected by statute of frauds, 51. divorced wife a creditor, 51. Cross-bill— See Complaint. Damages— interest upon default must be for, not for penalty, 36. Death— of grantor, mortgagor or trustee; executor, heir, devisee, legatee, etc., suing or defending. 31; secured claims not within statute or non- claim, 65, 87— compliance does not prejudice remedy to enforce security. of mortgagor, mortgagee may foreclose in equity at any time as if mortgagor were living, 65, 87, 97; executor and administrator may redeem, 97. of trustor, trustee's sale under trust deed forbidden within one year, except by order of court, 65, 87, 97; exceptions, where letters do not issue within one year— may be enforced ad libitum after one year-^ may be enforced by foreclosure suit in equity at any time without restrictions; security not impaired by suspension of remedy: reasons for enactment of above statute, 65; executors and administrators may redeem, 97. of trustee, generally, provision in trust deed for successor, 66. of mortgagee or cestui que trust, interest passes to personal represen- tative, 66, 87; is personal property; proper person to control enforcement of security; may accept payment upon maturity, 97. Debt— See Note, Consideration. Interest. gives character to mortgage securing it. 86; of non-resident secured by local property not taxable, 60; follows creditor's domicile; debt principal thing, mortgage incidental to— depends on latter for existence. agreement to pay, in mortgage itself, 37, 76; production of instrument prima facie evidence of debt, without note, if any. agreement to pay. in note or bond, 37; note evidence of amount of ; mortgage evidence of lien; each accordingly determines rights of parties. executors and administrators may mortgage, to pay. etc.. 15. promise to pay mortgage debt, mortgagor not liable for, as against grantee, 69; but liable to mortgagee, in absence of agreement, 70; promise is to pay, when due— if due, within reasonable time. promise to indemnify for, property secured primary fund to satisfy; grantee not personally liable, when, 69. INDEX. 141 reduction or extension of, constitutes consideration, 70. payment of, extinguishes mortgage, 81; title reverts to mortgagor, 38 ; extension of, secured by former trust deeds, not within new act, 84; refusal of tender, mortgagee forfeits remedy under security, 86' subsequent incumbrancer claiming satisfaction of, burden of prcrof to show. 20; recorded instrument, remains notice after maturity, 22, enforcement of, secured by incumbrance, concurrent and optional with enforcement of security, 86; not within statute of non-claim, 65; statute applying to presentation and allowance, 65, 87— see Death; local, have priority over foreign creditors, 13; action for debt, secured by absolute deed, reconveyance not necessary, 86. mortgagor or trustor's interest subject to levy for, 64— mortgagee may levy on mortgagor's interest for separate debt, 64— does not con- stitute waiver or estoppel of foreclosure for secured debt. Decree—to mortgage, does not authorize execution of trust deed, 15; nor stipulation for attorney's fees, upon foreclosure. annulling mortgage, may be recorded, 80. Deed— See Title Deed, Conveyance, Absolute Deed Made for Security, Certificate, of Sale— of Redemption. when husband and wife must join in, 12. of reconveyance, 29— see Reconveyance. of purchaser, at foreclosure or trustee's sale; by public trustee, execute on demand, 98; record of, relates back to record of certificate, 93; unrecorded, protected by record of trust deed, 22; cannot be impeached in ejectment, 94; simple payment by redemptioner annuls subsequently executed, 98. loss of. 32, 76. Deed of Trust— See Mortgage, Power of Sale in Trust Deeds, Trustor, Cestui Que Trust, Trustee. construed a mortgage with power of sale, 4, 5; a lien, 5, 64; chose in action, 5; not a "grant or conveyance" within pre-emption law, but so generally, 38; effect of, materially changed by new act, 90; executed after new act, not naming public trustee, a mortgage, 87. "decree to mortgage," does not include, 15; executed in violation of power, a mortgage, 15, 19. rights of parties under, not exact equivalent to rights of mortgagor and and mortgagee, 5; husband may not encumber homestead without wife's consent, 12; note of non-resident secured by local property, not taxable, 60; written jiermission to remove improvements from land, 62; interest of cestui que trust not subject to levy, 64; entitled to lecord, 49; of record, prior to mechanic's lien, 73— where not recorded, subordinate to; of record, remains notice after maturity, 22— after trustee's sale, though trustee's deed not recorded, 22, 93. trust and power of sale in, 38; inerted in violation of authority, en- forced as a mortgage, 15, 19; defaulting clause in deed, does not apply to note, 39, 86; general provision in, for successor of trustee disabled. 66. enforcement of, 90; secured debt not within statute of non-claim, 65; provisions for filing debt on death of trustor— see Death ; extension of debt secured by former trust deeds, not within new act, 84; executed after, not naming public trustee, foreclosed in equity, 87; any trust deed may be foreclosed in equity. equity of redemption, under new act, 5, 40, 97; waived formerly, 5, 40; see Equity of Redemption. action to annul, 80; see Cancellation and Reformation. Default— written notice of, to public trustee, by cestui que trust, 90. clause of immediate maturity upon, in mortgage alone, determines enforcement of security, 39, 86; liability on note postponed to maturity. clause of, in note, not part of contract, 36; interest therefor must be compensation for loss, not ijenalty. Defeas-ince- effect of, defeats title in mortgagee, 38. may be separate, in writing or parol, 29, 30; in writing, executed and delivered together, 29— loss of, contract proved lay parol, 32. Deficiency— on foreclosure, judgment entered for, 89 — lien on other property of mortgagor ; action for, on note postponed to maturity, when, 39. Delirery- essential to valid mortgage, 46; matter of intention, 47— proved 142 INDEX. by acts, circumstances, declarations and circumstances— not lightly in- ferred where burden imposed; acceptance completes, 46; by grantor cures fraudulent signature, 41; possession and record prima facie evidence of, 46; wife may testify to, of deed to husband, 47. of deed of reconveyanfce, must be simultaneous with deed. 29 Deposit of Title Deeds, 28. Description— -'agent" added to signature, descriptio personje, 41, 56,— may be rebutted by parol; officers and directors of corporation signing, instead of corporate name, may have reformation, 41— parol evi- dence to explain, admissible, 53, 54; "trustee" added to signature more than descriptio personae, 54. in notice of sale, reasonable certainty required, 90; error in, in order of sale, not fatal, 89. Destruction — See Loss. Devisee— does not control foreclosure, upon death of mortgagee, 87. minor as, 14; suing or defending, evidence, 31. Disability— insanity, 6; minors and others under, 14. Disbursements— decree to mortgage does not authorize stipulation for attorney's fee, on foreclosure, 15. Discharge- See Payment, Cancellation, Etc., Promise to Pay, to Indemnify. subsequent incumbrancer claiming, burden of proof to show, 20. agreement to, by mortgagee, acceptance and delivery of deed alone sufficient to charge, 46. Duress, 6, 45. Duties— of intending parties to mortgage. 20, et seq. E£fect-of deed conveying land, dependent upon intention of parties, not upon form, 30. of absolute deed and parol agreement to reconvey, a mortgage, 29 et seq. of moitgage, a lien, 3; of trust deed, a lien. 5; of consideration clause, a resulting trust and to estop grantee to deny deed, 3^ Hjectment— mortgagee may not maintain, 61— may after foreclosure sale, if purchaser, 81, 94,— production of mortgage alone sufficient, 94; purchasers at foreclosure and trustee's sales may maintain, 94. actions of, prescribed by code, 94; plaintiff^in. need not trace title back of incumbrance — title acquired at sale" relates back to execution of incumbrance; not required to show compliance with trust in trust deed; trustee's deed to purchaser cannot be impeached in. Election— notice of, by subsequent incumbrancer to mortgagee having two funds, 92. to declare trust deed in default and sell, cestui que trust notify public trustee, in writing, 90. Enforcement of Mortgage— See Foreclosure Sale, Trustee's Sale. according to equity, 38. Entry and Possession — mortgagee or cestui que trust no right of, before foreclosure, 3. Equitable Mort . age— See Absolute Deed Made for Security. kinds of, 28 et seq. Equitable Theory of Mortgage— in Colorado, 3; declared by statute, 3, 30 et seq. Equitable Title Under Trust Deed in grantor, 38; defeated by proper exercise of power of sale and trust, 38, 74, 90. Equity— See Equity Courts. enforcement of mortgage in, 38; mandatory, 3, 38, 87. Equity Courts— protect weak, 6; history of equitable mortgage doctrine, 30, 31; responsible for equity of redemption, 38. jurisdiction to cancel or reform instruments, 34, 52, 79; for recovery of instrument, where replevin inadequate, 76. Equity of Redemption— courts of equity responsible for, 38 — waiver of, contrary to fundamental principles of law, 40; declared by statute, 97— confined to execution on judgments— exceptions; subject to levy and execution, 64; executors and administrators may exercise, by order of court, 97; redemptioner charged with notice of want of jurisdiction, 98. from foreclosure sale, same as from execution sales upon judgment, 97; payment of purchase money and 10 per cent, interest, 90, 97; six months after sale; under trust deed, foreclosed in equity, embodies, 87, 97. INDEX. 143 Irom trustee's sale, under new act, mandatory, 5, 40, 90— waiver allowed previous to; payment of purchase money and 8 per cent, interest. 90, 97— payment to public trustee, 97; by grantor, six months al- lowed, 90, 97; by judgment creditor, nine months after sale, 97; by subsequent incumbrancers, 97— money paid covered by subsequent incumorance, against iudgment creditors, not against grantor beyond money paid, certificate of redemption, provisions for, 97; public trustee issue; enacted far protection of redemptioner, 98. certificate of purchase, simple payment cancels, 98. in default of, public trustee execute deed, on demand, 98. Estoppel— levy by mortgagee for separate debt, does not constitute, to foreclosure, 64; by conduct, may make mortgagee's interest subject to levy. 64. of agent, from attacking validity of security negotiated by him. 18. purpose of consideration clause, to prevent grantor denying execu- tion, 83. when payment constitutes, 84. Evidence- See Burden of Proof. law of, of situs, controls in the determination of questions of title, 59; rules of, modified bv married woman acts, to accomplish their purpose, 47. to prove loss and contents of lost and destroyed instruments, 32, 76. to prove absolute deed a mortgage, 30; kind, quantity and quantum, 31. recitals of. in deed, prima facie, of consideration, 34; production of mortgage containing debt, of indebtedness, 37, 76; officers of corporations signing as, and not in corporate name, individual act, 41; may have reformation; "agent" added to signature, 41, 55, 56— individual deed; may be rebutted by parol; of proper execu- tion — acknowledgment, 42; of delivery and acceptance— record and possession of deed, 46. parol, direct trust cannot be established by, 55; may be introduced to cure latent ambiguity, but not patent ambiguity, 54; to explain description; to correct error of scrivener, 53. quality of, to impeach notary's certificate, 45; to cancel deed, for fraud, mistake and want of consideration, 35. burden of proof, upon subsequent incumbrancer claiming dis- charge, 20; payment not of record, upon claimant, 84. of identity oi acknowledger to notary, when and when not neces- sary, 44. of acceptance, acts, declarations and circumstances, 47; record without consent of grantee, does not constitute, 46. of title, land office receiver's receipt constitutes, 11, 49. "trustee" added to signature constitutes written, 55; more than descrip- tio personse. attested instrument without record or acknowledgment may be read in, 42. where executor, administrator, heir, devisee or legatee sues or de- fends, 31. Execution— See Levy and Execution. Execution of Mortgage — See Form of Mortgage, Mortgage, Trust Deed, Signature, Acknov/ledgment. Delivery, Acceptance, Etc. as at law, enforcement in equity, 38; place of, controls validity, 59; must be in good faith, 51; absolute deed and reconveyance must be executed together, 29; decree to mortgage, does not include trust deed, 15, 19; general power for, does not authorize mortgage in favor of third parties, 19. parties to, 6 et seq.; delivery and acceptance essential to, 46; signature of grantee, seal, attestation, acknowledgment and record not essen- tial to valid. 41, 42, 43. Execution Sale — See Levy and Execution. any interest, before levy made specific upon, subject to homestead, 11. redemption confined to, on judgments, 97. Executor Without Power and Administrator — may mortgage to pay debts, etc. 15; decree to mortgage, does not authorize execution of trust deed, etc.; misappropriation of money secured by, 78; action to annul trust deed of, successor of, not party, 80. 144 INDEX. may accept payment and execute release, 81. control foreclosure proceedings, 65, 66, 87; filing claim for presentation and allowance, see Death; may redeem property, by order of court 97; suing and defending, evidence, 31. ' grant to two or more, joint tenancy, 17. Extension of Secured Debt— constitutes consideration, 70; when and when not within statute of frauds; trust deed executed before new act, excepted from its operation, 84. Filing— of transcript of judgment, to constitute lien, alone necessary 25; indexing and recording not. of secured claims, for presentation and allowance, see Death. Fixtures— on building, mechanic's lien extends to, 94. Forcible Entry and Detainer— purchase at foreclosure or trustee's sale may have action of, 94. Foreclosure- See Foreclosure by Equitable Suit, Foreclosure Sale Trustee's Sale. of mortgage, defined, 85; mandatory to recover possession, 3, 38, 61, 87; equitable proceeding under the code, 87; foreclosure without de- cree and sale forbidden. of trust d?ed, summary, under instrument, 38, 87, 90 et seq.; exercise of trust powers of sale legal equivalent of, at common law, 90. of title bond, 87; enforced by strict foreclosure of, except where title passed. of mechanic's lien, parties to, 73. forbearance of, constitutes consideration, 70. refusal of tender, incumbrancer loses remedy of, confined to debt. 86; land discharged of morigage. estoppel, mortgagee's levy for separate debt on security, does not constitute, or waiver of, 64; secured demands not within statute of non-claim, 65— compliance with does not constitute, to foreclosure. in case of death of party, 65, 66; presentation and allowance of demand, and when and when not necessary; see Death. concurrent and optional with action on debt, 86; debt barred by limita- tion, does not bar remedy upon security. action for deficiency on note — postponed to maturity, when, 39. mortgagee paying prior incumbrance entitled to reimbursement on, 63, 81. roreclosure by Equitable Suit — See Foreclosure. county where land situate, venue, 87. control of, by mortgagee or assignee. 87; upon death of mortgagee, personal representative, 66, 87 ; death ot mortgagor, does not require presentation and allowance of debt, 65, 87. trust deed, subject to, 87; trustee proper party to control; embodies equity of redemption; trust deed after new act naming other than public trustee. title bond, subject to, where title has passed out of vendor, 87; ordinarily by strict foreclosure, 87. bill of, parties to— mortgagor, mortgagee, assignees of, and subsequent incumbrancers of record, 88; prior incumorancers may be brought in; adverse claimants not, except by consent; mortgagor bankrupt during, assignee may be substituted as party; bill need not be under oath— counsel's signature sufficient, error, to dismiss cross- bill of subsequent mortgagee. note need not be produced where mortgage recites indebtedness, 76. account taken to ascertain debt, 89; where assigned, amount in note evidence of debt. order of sale, 89; judgment for deficiency — lien on other property; technical error in, in description, not fatal. See Foreclosure Sale, i>ost. Foreclosure "VVithout Sale, Strict Foreclosure — not permitted, 87; exception, title bond. Foreclosure Sale— See Foreclosure by Equitable Suit, Foreclosure, Trustee's Sale. of mortgage, mandatory, 3, 38. 87; exception, title bond, 87. within discretion of court to fix time of, before order goes into effect, 91. order or power to sell, general, seller may exercise discretion, to sell, in bulk or in parcels, 92; party interested may intervene, 91. rule of inverse order of alienation applies to, 67, 92; doctrine of substi- INDEX. 145 tution applies to, 92— see Marshaling: Assets, purchasers at, 93, 94, 95; caveat emptor applies to, 93; charged with notice of want of jurisdiction. 93; title acquired by, relates back to date of execution of mortgage, 94; see Purchasers. See Equity of Redemption, Foreign Corporation— See Corporation. Form— of mortgage, 27 et seq.; no particular form required, 27; policy of law disregards, and looks to intention ot parties, 30; kinds of, 27 et seq.; parties, 6 et seq.; consideration, 33 et seq.; defeasance, 38; default- mg, 39, 86; equity of redemption clause, 40; signature, 41; seal, 42; attestation; acknowledgment, 43 — in mortgage of homestead, 12; covenant in, to pay debt, 37. Fraud — courts of equity cancel instruments executed by, 84, 78; conveyance in, of creditors, 51— of divorced wife; consideration not restored, 6, 78. love and affection, not conclusive of, as against creditors, 35; fraudulent signature cured by acknowledgment and delivery, 41; notary's certificate impeached for, 45. principal charged, with, of agent negotiating security, 18. statute of, does not apply to absolute deed and parol reconveyance, 30; not in fraud of creditors; not legal fraud, but question of fact- Orantor— See Trustor, Mortgagor. Ouaranty— See Surety. Guardian — may petition, to mortgage estate of minors and others under disability, 14. Heir— suing and defending for deceased, evidence, 31; action to rescind, all heirs joined, 80. Homestead— act, purpose of, 8; enacted in accordance with Constitution; liberal construction, 10; meaning of "his recorded title" in— last acquired title, 11; wife construed "head of family" when title in her, 9; proceeding under, 10. husband may not, without wife's consent, 12; wife without husband's consent, 9; includes trust deeds, 12. wife may homestead, 9 ; mortgage of, by wife, join husband, judgment lien not made specific on land suoject to, 11 — superior as against creditors ; any interest subject to levy, subject to, 11. form of acknowledgment in mortgage of, 12; notary state knowledge of identity, conveyance and reconveyance of, must be re-homesteaded, 11 — con- veyance must be absolute; preemptor must re-homestead after final proof, 11; duplicate receipt of land office receiver, "evidence of title"— homestead entry made on. Husband— wife may mortgage to, 7; removal of disabilities of. inures to; wife adjoin him in mortgage of her homestead, 9; may testify to deliv- ery of deed, 47; creditor of, after divorce, 51— may set aside trust deed previously executed; not necessary party to action to annul security by husband, when wife surety, 80. love and affection sufficient consideration, when, 35. join wife in mortgage of hoirestead, 12. Illinois— origin of Colorado laws of real property, in, 2, 30; adopted same construction, 2. Improvements — property of minors, etc., mortgaged to make, 14. removal of, written permission from incumbrancer, 62. mechanic's lien extends to, 23; Hens upon, see Mechanic's Lien. Incompetent Persons— See Disability, Minors, Etc. Incumbrances, Covenant Acainst— See Covenants. Indemnity— See Promise to Pay and Promise to Indemnify Indexing— transcript of judgment not entitled to, 25; instruments entitled, strictly enumerated. Indorsement— See Note. Infancy— See Minors, Etc. Innocent Purchaser Without Xotice — See Purchaser. Insane, 6; property of, may be mortgaged, 14. Intention of Parties— effect of, deed, dependent upon, 30; acceptance matter of, 47. equity will reform instrument to conform to, 52; mistake in, fatal, 57. 146 INDEX. Interest — in property, of incompetent person, may be mortg;ae'ed, 14. legal rate of, 8 per cent, in absence of agreement, 36; judgment fixings higher rate, erroneous; no usury law in Colorado, on default, must be compensation for use of money, not penalty, 36 v rate stipulated prima facie value of use; rebutted by going rate; defaulting clause in note, not part of contract; defaulting clause in mortgage does not apply to note, when, S9. compound, prohibited, 36; interest upon interest upon maturity; inter- est included in principal drawing interest; exceptions, interest included in principal after maturity — defendant delinquent in duty, on purchase money, for redemption. 97. Inverse Order— parcels alienated by mortgagor or trustor, subject to incum- brance in, after mortgagor or trustor's parcel exhausted, 67; may be modified in deed. Joint Mortgagrees — presumption of law that shares are equal, 17; joint tenancy construed tenancy in common, in absence of agreement. Joint Tenancy— not recognized, unless expressly declared 17; construed tenancy in common; exceptions, grants to executors and trustees, presumption of law is that shares in, are equal, 17. Joint Trustees— joint tenancy 17; all must act. Judgment— not an agreement, 36; entry of, end of suit, 2i— incumbrances- between entry and writ of error, not pendente lite, transcript of, filed, 25; need not be indexed and recorded, 25; lien not made specific upon property, must yield to homestead entered in meantime, 11. satisfaction of, for secured debt, cancels security, 86. for deficiency, on foreclosure, 89. Judgment Creditor— may levy on mortgagor's interest, 64; subject to m Ttgage lien; may redeem from trustee's sale, 97. Jurisdiction— See Courts of Equity. district court has, over mortgage of minor's, etc., property, 14, purchaser at sales and redemptioner charged with notice of want of, 93,, 98. Xand Grant — by Congressional Acts, 26 ; Dunmeyer decision. Law of Place— of execution controls validity of contract, 59. law of Situs— controls determination of questions of title, 59; rules of evidence of, same, licase- may be homesteaded, 11; executors and administrators may. Id. liCgal Title— passes to mortgagee, 3, 38; to trustee, in trust deed, 38, 90— may transfer by deed, 74, 90; incumbrancer may protect, 62. liegatee- does not control foreclosure, 87; suing and defending, evidence, 31. lessee— agreement with lessor charges incumbrancer, when, 21, 72. levy and Execution— hens not subject to, 64; mortgagor's interest subject to, 64; formerly also mortgagee's interest— estoppel may operate to- make; interest must be a vested interest; element of possession must be present, mortgagee may make, upon security, for separate debt, 64. lien— See Mechanic's Lien. mortgage and trust deed, in effect, a, 3, 5, 38. judgment, not made specific upon property, subordinate to homesteaa entry in meantime, 11; on other property of mortgagor, tor defi- ciency, on foreclosure, 89. record of security, constructive notice of, on property, 48. not subject to levy, 64; not founded on property. limitations. Statute of-debt barred, does not bar remedy on security it not also barred, 86. ,. on u i «■ repudiation necessary, to set in motion, in resulting trust, 30— absolute deed and parol reconveyance, resulting trust, does not cover action to remove cloud, 84. possession based upon title, seven years, precludes recovery, 99; title acquired after possession, time runs from title. lis Pendens— See Pendente Lite. litigation— on land securities, normal, 1; parties to, may record notice pendente lite, 24. , , . -.o utt loan and Trust Companies— prime facie, agent of lender, IX; may snin, charged with negligence and fraud— of servants; estopped from attack- ing security negotiated by them, INDEX 147 Lobs— of instrument proved by introduction of evidence of contents, 32, 76; of recorded instrument, certified copy of record prima facie, of con- tents, 76. of bond of reconveyance, parol evidence of contents admissible, 32. remedy to recover instrument found, 76. ntarrled Woman— See Wife. disabilities) removed by Marrried Woman Acts, 7; common law rules of evidence modified to accomplish purpose, 47; inures to benefit of husband, 7. may mortgage as if feme sole, to husband and strangers, 7; may be- come surety for husband's debt, 7; treated as principal, if she unites with husband in mortgage, by separate acknowledgement, may mortgage homestead, 12; form of acknowledgment, see Homestead. Margliaiing; Assets— mortgagees having two funds, shall not disappoint party with one, 92; entitled to notice of election; negligence, wanton, to charge, with loss of fund. Master ana Servant— duress, 6; principal charged with negligence, etc., of servant, 18. Mechanic's I/ien— subsequent incumbrancer may pay ofi, 63, 81. lienor seeking priority, trustor, cestui que trust and trustee, mort- gagor and mortgagee, parties, 73. does not impair incumbrance recorded prior to signing contract or commencement of work, 23, 73; superior to prior unrecorded incumbrance, 73; on building, subordinate to mortgage on same; on land, subordinate to incumbrance on same, when, relates back to commencement of work, 23; where contract in writing, extends to, lands necessary for convenient use of improvement, 23; whole land, where indivisable; machinery and fixtures; different and greater interest of owner acquired subsequently; any assign- able mterest of owner to land under building or improvement, construed an incumbrance, 63. Merger — parties to a mortgage conveying to third parties, or to each other constitutes, 77; rule not inflexible. of after-acquired title, by grantor in breach of warranty, in gran- tee, 77. upon foreclosure, lien merged, 94. Mining Claims— adverse proceedings under Acts of Congress not within statute pendente lite, 24. title to, must be asserted within reasonable time, 90. Minors— and others under disability, 14; protected by Constitution from special mortgages, 14. realty of, may be mortgaged, when personalty insufficient for main- tenance and education of, 14; where realty can be improved and made productive; district co rt has jurisdiction; application by petition by parent and infant; term of mortgage not exceed minority; where will or conveyance, mortgage must not be contrary to. executors and administratois may accept payment of mortgage for, 81, Misappropriation— of money obtained in return for security, 78. MistaKe — in expression curable, in intention, not, 57. courts of equity have jurisdicton to cancel and reform instruments, for, 34, 52; will supply omitted words, 53; must be mutual to warrant reformation, 53; assignment does not destroy mutuality, latent ambiguity may be cured by parol, patent may not, 54; where parties are reversed, 53; parol evidence admissible to show identity of description, 54; by scrivener, 53, 95; notary's certificate im- peached for concurrent, 45; signatures descriptio personae, cured by parol, 41, 55, 56,— "trustee" more than descriptio personae, 55. Mortgage— See Deed of Trust, Title Bond, Absolute Deed Made FOR Security. effect of, a lien, 3, 38, 64, 74; evidence of lien, and determines rights under same, 37, 74; incident of debt it secures, 60, 74,— depends on existence of debt; transfer of note, assignment of security, 74; absence of agreement to restore title, incompatible with theory of mortgage, 28. duties olintending parties to a, 20 et seq. form of, 27, et seq.; executed according to law, enforced in equity, 38; 148 INDEX. validity of, determined by place of execution, 59— questions of title, by place of situs; parties to, 6 et seq; signing: by mortgagee, seal, 42. attestation, acknowledgment, 43, and record, 48, not necessary, 46, to validity of; keeping from record for a considerable may in- validate, 50. trust deed, title bond construed a, 4, 5, 87; trust deed, after new act, not naming public trustee, declared a, 87. decree to, does not authorize trust deed, 15, 19. not a grant or conveyance within pre-emption acts, 38; but at law. prior, unrecorded, subordinate to mechanic's lien, 73. recovery of instrument, by replevin and equitable action, 76. payment of debt, extinguishes, 81; satisfaction of judgment for debt, same, 86. See Mortgagee, Mortgagor. Mortgage With Power of Sale— See Deed of Trust trust deed construed a, 5. not authorized in decree or power to mortgage, 15. Mortgagee- See Cestui Que Trust. intending must make diligent inquiry about clear title, 21; rights in occupancy will charge, 21; oral agreement between grantor and lessee, when, 21, 72; transcript of judgment on file, 25— indexing and recording not necessary by statute; pendente lite, not charged with, unless recorded notice of, 24. signature to mortgage, by, not necessary, 41, 46; record by mortgagor, without consent of, does not constitute evidence of acceptance by, 46. legal title in, 3, 38; may protect legal title 62; may have action for waste. no right of entry in, before or after condition broken, 3, 61; but upon foreclosure and sale, 38, 93, — may have ejectment, if purchaser, 94; may not maintain trespass or ejectment, 61; note, property of, and follows domicile, 60; not taxable at situs of security. entitled to improvements put upon mortgaged property, 62; yields to mechanic's lien; entitled to written n Aict of removal of ; may levy on security for separate debt, 64; may convey his interest, 64— to mortgagor or stranger constitutes merger, 77- see Merger; with two fimds entitled to notice of election, 92 — see Marshaling Assets. interest of, not subject to levy, 64; but formerly; may become subject, by estoppel by conduct. necessary party to cancellation of mortgage, SO; to foreclosure of me- chanic's lien, when, 73. death of, interest passes to personal representative, 66; executor or administrator may accept payment, 81. subsequent, may pay off prior encumbrance and mechanic's lien, 63, 81- entitled to reimbursement; protected by statute, 82; prior un recorded mortgage valid against, with notice, 48; claiming payment of same, burden of proof upon claimant, 84. action on debt concurrent and optional with foreclosure. may purchase at foreclosure sale, 93. See Foreclosure, Payment. Mortgagor— See Mortgage, Mortgagee, Trustor, covenant, against encumbrances, in presenti — broken immediately, 68; for quiet enjoyment and warranty, 71; See Covenants. record by, without consent of mortgagee, not acceptance, 46. liens put upon property by, 73— seeMechanic'sLien; interest of, subject to levy, 64. may homestead, 11; may convey, 67— grantee takes equity of redemp- tion—see Inverse; deed containing promise to pay or prom- ise to indemnify, distinguished, 69, 70,— in former, as to mort- gagor, grantee principal— as to mortgagee, b.ith principal debtors, 70 — see Promise to Pay and etc.; parties conveying to each other or to stranger, merger, 77; equities between, and mortgagee, 74. payment of debt by, title reverts to, 38; entitled to nave papers can- celed, 81; payment unrecorded, burden of proof upon, to show, 84. necessary party to action to rescind, 80; to foreclose mechanic's lien, when, 73; bankruptcy of, assignee may be substituted, 24, 88. statute of limitations does not apply to removal of cloud by, 84. INDEX. 149 redemption allowed to, within six months after sale, 97. See Equity of Redemption. Negligence— of agent negotiating security; of servants of, 18. to enforce security, 90; in allowing discharged security to remain on record, 84; purchasers at sale charged with, of trustee and bene- ficiary, 93. New Trust Deed Act, 40, 84, 90, 92, 97. Non-claim, Statute of— does not apply to secured demands, 65 ; see Death. Notary— See Acknowledgment. proof of identity of acknowledger unnecessary, 44 — exception; state- ment of same unnecessary, except in mortgage or conveyance of homestead; form prescribed by statute. certificate of, impeached for fraud, duress, mistake, 45; proof essential to. defective signature, cured by full name in certificate and commission, 45. Note— See Debt. evidence of amount of debt, 37; rights and liabilities thereunder de- termined by, not by mortgage; property of mortgagee 60; of non- resident mortgagee, not taxable; defaulting clause not part of con- tract, 36. assignment of, carries mortgage with it, 74; existing equities between mortgagor and mortgagee; of overdue and non-negotiable; under- due, presumption of want of notice; indorsement By payee, neces- sary to transfer, 75; by transferee not— by delivery; guarantees gen- uineness. 75; "without recourse," limited to indorser of; liabil- ity of indorsers, 74, 75; measured by note. payment of, extinguishes security, 82; release before maturity, pro- tected by statute; two mortgages securing identical, priority and discharge shown by claimant, 20, 83; extension of, consideration, 84; immediate maturity clause in security does not apply to matu- rity of note when, 39, 86. enforcement of. optional, with foreclosure 86; not within statute of non- claim, 65. when necessary for presentation and allowance — see Death; need not be produced on foreclosure, when, 76; amount in, prima facie debt, on foreclosure, 89. action to cancel secured, trustee not a party. See Payment, Interest. Notice — See Record. actual, supplants record notice, 21; rights in occupancy and possession constitutes; potential right not sufficient; what is sufficient dili- gence of inquiry, by incumbrancer; when charged with parol agreement between grantor and lessee, 21; burden of proof to show, upon claimant as against record notice; assignment of underdue note raises presumption of want of, 83. record, constructive, notice to world 21, 48, 83; unacknowledged deed of, constitutes, 43. transcript of judgment on file constitutes; no provision for indexing and record, 25. pendente lite, incumbrancer not affected by, in absence of notice 24--litigants may file notice of, for record; exceptions, pending action to enforce mechanic's lien, proceedings under acts of Con- gress relating to mining claims— both constitute notice, without recording same. of mechanic's lien, relates back to commencement of work, etc. 23; takes priority over prior unrecorded mortgage, 73; see Mechanic's Lien of absolute deed and parol reconveyance constitutes; of mortgage, to creditors, 30; not to innocent purchasers 32. by publication, by foreign corporation, of intent to mortgage to foreign creditors. 13. of default, public trustee entitled to, in writing by cestui que trust 90. of sale, no particular form required, 90; reasonable certainty in; four weeks' publication mandatory under new trust deed act; subse- quent incumbrancers entitled to notice of, from public trustee. Oath— bill of foreclosure need not be under, 88. Obiter Dicta^important in new state, 3rd page. 1,50 INDEX. Omission — See Mistake. Origin— of Colorado laws of real property, 2. Parcels—See Inverse, Foreclosure Sale, Trustee's Sale. Parent and Child— See Minor, Guardian. Parol Agreement — to reconvey, see Absolute Deed Made for Security, agreement between grantor and lessee to regard real property per- sonal, charges incumbrancer, 30. Parol ETidence — bee Evidence. parties— See Capacity of Parties to Mortgage. intention of. controls effect of deed, 30. to foreclosure of mechanic's lien, 73. to reform orrescind, see Cancellation and Reformation, to equitable suit of foreclosure, see Foreclosure by Equitable Suit. PaymenL — covenant for.in mortgage, oi in separate instrument, 37; each deter- mines rights under, respectively; promise to pay by grantee of mort- gagor, see Promise to Pay and Promise to Indemnify; immediate maturity clause, upon default of, in security does not apply to note, 39, 86; defaulting clause in note, not part of contract 36. indorsement of note, guarantees, 75. of foreign creditors of, foreign corporations postponed, when, 13. executors and administrators may accept, 81; by trustee, in violation of trust powers, subsequent mcumbrancers may pay off prior incumbrances, 63, 81. of secured debt, before maturity, payor protected by statute, 82,83; extinguishes mortgage. 81; also, satisfaction of judgment on, 86; title reverts to mortgagor, 38; of prior mortgage debt, burden to show, upon claimant, 20. evidenced, by deed of release, of reconveyance, of record. 82; by entry on mortgage or on margin of record; record evidence of, not con- clusive, may be overcome by production of note showing payments of interest after 83. actual, not of record 84; burden upon claimant; mere cloud upon title; statue of limitations does not apply to removal of. for redemption, cancels certificate of purchaser without certificate of redemption, 98; 8 per cent interest allowed by new trust deed act on purchase money, 90, 97; 10 per cent under mortgages; money paid to public trustee in deeds of trust. 97. Pendente iLite—incumbrancers, held harmless, by statute, 24; litigants may hie and record notice of suit pending; does not apply to incum- brancers between final judgment and writ of error; entry of judgment, end of suit — writ of entry, new suit; statute does not cover action to enforce mechanic's lien, nor adverse proceedings under acts of Congress relating to mining claims, — incumbrancers take with notice as at common law. assignee in bankruptcy of mortgagor during foreclosure, 24. Personal Property — interest of mortgagee, 66. of persons under disability, insufficiency, justifies mortgage of realty, 14, 15. agreement to regard realty personalty, charges incumbrancer, 21, 72. Pleadings— show distinction between promise to pay and promise to in- demnify, 69. Possession — mortgagee no right of, 61; foreclosure and sale mandatory to, 3, 38, 61, 87; exceptions—trust deed, title bond, lease of homestead, does not constitute abandonment, 12. actual, notice to encumbrancers, 21. of deed and record, prima facie delivery and acceptance, 46. of seven years based on title precludes action for recovery, 99; where title acquired after possession, time runs from title. Power of Attorney— See Power of Sale, Power to Mortgage. to trustee, to buy in at trustee's sale, 93. Power of Sale in Trust Deeds— See Deed of Trust. form, 38; object, to defeat trustor's equitable title, 38, 90; proper exer- cise of, equivalent to foreclosure in equity, 90; power general, trustee exercise discretion to sell in bulk or parcels, trustee violating, passes legal title only, 15, 19, 38, 90; purchaser charged with irregularities of sale, 93; to maintain ejectment, nqt necessary to show compliance with trust powers, 94. INDEX. 151 yowei to Morteage — is a general power, 15; mortgage with power, trust deed, etc., not authorized under, 15, 19. Practice — declared practice must be followed in foreclosures, 87. Pre-emptor of Public I; contrary to fundamental rights, 40; guar nteed under new act. 40; ignored, in fofL closure of trust deed, in equity, 87. mortgagee levying on security for separat-e debt not, of foreclosure, 64. "Waste — mortgagee may maintain action for, 62. properly of deceased, and of persons under disability, mortgaged, to preserve from. 14, 15. "Wife— See Married Woman. "head of family," when title in her, 9; may homestead, 9 et seq. love and affection sufficient consideration. 35; may testify to delivery of deed to husband, 47. construed a creditor of husband after divorce, 51; trust deed of latter. set aside, not necessary party to actiori to rescind deed of husband, where a surety, 80- AVill— devising property to minors, etc., terms of, observed, 14; exception, executor, heir, devisee, and legatee, suing and defending, evidence, 31. Witnesses— See Attestation. Wx'it of Error— new suit, 24; incumbrance between final judgment and writ, not pendente lite, 24.