mortgagor had at the time of the execution of the mortgage, and the only proper or necessary parties defendant to such suit are the mortgagor and those who claim an interest in the property derived subsequent to the date of the mortgage. Titles adverse to that of the mortgagor, or superior to that covered by the mortgage, are not proper subjects for determination in the suit: Jones on Mortgages, sec. 1589; Wiltsie on Foreclosure, secs. 191, 192; McComb v. Spangler, 71 Cal. 418, 12 Pac. 347. Whenever it is made to appear that the interest of a defendant、 is adverse or superior to that covered by the mortgage, the proper action of the court is to dismiss him from the suit: Ord v. Bartlett, 83 Cal. 428, 23 Pac. 705; Cody v. Bean, 93 Cal. 578, 29 Pac. 223; Hoppe v. Hoppe, 104 Cal. 94, 37 Pac. 894. If, however, the plaintiff makes the holder of an adverse title a party defendant to the foreclosure suit, setting forth facts from which he claims that such title is subordinate to his mortgage, and issues upon these facts are presented for adjudication without objection on the part of the defendant, the judgment of the court thereon will not be void. The court may decline to pass upon the question as not germane to the suit for foreclosure, or it may determine that such claim of the defendant is unfounded, or that his interest in the premises is subordinate to the mortgage, or it may render a decree of foreclosure subject to the prior rights of such defendant. The subject matter of such controversy will be within the jurisdiction of the court, and, if the parties thereto submit the controversy to its determination, the judgment thus rendered will be as conclusive upon them as if rendered in an action specially brought for that purpose, and will not be subject to collateral attack: Helck v. Reinheimer, 105 N. Y. 470, 12 N. E. 37; Goebel v. Iffla, 111 N. Y. 170, 18 N. E. 649; Cromwell v. MacLean, 123 N. Y. 474, 25 N. E. 932.

Under the usual allegation in a complaint for foreclosure 238 that a defendant other than the mortgagor claims some interest in the premises, and that such interest is subsequent and subordinate to that created by the mortgage, any prior interest held by such defendant is not affected by the judgment therein. Such averment is not material to the plaintiff's cause of action, nor is it an issuable fact, and whether the court rendered judgment upon the default of the defendant, or upon an issue created by his denial of this averment, without setting forth the character of his interest, any prior interest held by him is not affected by such judgment: Lewis v. Smith, 9 N. Y. 502, 61 Am. Dec. 706; Frost v. Koon, 30 N. Y. 428; Smith v. Roberts,

91 N. Y. 470; Payn v. Grant, 23 Hun, 134; Elder v. Spinks, 53 Cal. 293; Sichler v. Look, 93 Cal. 600, 29 Pac. 220.

It does not appear that in the foreclosure suit there was any adjudication upon the title of the plaintiffs which is set forth in the complaint herein, or that their claim that their interest in the mortgaged premises is superior to that derived under the mortgage was submitted to that court for determination, or was determined by it. The allegation in the complaint therein that they claimed an interest in the mortgaged premises, and that this claim was subsequent and subordinate to said mortgage, did not present this issue for determination. The averment that their claim was "subordinate" to the mortgage was but a legal conclusion, and the allegation of fact upon which that conclusion depended-that the claim was subsequent to the mortgage-negatived any claim that it was prior thereto. The answer of these plaintiffs was but a denial of these allegations, and their admission that they had an interest in said premises as purchasers was not only consistent with the allegations of the complaint and with the object of the foreclosure suit, but failed to present any issue upon a claim of title superior to that covered by the mortgage, or upon the validity of such title. No facts were alleged, either in the complaint or in their answer, by which an issue upon their title or claim was presented to the court or made a subject for its determination, and the oral statement of their attorneys to the court, and its finding and decree thereon that their claim and interest 239 were "subsequent" and subordinate to said mortgage, is of no higher force than if made upon their default.

The demurrer should, therefore, have been overruled.

The judgment is reversed, and the superior court is directed to enter an order overruling the demurrer of the defendant, and giving to it a reasonable time within which to answer the complaint.

Van Dyke, J., and Garoutte, J., concurred.

IN THE CASE of Murray v. Etchepare, 129 Cal. 318, 61 Pac. 930, it was held that a cross-complaint of a defendant in an action to foreclose a mortgage, who had at one time been the owner of the mortgaged premises, averring that the conveyance made to the mortgagor was procured by fraud and false representations on his part, and that this was known to the plaintiff when the mortgage was taken, undertook to assert a paramount and hostile title, and should not be permitted to be filed, and that the principle that an adverse title cannot be litigated in a foreclosure suit and is not affected by a decree of foreclosure applies as well to adverse equi. table as to adverse legal estates.

HOMESTEAD, WHETHER MAY INCLUDE HOTEL-A building constructed for use as a hotel, and used primarily for that purpose, cannot be selected and held exempt as a homestead, though the owner and his family occupy it as their home: McDowell v. His Creditors, 103 Cal. 264, 42 Am. St. Rep. 114, 35 Pac. 1031. But see Cass County Bank v. Weber, 83 Iowa, 63, 32 Am. St. Rep. 288, 48 N. W. 1067; Turner v. Turner, 107 Ala. 465, 54 Am. St. Rep. 110, 18 South. 210; monographic note to Pryor v. Stone, 70 Am. Dec. 349, 350.

MORTGAGE FORECLOSURE - LITIGATION OF TITLE.-A suit to foreclose a mortgage is not a proper proceeding in which to litigate questions of adverse or paramount title: Farmers' Nat. Bank v. Gates, 33 Or. 388, 72 Am. St. Rep. 724, 54 Pac. 205. Compare Provident Loan Trust Co. v. Marks, 59 Kan. 230, 68 Am. St. Rep. 349, 52 Pac. 449. On the effect of a default judgment, in foreclosure proceedings, against the holder of an adverse or paramount title, see the monographic note to Provident Loan Trust Co. v. Marks, 68 Am. St. Rep. 360-362,

DANIELS v. JOHNSON.

[129 Cal. 415, 61 Pac. 1107.]

MORTGAGE EFFECT OF CONVEYANCE ASSUMING PAYMENT.-If a deed specifies that it is subject to a mortgage (designating it), and that the grantee assumes its payment, this amounts to a covenant that he will pay the note for the security of which the mortgage was given.

MORTGAGE-STATUTE OF LIMITATIONS-WAIVER OF IN A COVENANT BY A GRANTEE.-If a conveyance of mortgaged premises refers to a mortgage and declares that the grantee assumes its payment, that declaration waives so much of the statute of limitations as had run in favor of the mortgagor, and establishes a continuing and not a new contract. The mortgage continues as security for the period during which the original note as thus continued had to run.

MORTGAGE-ASSUMPTION OF BY GRANTEE RIGHT OF MORTGAGEE TO SUE THEREON.-If a conveyance of property asserts the existence of a mortgage thereon, which the grantee assumes, the mortgagee may foreclose the mortgage in the event of its nonpayment when due, and hold such grantee liable for any deficiency for which the original mortgagor was liable.

IS

MORTGAGE-RENEWAL OR EXTENSION-WHAT NOT.-A statute providing that a mortgage can be renewed or extended only by a writing executed with the formalities required of grants of real property is not applicable to a continuation of an original liability for a longer term before the statute of limitations had barred the right of action thereon. In such case the mortgage remains as security for the payment of the debt during the term as BO extended.

Otis & Gregg, for the appellants.

E. R. Annable and Charles E. Truesdell, for the respondent.

416 CHIPMAN, C. Foreclosure. On February 23, 1892, one Wilson made his promissory note to plaintiff, payable February 3, 1893, and to secure its payment he executed his mortgage, of even date with the note, to foreclose which this action was brought on June 9, 1897. Defendant Hammond made default, and plaintiff dismissed the action as to defendants Wilson, Howe, and Hogan. Plaintiff had judgment, and defendants Johnson and wife appeal from the judgment and the order denying their motion for a new trial. The only defense is the four year statute of limitations, section 337 of the Code of Civil Procedure. On its face the note was barred, but the complaint averred an express renewal of the note and mortgage and certain acknowledgments of the debt and new promises to pay.

It appeared from the evidence that Wilson, the mortgagor, conveyed the mortgaged premises by deed to defendant Howe on September 28, 1892, containing the following: "This deed is given subject, nevertheless, to one certain mortgage dated February 2, 1892, given by grantor herein to H. H. Daniels, for the sum of seven hundred and fifty dollars, and which said mortgage is of record in book 42 of mortgages, at page 351 thereof, said San Bernardino county records, and which said mortgage the grantee herein assumes and agrees to pay." On January 28, 1893, Howe conveyed the premises by deed to defendant Hogan, the deed containing a provision identical with that just quoted. On December 21, 1895, Hogan conveyed the premises 417 by deed to defendant Alfred Johnson, the deed containing the provision: "Subject, however, to a certain mortgage of seven hundred and fifty dollars dated February 2, 1892, upon which has been paid fifty dollars; the party of the second part hereby assumes the payment of the above mortgage." Appellant contends that the above provisions found in the deeds do not constitute a promise of defendant Johnson to pay the note, but that they amount to nothing more than an agreement on his part to discharge the mortgage lien. It is also contended that a mortgage cannot be renewed or extended except as provided by section 2922 of the Civil Code. The effect of the condition in the deed was more than an agreement to discharge the lien; it was, in our opinion, an agreement to pay the note secured by the mortgage, for in no other way could the mortgage be paid. It was said in Stuyvesant v. Western Mortgage etc. Co., 22 Colo. 28, 43 Pac. 144: "While the language of an agreement is that the plaintiff shall pay the mortgage, the real meaning of the covenant is that plaintiff shall pay the note which the mortgage

secures, for the discharge of the note is the only way to pay the mortgage, the latter being only the incident, the note being the principal thing."

The effect of the deed from Wilson to Howe, executed as it was while the note was a subsisting obligation, or, in other words, before it was barred by the statute of limitations, was to waive so much of the period of limitations as had run in favor of Wilson, the mortgagor, and established a continuing contract and not a new contract. There was no merger of the old debt in the new, but merely a continuation of the original liability for a longer term. There was no renewal of the lien, and no occasion for its renewal; it was not extended, nor was it extinguished, but continued for the period during which the note, as continued, had to run (Southern Pac. Co. v. Prosser, 122 Cal. 413, 55 Pac. 145; Roberts v. Fitzallen, 120 Cal. 482, 52 Pac. 818), and this result differs, as is pointed out in the case just cited, from the result which would follow where the original obligation is renewed after the bar of the statute has occurred, which was the case of Wells v. Harter, 56 Cal. 342. The same may be said of the effect of the deed from Howe to Hogan of January 28, 1893, which was within four years from the maturity of the note. 418 And so, also, when Hogan conveyed to Johnson, December 21, 1895, more than four years had not elapsed from the maturity of the note.

As between the parties to the deed, Southern Pac. Co. v. Prosser, 122 Cal. 413, 55 Pac. 145, is authority for holding that the mortgage lien was not barred, and the only question is whether the agreement of Johnson is available to the mortgagee. It was said in Tulare County Bank v. Madden, 109 Cal. 312, 41 Pac. 1092: "It may be that there is no such privity of contract between the mortgagee and the grantee of the mortgagor resulting from the acceptance of the deed, nor any such promise for the benefit of the mortgagee as would sustain an action at law against him; . . . . yet, in equity, the creditor is entitled to the benefit of all securities or collateral obligations that his debtor may have acquired for the payment of the debt, and the creditor may, in his action to foreclose the mortgage, treat the mortgagor's grantee, who has assumed payment of the debt, as a principal debtor, and hold him liable for any deficiency for which the mortgagor would be liable on his express promise": Citing Williams v. Naftzger, 103 Cal. 438, 37 Pac. 411. See, also, Hopkins v. Warner, 109 Cal. 133, 41 Pac. 868; Roberts v. Fitzallen, 120 Cal. 482, 52 Pac. 818.