LARABEE v. PRATHER, Auditor. (Supreme Court of Kansas. July 8, 1893.) SCHOOL LANDS-SALE FOR TAXES-RIGHTS OF PURCHASER.

1. Where school lands, on which only a part of the original purchase money has been paid, are sold for taxes, the right of redemption from such tax sale is limited to one year from the date of the certificate of sale: and, if the original purchaser fails to redeem within said time, the holder of the tax-sale certificate, on payment of the balance due the school fund, and compliance with the other provisions of the statute in relation to sales of school lands, is entitled to a patent from the state.

2. On presentation of a certificate of the county clerk showing that the holder of a taxsale certificate which had been issued more than one year, and from which sale the original purchaser had failed to redeem, has paid the full amount of purchase money, and all interest due, for the school lands described in the taxsale certificate, it is the duty of the auditor of state to certify thereon that he has charged the county treasurer of the county where the land is situated with the full amount of the purchase money mentioned in the original sale certificate, in order to enable the holder of such tax-sale certificate to obtain a patent for the land.

(Syllabus by the Court.)

Original application for mandamus by Frank S. Larabee against Van B. Prather, auditor. Writ granted.

Valentine, Harkness & Goddard, for plaintiff. John T. Little, Atty. Gen., and George W. Clark, for defendant.

ALLEN, J. This action is brought by Frank S. Larabee, who holds a tax-sale certificate on certain lands in Jewell county, which were originally school lands, to compel the defendant, as auditor, to make the necessary certificates required to enable him to obtain a patent for said lands. The question presented is whether, after the expiration of one year from the date of the tax sale of school lands, the purchaser at the tax sale has the right to pay all the remaining installments due the school fund from the original purchaser of the school lands, and take a patent in his own name from the state without any notice having been first served on the school-land purchaser, under paragraph 5782 of the General Statutes of 1889. The facts in this case are that on December 30, 1878, the school land in question was sold to one R. J. Henry, who paid one-tenth of the purchase price, and executed the proper bond, as required by statute, and received a proper certificate of purchase. He paid all interest due under his purchase up to November 25, 1889. Default was made in the payment of the taxes for 1890, and the land was sold for taxes on September 1, 1891, to J. D. Larabee, who on August 5, 1892, assigned the sale certificate to plaintiff. On December 9, 1892, plaintiff paid to the county treasurer of Jewell county the full amount of the purchase money, and all interest due thereon, for said land, and also executed a school-land

purchaser's bond, as required by statute; and thereupon the county clerk of Jewell county issued to him a certificate of pur chase, and also a certificate showing that the full amount of principal and interest due ou said lands had been paid by said Larabee. These certificates were presented to the defendant, as auditor of state, and he was requested to certify thereon that he had charged the county treasurer of Jewell county with the full amount of the purchase noney mentioned in said certificate, in order to enable plaintiff to obtain a patent from the governor. This the defendant refused to do, and this action is brought to compel him to make such certificate.

In deciding the case, we are called on to construe various provisions contained in the statutes. Paragraphs 5780 of the General Statutes of 1889 reads: "No purchaser of school land, prior to his obtaining title to the same, shall commit any waste upon such land, or take or remove mineral or timber from the same, other than for use upon, or improvements of, said land. The lands purchased under this act shall be subject to taxation, as other lands, and in case of nonpayment of any taxes charged thereon the said lands may be sold, as in other cases; but the purchaser at such sale shall be subject to all the conditions of the bond of the orig inal maker, and of the certificate of pur chase: provided, that such purchaser of said school land shall be allowed one year from the date of the certificate of sale of such land for such taxes in which to redeem from such tax sale by complying with the provisions of law relating to the redemption of land from tax sale, and paying to the county treasurer, for the benefit of the holder of such tax certificate, all installments of interest or other payments which such holder of a tax certificate has been compelled to pay in order to prevent a forfeiture of the rights of purchaser of school land, under the provisions of section sixteen of this act." Laws 1876, c. 122, art. 14, § 14, as amended by Laws March 13, 1879, c. 161, § 1. Paragraph 6959 reads: "When school lands are sold for taxes a deed shall not be given to the purchaser until he shall have paid all the installments and the interest due thereon at the time, and shall have given a bond as required from the purchaser in the first instance; and, upon filing with the county clerk such bond, such clerk shall give him a certificate of purchase." It is contended on behalf of the defendant that where there has been no default in the payment of principal or interest due the school fund the holder of a tax-sale certificate is not entitled to a certificate of purchase until such time as he could legally demand a tax deed, and that the only effect of the one-year limitation contained in paragraph 5780 is to allow him, in case default be made in the payment of principal or interest, where the 60-day notice provided for in paragraph 5782

has been given, to pay to the county treas urer the amount due and in default to the school fund, and after the expiration of the 60-day notice, and of the full year from the date of the tax sale, to obtain a certificate of purchase from the county clerk. This construction does not seem to us to accord with the language of paragraph 5780 of the statute, and unless the other provisions of the law, when construed together, extend the right of redemption beyond the year mentioned in this paragraph, the position of the defendant is untenable. It will be noticed that section 110 of the tax laws prohibits the issuing of a tax deed to school lands until the purchaser shall have paid the balance due the school fund. The reason for this provision is obvious. The state could not consistently authorize a deed to issue under the tax sale where a portion of the purchase price due the state school fund yet remained unpaid; and, as the purchaser is required to pay the balance of purchase money, it is hardly to be presumed that the legislature intended that the tax purchaser should derive his title to the land through a tax deed, and that no patent, in such case, should ever be issued at all. The tax deed might be made to pass the interest of the original purchaser in the land, but section 110 prohibits even such conveyance until the whole amount due the school fund is paid. If the original purchaser, then, should refuse to pay any taxes after making his purchase, but should pay 6 per cent. interest on the balance of the purchase money, if the contention of the defendant is correct, he could retain possession of the land for 20 years, and the taxsale purchaser would be without remedy. The tax-sale purchaser could get no deed, because the balance due the school fund was not paid, and no notice could ever be served on the original purchaser, under paragraph 5782, because he was not in default in the payment of principal or interest. Paragraph 5782 was not enacted as a provision for determining the respective rights of the original purchaser and the holder of the tax-sale certificate, but for the purpose of protecting the school fund. The 60-day notice which is required by that section to be served is for the purpose of cutting off the rights of both original and tax-sale purchasers in case the installments due the school fund are not paid. The section provides not only for service on the original purchaser, but also contains this provision: "And in case such land, or any part thereof, has been sold for taxes, a copy of such notice shall be delivered to such purchaser at tax sale, if a resident of the county." If the installments in default are not paid within 60 days after service of the notice, the rights of the tax-certificate holder, as well as of the original purchaser, are terminated, and the state then resumes its full title, freed from all claims. While the language of the law is not as clear and explicit as it v.33P.no.12-39

might be, we are of the opinion that it was. the intention of the legislature to shorten the period within which school-land purchasers might redeem their lands when sold for taxes, and that the tax sale, where the lands remain unredeemed for one year, pases to the holder of the sale certificate all the rights and interest of the original purchaser to the land, and this wholly without reference to any notice under paragraph 5782; that the tax-sale purchaser may then pay to the county treasurer the balance due the school fund from the original purchaser, and obtain a patent for the lands. It follows, therefore, that the plaintiff in this case is enitled to a patent for the lands in controversy, and that it is the duty of the auditor to make the certificate as demanded. A peremptory writ will be awarded. All the justices concurring.

(24 Or. 203)

BAMBERGER et al. v. GEISER et al. (Supreme Court of Oregon. June 28, 1893.) MORTGAGES-WHO MAY DISCHARGE-ASSIGNMENT -NECESSITY OF RECORDING.

1. Under Hill's Code, § 3031, providing that a mortgage may be discharged upon the record thereof "by the mortgagee or his personal representative or assignee,' a mortgagee, after assigning a negotiable note secured by the mortgage, has no power to enter satisfac tion of the mortgage, and such an entry by him on the record will not give priority to a subsequent mortgagee in good faith without notice of the assignment.

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2. In the absence of a statute requiring an assignment of a mortgage to be recorded, there is no obligation resting upon signee to record an assignment in order to protect himselt against a subsequent purchaser or mortgagee.

Appeal from circuit court, Baker county; M. D. Clifford, Judge.

Action by H. Bamberger, M. L. Tichner, and Sol Tichner, copartners doing business under the firm name and style of Bamberger, Tichner & Co., against Daniel Entermille, Emma Geiser, Edward Geiser, and Frank Geiser, and also Albert Geiser and Louise Geiser, both individually and as ad ministrators of the estate of John Geiser, deceased, to foreclose a mortgage. Judg. ment for plaintiffs, and defendants appeal. Affirmed.

The other facts fully appear in the follow. ing statement by LORD, C. J.:

This is a suit to foreclose a mortgage. The facts are that on the 15th day of July, 1889, the defendant Entermille made and delivered his negotiable promissory note to A. J. Lawrence, C. W. Mandeville, and R. S. Anderson for the sum of $500, payable 60 days after date, and that to secure the pay. ment of the same he made and delivered to them his mortgage upon certain real estate. which mortgage was duly acknowledged and recorded. That thereafter the said promissory note was indorsed on the back "Without recourse," and signed by each of the payees named therein, when it was delivered

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

as

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

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

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

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

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

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

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

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

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

of subsequent purchasers or incumbrancers. The most that can be said for this section is that there is an implication that when the instrument of assignment is in the form of a conveyance it may be admitted to record, but there is no language in it, or any other provision of the recording acts, which requires the assignee to record it in order to protect himself against the subsequently ac quired rights of purchasers or incumbrancers in good faith or for value. Where there is no legal obligation resting upon the assignee to record the assignment to protect himself against subsequently acquired rights in the property, a mortgage may be assigned with out any formal conveyance, as in the present case, by a simple indorsement on the note, and delivery of the mortgage. The fact, therefore, that the assignee might take the assignment in the form of a conveyance and record it cannot make his failure to do so negligence which operates to postpone his lien as against subsequent purchasers or mortgagees. The question is not what the plaintiffs might have done to apprise the defendant grantees that they were incumbrancers, but what they were legally bound to do in order to preserve the priority of their lien against the subsequently acquired rights of the defendants in the property. As the plaintiffs were not bound, under the recording acts, to register their assignment, they were under no legal obligation to take the assignment of the mortgage in the form of a conveyance, and record it, in order to prevent a fraudulent discharge on the record, or to protect subsequent grantees or mortgagees. They had the right to assume that the defendant grantees knew the law, and that they would exercise that degree of care and prudence which the law imposed upon them to avoid loss. When the defendants found that the mortgage was satisfied upon the record they were bound to ascertain whether it was done by one having authority, or take the consequences of their neglect. As Elliott, C. J., said: “A second mortgagee who finds on record a mortgage receives notice of its existence, and he must ascertain whether the release was executed by one having authority, for he is bound to know, as matter of law, that notes secured by mortgage are transferable as articles of commerce, and that, after transfer, the mortgagee has no right to release the mortgage. He is bound, also, to know that he can obtain no notice from the record, because the law does not authorize the recording of assignments, and that he must, therefore, look elsewhere for information." Reeves v. Hayes, 95 Ind. 527. Section 7, 2 Rev. St. 1876, p. 335, of the Indiana statute is identical with section 3030, supra, and although there are terms in the registry laws of that state much more comprehensive than our own, yet it was held in Reeves v. Hayes, supra, (1) that a mortgagee, after assigning the debts secured by a mortgage,