following order upon demand of any interested person:

(1) to the property against which he has an exclusive encumbrance;

(2) to the property which is subject to the fewest inferior encumbrances;

(3) in like manner inversely to the number of subordinate encumbrances against the same property; and

(4) when several pieces of property are within one of the foregoing classes and subject to the same number of encumbrances, resort must be had:

(a) to the property which has not been transferred since the superior encumbrance was created,

(b) secondly, to the property, which has been so transferred without a valuable consideration, and

(c) lastly, to the property which has been .transferred for a valuable consideration in

the inverse order of transfer.

to pay the mortgage': Irvine v. Perry, 119 Cal. 352, 356, 51 Pac. 544, 51 Pac. 949.

Illustrations.- Where two parcels of land were covered by a mortgage, and the mortgagor sold them to different purchasers, each of whom agreed to pay a certain proportion of the mortgage indebtedness, one of them in fact paying, but the other failing to do so, and the mortgagee maintained an action to foreclose his mortgage, the parcel of land the

22. Application of Proceeds When Securing Two Obligations.11

Where certain property is held as security for two obligations, one of which is also otherwise. secured, in the absence of a modifying agree

grantee of which had not paid his pro rata must first he sold: Weyant v. Murphy, 78 Cal. 278, 12 Am. St. Rep. 50, 20 Pac. 568.

11 Application of Proceeds When Securing Two Obligations. The principle underlying this section is stated in Murdock v. Clarke, 88 Cal. 384, 390, 391, 26 Pac. 601, as follows: "When neither party to the transaction makes any application of the payment and there are different debts due from the debtor to the creditor, the law will make the application in such a manner, in view of all the circumstances of the case, as is most in accordance with justice and equity, and will best protect and maintain the rights of both parties. One of the elements underlying the rule for the protection of each party in his rights is, that the burden shall be made as light upon the debtor as is consistent with giving the creditor all that the debtor has bound himself to pay. If the creditor, by any application that may be made for him, can receive all for which the debtor is under any cbligation to him, it is but equity that it should be applied in such a mode as will be least onerous to the debtor. On the other hand, when the interest of the debtor cannot be promoted by any particular application of the payment, or when it is a matter of indifference to him in which mode the application is made, the law raises a presumption that the payment was actually received in the way that was of most advantage to the creditor. If the application can be so made as to discharge all the obligations of the debtor without increasing his burden, it will be deemed indifferent to him upon which obligation the payment shall be applied. The principles of this rule find their application in cases where it is held that a payment is to be applied to interest instead

ment or of intervening rights of third parties, the encumbrancer is entitled to have the proceeds of the sale of such property applied in liquidation of the obligation which is most precarious by reason of being least secured.12 In general, the law will so apply the proceeds of the

of principal; to an interest-bearing debt in preference to one bearing no interest; to the payment of legal interest instead of that which is usurious; to a debt that has matured rather than to one which is not yet due; to the payment of legal items in an account rather than those which are illegal; and, on the other hand, for the purpose of protecting the rights of the creditor, a payment will be applied to the earlier items of an account in preference to later ones; to an unsecured debt in preference to one for which he holds security; and when he has more than one security, to that debt for which the security is most precarious. No specific rule can be laid down that will embrace all the cases that may arise for its application, inasmuch as the infinite variety of human transactions cannot be included within the limits of a formulated rule; and therefore courts must be governed by principles rather than by fixed rules. In this state an attempt has been made for the guidance of courts in this matter, but the rules there prescribed are insufficient for all occasions, and do not embrace even the conditions of the present case."

The rule formulated in the code is found in Civil Code, section 1479, subdivision 3.

12 So where certain logs were held as security for the payment of two notes, one of which was also secured by sureties, the pledgee was entitled to have the proceeds of the sale of the logs credited to the payment of the note not otherwise secured: California Nat. Bank v. Ginty, 108 Cal. 148, 152, 153, 41 Pac. 38.

sale of encumbered property as will best protect and maintain the rights of both parties.1

13

13 So where four thousand dollars was realized by the sale of encumbered property, the law will apply it first to the payment of interest and afterward to the secured obligation: Haber v. Brown, 101 Cal. 445, 455, 35 Pac. 1035.

TITLE 4.

SPECIAL EVENTS AFFECTING ENCUM

BRANCES.

CHAPTER 1.

DEATH OF OWNER OF ENCUMBERED PROPERTY.

ARTICLE 1.

VALIDITY OF ENCUMBRANCE AGAINST PROPERTY OF DECEDENT.

23. Encumbrance not affected by death except when against homestead.

23. Encumbrance not Affected by Death Except When Against Homestead.

An encumbrance for security only subsisting

1 Encumbrance not Affected by Death. - Compare Code of Civil Procedure, section 1500: "No holder of any claim against an estate shall maintain any action thereon, unless the claim is first presented to the executor or administrator, except in the following case: an action may be brought by any holder of a mortgage or lien to enforce the same against the property of the estate subject thereto, where all recourse against any other property of the estate is