mortgagor should be permitted to continue in business for its own benefit, yet there is no stipulation in express terms to that effect, or, in fact, that it shall be allowed to continue in business at all, or that the bank shall make any advances, but it is rather a provision that if the bank should see proper to make future advances, such advances should be secured by the mortgages. In this view such provision does not render the mortgages void, and we are bound to construe the terms of the instrument in harmony with honesty and fair dealing, if it can be done without doing violence to the language. The company was at the time in active business, and had an undoubted right to provide by mortgage of its property for future advances. Hendrix v. Gore, 8 Or. 407; Nicklin v. Spring Co., 11 Or. 406, 5 Pac. Rep. 51. And such a provision does not necessarily render the mortgage fraudulent, although it may subsequently turn out that the mortgagor was in fact unable to pay all his debts at we time the mortgage was given. U. S. v. Hooe, 3 Cranch, 73. Every mortgage necessarily tends to hinder or delay creditors other than the mortgagee, but a delay necessarily resulting from a fair and honest exercise of the right to dominion over one's property, and to pledge or otherwise dispose of it, is neither an unjust nor lawful interference with the rights of others, and is not within the terms of the statute making void conveyances intended to hinder or delay creditors. Nor are we able to concur with the contention of counsel that the evidence shows the mortgages to be fraudulent in fact. There are some circumstances, it is true, which, unexplained, on their face tend to support this contention, such as, for instance, that the corporation was financially embarrassed at the time the mortgages were given; that the debts were long overdue, and no time is provided in the mortgages for payment; the inference that it was contemplated the company should continue in business at the pleasure of the bank, which is sought to be drawn from the stipulation for future advances, and the restriction imposed upon the trustee to foreclose only when requested by the bank; that the only possession in fact taken by the trustee was by appointing the agents and officers of the corporation agents for him, and allowing them to sell and dispose of the property, turning the proceeds into the bank, which were credited on overdrafts paid by the bank subsequent to the execution of the mortgages; that no special effort was made by the bank to collect the accounts and bills receivable assigned to it except by appointing and authorizing the officers of the company to do so; that the length of time the bank was to suffer the mortgages to remain unforeclosed was to depend on circumstances, as testified to by its cashier. While these circumstances point with more or less directness to the conclusion that the mortgages were intended to hinder and delay

creditors, yet they are all explainable consistently with honesty and good faith. And when it is remembered that the debt for which the security was given was a bona fide debt, long overdue, and about which the bank had manifested much solicitude, and it was only after repeated and urgent solicitation, and when the company found itself unable to obtain further accommodation at the bank, that it concluded to give the mortgages, that the mortgages were promptly filed and recorded, and there was no attempt at concealment, but the entire transaction was open and above board, it seems to us that upon the whole case it cannot be said that the mortgages were not executed in good faith to secure the debt. The mortgages are prima facie valid, and to overcome this presumption it is not enough that some of the circumstances attending the transaction may tend to show fraud. There is an essential difference between the material fact of fraud and the circumstances tending to prove it. The burden of proof is on the plaintiff, and the mortgages must be deemed valid until he overcomes the presumption by a clear preponderance of the evidence. The findings of the trial court, who heard the witnesses, and was therefore in a better position to judge of the effect and value of their testimony than we are, were in favor of the defendant; and, while the case is not free from doubt, we are unprepared to say that such findings are unwarranted by the testimony.

It is claimed there is some evidence which tends to show that one object of the company in giving the mortgages was to hinder and delay creditors by preventing a sacritice of its property. But it cannot, we think, be successfully contended that the bank participated in the fraudulent purposes of the company, if any such existed, or had any other motive for taking the mortgages than a desire in good faith to secure its claim; and although it may have known the mortgages would operate to hinder and delay other creditors, and even if it knew the company intended them to have that effect, the transaction will not be void, unless the bank participated in the fraudulent purpose of the company. 2 Cobbey, Chat. Mortg. § 771; Dudley v. Danforth, 61 N. Y. 626; Bank v. Lowrey, (Neb.) 54 N. W. Rep. 571; Aiberger v. White, (Mo. Sup.) 23 S. W. Rep. 92; Shelley v. Boothe, 73 Mo. 74; Pollock v. Meyer, (Ala.) 11 South. Rep. 385; Ford v. Williams, 3 B. Mon. 550; Worland v. Kimberlin, 6 B. Mon. 608; Covanhovan v. Hart, 21 Pa. St. 495; Hodges v. Coleman, 76 Ala. 103; Olmstead v. Mattison, 45 Mich. 617, 8 N. W. Rep. 555. If a debtor converts his property by sale into money because it is more easily secreted, intending to put it and its proceeds out of reach of his creditors, he, of course, commits a gross fraud; and one who purchases of him with knowledge of his object in making the sale obtains no title as against

creditors, though he may have paid the full price. But the rule is different when the property is taken in payment or in security for a bona fide debt which only amounts to giving one creditor preference over another. In the absence of a statute a debtor in failing circumstances may prefer one creditor to another by giving him adequate security for his debt, to the exclusion of others. The right to give such preference necessarily implies the right of the creditor to accept it, and, if he accepts the preference in good faith, without fraudulent purpose on his part, it will not be void on account of the motive which may have prompted the debtor to make it. One creditor is not bound to take care of another. He has a right in good faith to demand and receive the property of his debtor as security for his debts, though he may know that he will thereby withdraw the means of satisfying other creditors, and though he may know that the debtor thereby intends to hinder, delay, or defraud such other creditors. It is simply a race of diligence, in which the law rewards the successful party, provided he acts in good faith.

2. It is urged that at the time the mortgages were given the corporation was insolvent, and that the bank knew or suspected that it had not sufficient means to pay all its creditors in full, and demanded security for its debt, and thereby obtained an undue | advantage over other creditors. If these conditions actually existed, the validity of the security so taken might well be questioned; but we do not think there was such a condition in the financial affairs of this company as would justify the conclusion that a state of insolvency existed which would preclude the bank from demanding and receiving the security which was given for its debt. It is true that at this time the company was largely in debt, and may perhaps have been insolvent, within the meaning of that term as used in the bankrupt or insolvent laws. It was, however, a "going concern," engaged in the conduct of the business for which it was incorporated, and not known or believed to be insolvent by its officers or agents, and with assets exceeding its liabilities by at least $20,000, according to the least value placed thereon, as appears from the testimony. Such a corporation can hardly be said to be insolvent, within the rule sought to be invoked in this case. It is difficult, if not impossible, to lay down a definition of insolvency applicable to all cases. It must necessarily be construed with reference to the facts of each particular case. In its general and popular meaning it is used to denote the insufficiency of the entire property of an individual to pay his debts, but under the bankrupt and insolvency proceedings, which were designed for the benefit of the debtor, it is used in a more restricted sense, and denotes the inability of a party to pay his debts as they become due in the ordinary course of business. Toof v. Martin, 13 Wall.

And to

40; Webb v. Sachs, 4 Sawy. 158. this effect are the authorities cited by plaintiff. We are, however, not disposed to apply the rigor of the rule that obtains in bankruptcy proceedings to a case of this charac ter. It often happens that corporations with assets more than sufficient to pay all their debts are unable to meet an outstanding obligation as it matures, and, without undertaking to lay down any definite rule by which the question of the solvency or insolvency of a corporation may be determined, it is sufficient for the purposes of this case to say that, so long as a corporation is a "going concern," engaged in the conduct of the business for which it was organized, and not known or believed to be insolvent by its officers and managers, with assets exceeding its liabilities to the extent shown by the testimony in this case, it is not in such a state of insolvency as will preclude its executing a mortgage on its property in good faith to secure a debt of the corporation, even though the debt may be one for which the directors are security. As the corporation was not insolvent, it is unnecessary to examine or de cide the question as to the right of an insolvent corporation to prefer creditors, or of a director of such a corporation to secure the debts thereof for which he is personally liable. It follows that the decree of the court below must be affirmed.

WENZEL v. SCHULTZ et al. (No. 18,125.)

(Supreme Court of California. Nov. 8, 1893) VENDOR AND PURCHASER LIEN - MORTGAGE RIGHT OF MORTGAGOR TO COMPEL FORECLOSURE. 1. S. conveyed land, subject to a mortgage, to plaintiff, by absolute deed, as security for a debt. Plaintiff renewed the mortgage, and afterwards, without having his debt paid, reconveyed it to S., who was to sell it, and pay plaintiff. S. conveyed it to his wife, and she conveyed it to D., who had no notice of any vendor's lien on the land. All the conveyances were subject to the mortgage given by plaintiff. Held, that plaintiff was not entitled to a vendor's lien on such land.

2. D. is not estopped, in such case, from denying that plaintiff ever had title to the land.

3. Though the note secured by the mortgage given by plaintiff is payable on or before a date specified, he cannot compel a foreclo sure of the mortgage before the note is due, especially where D. simply bought the land subject to the mortgage, and did not obligate herself to pay it.

Commissioners' decision. Department 2 Appeal from superior court, Calaveras county; C. V. Gottschalk, Judge.

Action by Frederick Wenzel against Lavantia Schultz, Elizabeth A. Davis, Hattie Stoerling, and Ed. D. Taylor, administrator of the estate of Charles F. Schultz, deceased, to establish and foreclose a vendor's lien on land, and to compel the foreclosure of a mortgage on such land executed by plainiff to defendant Stoerling. From a judg

ment of nonsuit, and from an order denying | a motion for a new trial, plaintiff appeals. Affirmed.

Eagon & Rust, John W. Armstrong, and Armstrong & Platnauer, for appellant. Daniel Titus, for respondents.

SEARLS, C. According to the averments of the amended and supplementary complaint, plaintiff was on the 8th day of December, 1888, the owner of, and in the possession of, certain land described therein. That plaintiff sold and conveyed the land to Charles F. Schultz. The consideration of the sale was $5,000, as follows: Schultz agreed to pay off a debt of plaintiff to Hattie Stoerling, amounting to $1,500, evidenced by a promissory note bearing interest at 10% per cent. per annum, and secured by a mortgage on the land conveyed. The residue of the purchase money, amounting to $3,500, was to be paid in gold coin. No part of the purchase price was paid. On the 1st of May, 1889, on an accounting between plaintiff and Schultz, there was found to be due to plaintiff on account of the $3,500, part of the purchase price of the land, the sum of $2,700, for which sum Charles F. Schultz and Lavantia Schultz, his wife, made to plaintiff their promissory note, payable one day after date, with interest at 9 per cent. per annum. On the 28th day of May, 1889, Charles F. Schultz, being at the point of death, and desirous of avoiding the necessity of administration on his estate, conveyed said land to Lavantia Schultz, his wife, subject to the vendor's lien of plaintiff, and subject to the payment to plaintiff of the purchase money, as aforesaid, of all of which she had notice, and then and there agreed to pay said purchase money to plaintiff. Lavantia Schultz is insolvent. The interest of the defendant Elizabeth A. Davis in said land is vested under a deed from the defendant Lavantia Schultz, dated February 6, 1891, and as a part of the consideration thereof the former assumed and agreed to pay the debt of the plaintiff to Hattie Stoerling, secured by said mortgage; and the deed to her recites that the conveyance is subject to the mortgage which is described therein. Charles F. Schultz died on or about June 30, 1889, and defendant Ed. D. Taylor is administrator of his estate. Defendant Davis has not paid off or discharged the Stoerling mortgage upon the land, and the sum secured thereby was not due when the action was commenced; the note being payable "on or before October 1, 1892." The claim of plaintiff, and the alleged vendor's lien, as well as the agreement to pay the mortgage by Schultz, deceased, was presented to the administrator, and by him allowed as against the estate, but without prejudice to the rights of third persons in the land, and his action was approved by the judge. On the

23d day of November, 1891, plaintiff requested the administrator to institute proceedings for the sale of the land to satisfy his claim, which was refused, whereupon this action was brought. Defendant Elizabeth A. Davis answered, denying, among other things, that the plaintiff was ever the owner of the land in question, or that he sold it to Schultz. She admits her purchase thereof, and avers it was for a valuable consideration, and without notice of plaintiff's alleged vendor's lien, and avers the Stoerling note and mortgage are not due and payable. The case was tried by the court without a jury, commencing June 15, 1892, and a judgment of nonsuit was entered, from which, and from an order denying a new trial, plaintiff appeals.

The motion for a nonsuit was based upon "the ground that said plaintiff has failed t show that he has a lien on the property described in the complaint, or that he was entitled to any relief against said defendants." The nonsuit seems to have been properly granted. The evidence tended to show that Charles F. Schultz was the owner of the property, and, being indebted to plaintiff, he conveyed the land to the latter by an absolute deed of conveyance, but simply as security for the sum of money due said plaintiff. There was an understanding that plaintiff would sell the land, pay off a mortgage held by defendant Stoerling, which Schultz had created, for $1,400, retain the sum of money due him, and pay to Schultz the residue, if any, received from the sale. Failing to make a sale of the property, by reason of being absent much of the time from the locality, plaintiff reconveyed to Schultz upon an understanding that he (Schultz) would sell the land, pay off the Stoerling mortgage, which plaintiff had renewed in his own name for $1,500, and pay plaintiff the sum due him from the proceeds. Schultz was sick, nigh unto death, and, at the request of plaintiff, conveyed the land in question to his wife by deed of gift, with a like understanding. The latter conveyed to the defendant Elizabeth A. Davis, subject to the Stoerling mortgage, but, so far as appears, without notice of any vendor's lien on the part of plaintiff. Under such circumstances, the deed from Schultz to plaintiff was a mortgage, and conveyed no title to the latter. Civil Code, § 2924; Code Civil Proc. § 744. Upon its face, the deed from Charles F. Schultz to the plaintiff, under date of April 30, 1885, was an absolute conveyance; and while, between the parties, it only amounted to a mortgage, yet it was sufficient to pass the title as betweer plaintiff and a purchaser from him, had he sold and conveyed the property in good faith, and for a valuable consideration, to an innocent purchaser without notice. He did not do so, however, but reconveyed the property to his mortgagor, relying, apparently, upon the good faith of the parties, who were

his friends, to make the sale which he had failed to accomplish, and to pay him from the proceeds what was justly due him.

The doctrine of estoppel, invoked by appellant, has no application, as against de-fendant Elizabeth A. Davis, so far as the vendor's lien is concerned. She is not, in other words, estopped from saying that plaintiff never had title to the land. Her predecessor in interest, Charles F. Schultz, was not estopped from showing that his deed to plaintiff was in fact a mortgage, and neither ls she estopped from making the same claim. Were the rule as contended for by appellant, no absolute deed could ever be shown by parol to be intended as a mortgage. We may add that a grantee in fee, who owes no duty to his grantor, is not estopped from disputing the title of such grantor. As was said in San Francisco v. Lawton, 18 Cal. 476: "A grantee in fee may deny that his grantor had any title. With the execution of the conveyance, the transaction between the parties is closed. Thenceforth, the grantee holds the property for himself, and is neither bound to surrender possession to his grantor, nor to maintain the validity of his title." In Osterhout v. Shoemaker, 3 Hill, 518, it was said: "There is no estoppel where the -occupant is under no obligation, express or implied, that he will at some time, or in some event, surrender the possession. The grantee in fee is under no obligation. He does not receive the possession under any contract, express or implied, that he will give it up. He takes the land to hold for himself, and to dispose of it at his pleasure. He -owes no faith or allegiance to the grantor, and he does him no wrong when he treats >him as an entire stranger to the title." Sparrow v. Kingman, 1 N. Y. 253; Blight's Lessee v. Rochester, 7 Wheat. 548; Society v. Town of Pawlet, 4 Pet. 506; Watkins v. Holman, 16 Pet. 54; Barker v. Salmon, 2 Metc. (Mass.)

32.

The question as to the character of the deed from Schultz to plaintiff was properly in issue. The answer of defendant Davis denied that plaintiff ever owned the land, and under such a denial it was proper to -show that the deed to plaintiff was a mortgage, and hence did not convey the title. Smith v. Smith, 80 Cal. 323, 21 Pac. Rep. 4, and 22 Pac. Rep. 186, 549; Grewell v. Wal-den, 23 Cal. 165. It is conceded that the -defendant Davis took the land subject to the lien of the mortgage executed by the plaintiff to Hattie Stoerling, but the mortgage was not yet due when this action was commenced. The note which it was given to secure was, it is true, payable on or before October 1, 1892. This gave plaintiff an option to pay it prior to that time, but did not give to the payee a right to enforce it until the date mentioned, and the obligation devolving upon defendant Davis is no greater than that of the plaintiff. Indeed, there

· is nothing in the record showing that the defendant Davis ever obligated herself to pay the note. She bought the land subject to the mortgage, and if she does not discharge it the land becomes liable for its payment, not because of any personal obligation on her part to pay the note, but because it is secured by a lien on such land. The judg ment and order appealed from should be af firmed.

We concur: BELCHER, C.; TEMPLE, C.

PER CURIAM. For the reasons given in the foregoing opinion, the judgment and order appealed from are affirmed.

PEOPLE v. MITCHELL. (No. 21,003.) (Supreme Court of California. Nov. 11, 1893.) CRIMINAL LAW-MISCONDUCT OF JURY-EVIDENCE 1. On a murder trial, one of defendant's principal witnesses was a woman who kept a disreputable place, and with whom he lived. During the trial, four of the jurors visited her place repeatedly, and their conduct became so notorious that the judge reprimanded them, and placed them in the custody of the sheriff, and his comments were published in the newspapers. The sheriff also told the jury that if a disagreement was brought about by those of their number guilty of the misconduct, "there will be hell to pay." Held, that a conviction would be set aside, since the freedom of action of the jury had been foreclosed by the notoriety attending their misconduct, and the only way they could free themselves from suspicion was by a conviction.

2. On a trial for the murder of a militiaman, the fact that defendant had been ordered out of the way by an officer, not the deceased. when the company was engaged in skirmish drill, several hours before the murder, is not admissible in evidence, since any inference of ill feeling by defendant against deceased on this ground is too strained.

3. Evidence that a third person is guilty of the murder is admissible, though he had been previously acquitted of the offense.

Commissioners' decision. Department 1. Appeal from superior court, Tehama county; John F. Ellison, Judge.

Rube Mitchell was convicted of murder, and appeals. Reversed.

Clay W. Taylor and Johnson & Chase, for appellant. Atty. Gen. Hart, for the People.

SEARLS, C. The defendant was informed against for the crime of murder, and convicted for killing Oscar Crandall in the county of Tehama on the 24th day of April, 1891. The appeal is from a final judgment and from an order denying a motion for a new trial. On a former trial defendant was convicted of murder, and on appeal to this court a new trial was ordered. People v Mitchell, 94 Cal. 550, 29 Pac. Rep. 1106. C. A. Boyden and Frank Hughes were charged in the same information with defendant. Boyden had been tried and acquitted, and Hughes had been discharged without a trial

It appears, also, that one Long had been indicted or informed against by a separate proceeding for the same offense, and upon a trial had been acquitted. Oscar Crandall was a member of a military company, and on the evening of April 23, 1891, which was a bright, moonlight night, had been out with his company drilling. The defendant was on the ground where the drill was carried on. About 11 o'clock P. M., Crandall, with four comrades, repaired to the Arcade saloon, at the corner of Main and Hickory streets, Red Bluff, kept by Henry Rathja, passed into a back room, and engaged in a game of cards. Crandall did not participate in the game, but witnessed it. Some time later, and, according to a preponderance of testimony, after 12 o'clock, the defendant entered the saloon, passed to the back room, remained a brief period, returned to the front room, met C. A. Boyden, who had come in, engaged in conversation with him, and the two went out together. About the same time, according to the testimony of Rathja, Crandall arose, and walked out the back door upon a high porch which overlooked a back yard, with a gate at the side near the steps leading down from the porch opening into Hickory street, and commenced talking in imitation of a Chinaman. While so talking, some one in Hickory street replied to him, whereupon a conversation involving threats and much vulgarity and obscenity was heard. Crandall evidently went down the steps and to the gate, which was open. A pistol shot was heard, and Crandall was found near the gate, insensible, shot through the head, and with a contused wound on the head near where the bullet entered, from which wounds he died a few hours later. The theory of the defendant at the trial was that he was at a saloon until the south-bound Oregon express arrived, due 11:50 P. M.; that he rode back on the bus of the Tremont hotel to the Cone and Kimball's corner, where he jumped off, went to Rathja's saloon, talked with Boyden, who wanted some opium; that they went to his, defendant's, house, 12 blocks away, and, while in the act of administering a "shot of opium" to himself and Boyden, they heard the shot, and a few moments after Hughes rushed in, and said a man was shot, whereupon the three men ran to the spot, found the body, and carried it around to the front of the saloon. The testimony on the part of the prosecution was mainly circumstantial. One witness, who heard the conversation between Crandall and his supposed slayer, identified one of the voices as that of defendant. Numerous witnesses testified to the fact that at the time the supposed fatal shot was fired defendant was in his house on High street. Upon the whole case as made by the testimony, it may be said the result very properly depended upon the degree of credit which properly attached to the statements of many of the witnesses. Under

such circumstances, the office of the jury was one calling for the exercise of careful discrimination and sound judgment.

The trial of the cause commenced October 14, 1892. Mary Howard, a woman who lived with the defendant on High street, in Red Bluff, and who was an important witness on his behalf, and who, it is apparent, kept a disreputable place, files an affidavit, and is supported by other and reputable witnesses, showing that four of the jurors at 10 o'clock at night visited her place, drank intoxicating liquor, and that two of the jurors talked with her about the case; that the four jurors were at her house on another night during the trial, and that one of them visited her a number of times during the trial, and while the testimony was being taken. This conduct became so notorious that on the 28th day of October the judge of the court took occasion to deliver to the jury a somewhat lengthy and most sensible admonition, in which he dwelt upon the duty of jurors to refrain from intercourse and association with parties and witnesses intimately connected with the case, and closed his remarks by stating that, unless his suggestions were literally followed, the jury would be placed in the custody of the sheriff. The admonition of the court was published at length in the Daily Sentinel, a newspaper published in Red Bluff, under the heading of "What Does it Mean?" Subsequently, and while some of the jurors were discussing the conduct of the jurors in visiting the Howard place on High street, the sheriff of the county, who was an important witness on behalf of the prosecution, approached them, and declared to them: "If those fellows who were down on High street hang this jury, there will be hell to pay, and you'll all be in it." The sheriff and one other witness admit the language charged to have been used by him to the jurors, except that they deny that he said "you'll all be in it." The jurors implicated file affidavits, admitting the visits to Mary Howard as charged, say they only took one small glass of beer each, and those shown to have been there at other times, and to have conversed with the Howard woman, deny that it had any effect on their verdict. On Monday, October 31st, the jury was ordered into the custody of the sheriff, and remained in his charge until November 3, 1892, when a verdict was rendered. While thus in custody of an officer, John Tait, one of the jurors, on, to wit, the evening of November 2d, separated from his fellows, and went to the town of Tehama, 12 miles distant, where he remained over night with his family, returning the next morning. In justice to him it must be stated that his wife was dangerously ill, and his conduct was doubtless prompted by natural affection, and no suspicion attaches to him. That he should have applied to the court for leave to thus separate from his fel