In the superior court the case was referred to a master, who found the following facts:

In 1869 the plaintiff bought the land in question, subject to a mortgage, and proceeded to erect a tenement house. Leonard Carey, the husband of the defendant, who was a carpenter and indebted to the plaintiff for money lent, built the house for the plaintiff, supplying nearly all the materials and labor under an oral agreement whereby his indebtedness to the plaintiff was to be applied in payment of the cost of construction. When the house was completed the balance due Carey, after paying his debt to the plaintiff, was $1,106, and the value of the house and land above the existing mortgage was $3,300. The plaintiff moved into the house and occupied it about six months.

On or about June 1, 1870, the plaintiff and Carey made an oral agreement that Carey should gain title to the premises by levy on execution, and by a sale under the power in the mortgage, and hold them as security for the plaintiff's debt to him, and, after payment of the debt and expenses out of the rents, should reconvey to the plaintiff. In pursuance of this agreement, the plaintiff, on June 1, 1870, gave to Carey a note for $4,000, upon which an action was brought and judgment obtained by default against the plaintiff as agreed. An execution was issued and levied by a sale to Carey of the plaintiff's equity of redemption in the premises for $4,317.39, and a conveyance in due form was made to him on May 29, 1871. On July 6, 1871, Carey, by the payment of $583.17, procured the assignment of the mortgage to a third person, who proceeded in due form to sell the premises under the power therein to Carey for $950, and a deed was given to him and duly recorded. Prior to the sale on execution and under the mortgage, Carey was put in possession of the premises by the plaintiff, and so continued until his death, on October 25, 1885. At various times. the plaintiff demanded of Carey a settlement and reconveyance of the premises, his last demand being made a few days before Carey's death, in the presence and hearing of the defendant. Carey made a will, by which his real estate was devised to the defendant, who took possession of the premises and continued to receive the rents and profits. The defendant declined to file an account, but it was agreed by both parties that the receipts by Carey and the defendant had been sufficient to pay the plaintiff's debt to Carey, including interest and expenses. The master also found that there had been no laches on the part of the plaintiff.

The case was then heard on the report of the master, and a

charge the party with fraud in setting up his claim against it." Paine, J., in Rasdall v. Rasdall, 9 Wis. 379. See Article by J. B. Ames, in 20 Harv. L. Rev. 549.

decree was entered that the defendant convey the premises to the plaintiff. The defendant appealed to this court.

MORTON, C. J. It was held in Campbell v. Dearborn, 109 Mass. 130, that, although a deed be given which is absolute in form, yet the grantor may prove by parol testimony that it was understood and agreed by both parties to be given as security for a debt; and that upon such proof a court of equity will treat the deed as a mortgage. This is decisive of the case at bar.

For some reason, which does not appear to be fraudulent, the plaintiff did not directly convey the estate in question to the defendant's testator; he permitted the latter to obtain a judgment upon a debt in part fictitious, and thus to get a title by a levy upon the execution, and also to foreclose by a sale under an existing mortgage. But the substance of the transaction was the same as if a deed had been directly given by the plaintiff. Both parties agreed that the title thus obtained was to be held solely as security for the debt of the plaintiff to the defendant's testator, and a court of equity will treat the transaction according to its real nature as a mortgage.

The defendant does not stand in the position of an innocent purchaser, as she contends. She took as a general devisee under the will of her husband, and besides is shown to have had notice of the nature of the transaction.

Decree affirmed.18

EDITORIAL NOTE. When land is conveyed by absolute deed, either upon a present consideration or upon a pre-existing indebtedness, and the grantee agrees that, upon payment to him of a certain sum at a certain time, he will reconvey the premises to the grantor, it

18 "It is frequently the case that parties desire to give security upon lands the title to which is not in them, but is subject to their control. It is also frequently true that they desire to give it upon lands owned. by them, but liable to be sold on judicial proceedings against them. The rule itself being once established, that parol evidence may be admitted to show an absolute deed a mortgage, when such an agreement is clearly established, we do not think it material whether a judicial sale was adopted merely as a means of conveying the title to the mortgagee, or whether it was conveyed to him by some third party for and on account of the mortgagor. These circumstances furnish no substantial grounds for distinguishing the case from a direct conveyance from the mortgagor, and the cases which have established the rule do not make any distinction." Paine, J., in Sweet v. Mitchell, 15 Wis. 641, 664.

See also, Smith v. Cremer, 71 Ill. 185; Beatty v. Brummett, 94 Ind. 76; Fisk v. Stewart, 24 Minn. 97; Niggeler v. Maurin, 34 Minn. 118; Stoddard v. Whiting, 46 N. Y. 627.

Cases of this sort are sometimes disposed of under the theory of resulting trust. McDonough v. O'Niel, 113 Mass. 92; Hidden v. Jordan, 21 Cal. 92. Pomeroy Equity, § 1038.

is often a very difficult problem to determine whether this transaction amounts in law to a mortgage, or simply to what is called a "conditional sale," meaning thereby a conveyance with contract for repurchase. The latter is, of course, what the transaction, upon its face, appears to be; but, under the equitable doctrine of mortgages, if the parties have used this form of transaction to secure a debt to the grantee, equity will treat it as a mortgage, and parol evidence is admissible to determine what the real purpose of the transaction was.

The question, then, becomes one of intention-whether the intention of the parties was to effect a sale or a security; and this, in turn, depends chiefly upon the question whether there was a debt to secure. Authorities on this subject are therefore placed in section 2 of this chapter, entitled The Debt, q. v.

SECTION 2.-THE SUBJECT MATTER.

TIFFANY, REAL PROPERTY, § 509. Any interest in land which may be the subject of sale, grant, or assignment may be mortgaged. Accordingly, there may be a mortgage of a rent, an estate in expectancy, an estate tail, an estate for life, including a widow's dower estate, and an estate for years. A mortgagee's interest may itself be mortgaged, whatever theory be held as to the character of such interest. An heir or devisee may mortgage his interest in the estate of the deceased, subject to the payment of the latter's debts.

A mortgage may be made of improvements on land apart from the land itself, and growing crops may be mortgaged by the owner of the land.

Equitable interests, as well as legal, may be mortgaged; a usual instance of such a mortgage occurring in the case of a mortgage by the vendee under a contract of sale. The mortgage of an equitable interest in land cannot, it would seem, in states in which the legal theory of mortgages is recognized, have the effect of passing the legal title to the mortgagee, since the mortgagor has no such title to pass.19 And

19 Nor can it, in states in which the lien theory of mortgages is recognized, have the effect of creating a legal lien, since no legal interest can be raised out of an equitable interest. In short it is an equitable mortgage, though it be perfectly regular in form. Brockway v. Wells, 1 Paige (N. Y.) 617. If the mortgagee afterward gets in the legal title from the trustee or vendor, either with the consent of the mortgagor,

so in England it is recognized that a second mortgage-that is, a mortgage of the mortgagor's interest-passes no legal title to the mortgagee. In this country, however, no such distinction between the positions of first and second mortgagees seems to be recognized.20

SEYMOUR v. THE CANANDAIGUA RAILROAD CO.

SUPREME COURT OF NEW YORK, 1857.
25 Barb. 284.

This action was commenced for the foreclosure of a mortgage, given by the Canandaigua and Niagara Falls Railroad Company upon its railroad, track and franchises, and appurtenances, to secure the payment of $1,000,000 of the bonds of said company, issued to, and held by different persons. The mortgage was executed in due form, and bore date March 17, 1852.

Niggeler v. Maurin, 34 Minn. 118, or without his consent, Meigs v. McFarlan, 72 Mich. 194, we then have an equitable mortgage of the sort presented in the preceding section, the legal title being acquired by absolute deed but for the purpose of security. Cf. Cullen v. Carey, supra.

20 The English doctrine regarding junior mortgages is the logical result of the English theory that the first mortgage passes the whole legal estate leaving only an equity in the mortgagor. In this country the status of junior mortgages has not been frequently passed upon, due to the fact that our recording system has largely eliminated the practical significance of the distinction between legal and equitable mortgages. The logic of our lien theory leads irresistibly to the conclusion that senior and junior mortgages are technically alike, except for priority, for the legal title, remaining always in the mortgagor, is capable of raising an indefinite number of legal liens. This seems never to have been questioned. Under the title theory, while the logic of the case is not so simple, the same result would flow from the accepted, though paradoxical position, that, while the mortgage passes a legal title to the mortgagee, for the purpose of security, the general ownership, at law as well as in equity, remains in the mortgagor. If the general legal ownership remains in the mortgagor, it is capable of raising more "legal titles for the purpose of security." That a second mortgagee has a legal title was held in Gooding v. Shea, post; and see Sanders v. Reed, ante. But see Jackson v. Turrell, 39 N. J. L. 329, “A second mortgagee is, at law as well as in equity, a mere lien holder. * * The reasons which support the claim of the first mortgagee defeat the claim of every other one, to be regarded as the legal owner of the fee." And see Goodman v. White, ante, accepting the English doctrine without qualification.

The defendants were duly organized as a corporation, under the general railroad act of this state, passed April 2, 1850, for the purpose of constructing a railroad between the village of Canandaigua in the county of Ontario, and the suspension bridge over the Niagara river, near the village of Niagara Falls. It did not appear at what precise date the company were organized; but from the proceedings of the company, produced in evidence, it must have been in or before the year 1851. And from like proceedings it appeared that the route of the said road was surveyed in or before the termination of the said year 1851. From proceedings of the board of directors of March 18, 1852, in evidence, it appeared that they claimed or asserted that the route of the said road, from the Genesee river west to the Tonawanda creek, had been located before that time; that on the 16th of April, 1852, the directors altered the route; and that the route from Tonawanda to Niagara Falls was also altered July 16, 1852.

It was in proof that a certificate of location in Erie county, according to the statute, with a map or profile annexed, was filed in Erie county clerk's office on the 4th day of April, 1852. This location of the road crossed the Tonawanda creek at a considerable distance east of Tonawanda village, and laid down no branch track to the river.

On the 22d of December, 1852, the company changed, in due form, the location of their road for a considerable distance in Erie and Niagara counties, and laid down a branch or side track in the village of Tonawanda, from such altered line to the Niagara river, a distance of 7,132 feet; and filed a map and certificate of such change in the clerk's office of Erie county, December 30, 1852, and in the Niagara county clerk's office December 31, 1852.

It did not appear when the work of constructing the railroad was actually commenced; or when the company commenced acquiring the title to lands needed for it, or what lands, if any, were actually acquired before the date or giving of the mortgage in question. It appeared that the road was open for travel from Canandaigua to Batavia, in January, 1853, and thence west to the suspension bridge, in July 1853; thus completing the line of railway from New York to the suspension bridge via the New York & Erie railroad.

The mortgage was recorded in the counties of Ontario, May 3, 1852, Monroe, May 4, Erie and Niagara, May 5, Livingston, May 6, and Genesee, June 10; the railroad being situated in parts of said counties. The mortgage, after reciting that the said railroad company, in pursuance of the power conferred upon them by the act of the legislature of the state of New York, entitled "An act to authorize the formation of railroad corporations, and to regu