son." (The words "at that time" clearly refer to the time when the transaction was closed up,-the time when the debts to other creditors were paid.) "Now if that was the understanding between Peter Pfluger and John Pfluger at the time this was closed up, or at any time during these transactions, *it is for you to consider, and determine, under all the evidence, whether it was understood and agreed that he should pay Smith & Johnson's debts as well as the others, which he did pay." (The jury must have understood that it was for them to determine whether, as Peter testified, when the trade was closed up and his other debts mentioned were paid by John, it was understood and agreed that Smith & Johnson's debt should also be paid.)

Immediately following the quoted words the court said: "Now if that was the understanding of the parties at the time, then the plaintiff is entitled to recover." It is contended on behalf of appellant that the jury were thus permitted to find in respondent's favor, if there was any understanding at any time during the transactions resulting in John Pfluger acquiring the property, even though it was superseded by an agreement with the Brewing Company in the end.

The charge is by no means a model of clearness. It is justly criticised by counsel for appellant. Yet it seems that the court intended to have the jury understand that if, as testified to by Peter Pfluger, at the time the property was delivered to John Pfluger the latter agreed to pay therefor in part by paying certain debts of Peter's, including one to Smith & Johnson, they were entitled to recover. In all reasonable probability the jury so understood the court. The words "at that time" in all reason go back to the same words in the statement by the court of Peter's evidence, which unmistakably refer to the closing up of the deal when certain debts of Peter's were paid. The word "understood" used in the charge in connection with "agreed" and sometimes not, clearly referred to the understood conditions of the sale by Peter—in form to the Brewing Company, but in effect to John-forming a part of the transaction between them, leading up to and affecting the final close, whether specifically mentioned at the end or not.

Error is assigned because the court left it to the jury to determine whether John bought the property or not. We do not see that clearly. The jury were instructed that whether John bought the property for $1,400, or $1,500, made no difference if he agreed to pay the Smith & Johnson claim on account thereof. There was no question for the jury as to whether "John bought the property or not," as counsel for appellant suggests. Not because the bill of sale on its face shows that the transfer was to the Brewery Company, however, but because the conceded evidentiary facts show beyond controversy that the sale was to John, and that the transfer to the Brewery Company was a mortgage.

It is contended that the court erred in instructing the jury that a mere oral promise on the part of appellant to pay Peter's debts, under the circumstances, was binding. It is argued that there can be no binding contract in such circumstances without all the elements of novation be

ing present, viz:-as applied here a debt from Peter to Smith & Johnson, a debt from John to Peter and an agreement between the three whereby Smith & Johnson released Peter and took John in his stead in consideration of the latter's agreement to pay Peter's debt to them. It does not seem necessary to discuss at length the doctrine of novation, which is invited by the learned counsel's somewhat extended treatment of the matter. Counsel on both sides, as suggested on the oral argument, misconceived the law applicable to the case in giving so much attention to the subject of novation. There is little need, it would seem, for confusing such subject with that of an agreement by one person with another for the benefit of a third. Such an agreement is binding regardless of the relations between such other and the third person, and of whether such other was a party to, or had knowledge, of the agreement when made or of the continuing existence of the indebtedness of such person to such other, if such indebtedness is a circumstance of the transaction. Upon the making of an agreement between such person and such other the law operating upon the acts of the parties creates the essential of privity between such other and the third person, necessary to a binding contract between them. The law on this matter has been so fully discussed in recent years that it would be a work of supererogation to go over the matter again. The doctrine is firmly established here, as concisely stated in the syllabus of the decision in Tweeddale v. Tweeddale, 116 Wis. 517, 93 N. W. 440, 61 L. R. A. 509, 96 Am. St. Rep. 1003.

"If a person makes a contract with another for the benefit of a third person, the latter may enforce it at law regardless of his relations with the first person or whether he had any knowledge of the transaction between such person and such other at the time of its occurrence, and regardless of any formal assent thereto on his part prior to the commencement of the action."

The law, as above indicated, was fairly stated by the trial court to the jury. The misconception of it on the part of counsel for appellant seems to be at the foundation of the assignments of error chiefly relied upon. We are unable to discover any harmful error in the record. The jugdment is affirmed.

MORTGAGES

III. Mortgage to Secure Future Advances3

LADUE v. DETROIT & M. R. CO.

(Supreme Court of Michigan, 1865. 13 Mich. 380, 87 Am. Dec. 759.)

Appeal in chancery from Wayne circuit.

The facts, so far as they are necessary to an understanding of the legal questions involved in the case, will be found stated in the opinion. CHRISTIANCY, J. The mortgage, which the bill in this case seeks to foreclose, was executed by John Ladue to the complainant and Francis E. Eldred, composing the firm of Ladue & Eldred, on the 4th day of August, 1852, to secure and indemnify the firm against any indorsements which might be made, or liabilities to be incurred, by them as sureties for John Ladue, as well as for any moneys they might advance for him, according to the condition of a bond to which the mortgage was collateral, and which was of like effect. There was nothing in the papers or in the arrangement between the parties which bound Ladue & Eldred to make any advances or to indorse any paper for John Ladue, or to incur any liability for him, nor was the latter bound to accept any such accommodation. The effect of the arrangement was that such advances and liabilities, if made or incurred, would be purely optional on the part of the mortgagees. This mortgage was duly recorded on the day of its date. On the 9th day of May, 1853, John Ladue, the mortgagor, sold and conveyed the mortgaged premises to Charles Howard (through whom the railroad company derive their title), by warranty deed, which was duly recorded on the 9th day of July, 1853. John Ladue, however, remained in possession, using the premises as before, until his death, December 4, 1854.

No claim is made for any advances made by Ladue & Eldred to John Ladue, but the whole claim under the mortgage is based upon indorsements made for him by the mortgagees, which have been paid by Andrew Ladue, one of the complainants, and all these indorsements, as shown by the proofs, were made some time after the sale to Howard and the recording of his deed. Whatever indorsements were made prior to that time seem to have been taken up by John Ladue; and it does not satisfactorily appear by the evidence that any of these indorsements, made since the recording of Howard's deed, were made in renewal of paper indorsed by them previous to that time. No indorsements made prior to the recording of Howard's deed are in any way involved, and the case may therefore be considered in all respects in the same light as if no such previous indorsements had ever been made, especially as it does not appear that at the time of the sale to

3 For discussion of principles, see Eaton on Equity (2d Ed.) §§ 225–227.

Howard, or the recording of his deed, there was any existing unsatisfied indorsement, or any subsisting liability, inchoate or otherwise, incurred by the mortgagees for the mortgagor.

The mortgagees at the time of the indorsements in question, had no notice of the deed to Howard, unless the record of that deed is to be considered such notice, the deed having been some months previously recorded. The validity of the mortgage, as between the parties, for any amount of advances which might be made, or liabilities incurred under it. after they should have been thus made or incurred, is not questioned by the defendants; nor is it denied that the record of it would be sufficient notice to subsequent purchasers and incumbrancers, of the amount which the mortgagees might actually have advanced or indorsed for the mortgagor; or, in other words, the amount for which it had become an actual and subsisting security, at the time when the question of notice of the mortgage became material, which, for the purposes of this case, is admitted to cover the period from the purchase by Howard down to the time of the recording of his deed, the record of which is claimed to be notice to the mortgagees as regards any advances made to, or liabilities incurred by, them for the mortgagor after the recording of the deed. Nor is it denied, that if the mortgagees, by the contracts or arrangements between them and the mortgagor (to secure which, on the part of the latter, was the object of the mortgage), had been bound to make advances or to indorse for the mortgagor, the record of the mortgage would have been full notice to Howard, and the mortgage would have been good against him, though the advances were not in fact made or the paper indorsed until after the deed to him and actual notice of that deed to the mortgagees.

The defendants also admit that the result would be the same under this mortgage, as to any advances made or paper indorsed by the mortgagees for the mortgagor, before they had actual or constructive notice of the sale and deed to Howard. But they insist that, as there was not at the time of Howard's purchase or the recording of his deed any debt of the mortgagor, or any liability incurred for him by the mortgagees, absolute or inchoate, nor any obligation on their part to incur such liability, the mortgage was not then an incumbrance in fact or in legal effect; that it could only become such from the time when the advances or indorsements were actually made; and it being optional with the mortgagees whether they would make any such advances or indorsements, and the indorsements being made subsequent to the recording of Howard's deed, the mortgage is, in legal effect, subsequent to the deed, and the record of the deed was notice to the mortgagees of Howard's rights.

The first question, therefore, for our determination is, what was the legal effect of the mortgage (if any) upon the land, at the time of the recording of the mortgagor's deed to Howard?

That a mortgage in this state, both at law and in equity, even when

given to secure a debt actually subsisting at its date, conveys no title of the land to the mortgagee (especially since the statute of 1843, taking away ejectment by the mortgagee); that the title remains in the mortgagor until foreclosure and sale, and that the mortgage is but a security, in the nature of a specific lien, for the debt, has been already settled by the decisions of this court. Dougherty v. Randall, 3 Mich. 581; Caruthers v. Humphrey, 12 Mich. 270; and Crippen v. Morrison, to be reported in 13 Mich. 23. This is in accordance with the wellsettled law of the state of New York, from which our system of law in regard to mortgages has been, in a great measure, derived. Jackson v. Willard, 4 Johns. 41; Collins v. Torry, 7 Johns. 278, 5 Am. Dec. 273; Runyan v. Mersereau, 11 Johns. 547; Gardner v. Heartt, 3 Denio, 232; Edwards v. Insurance Co., 21 Wend. 467; Waring v. Smyth, 2 Barb. Ch. 119, 47 Am. Dec. 299; Bryan v. Butts, 27 Barb. 504; Bank v. Tallman, 31 Barb. 201; Kortright v. Cady, 21 N. Y. 343, 78 Am. Dec. 145.

This view of a mortgage is also sustained by several of the English decisions, and substantially this is the more generally received American doctrine, as will sufficiently appear by reference to the decisions, most of which have been carefully collected in the elaborate brief of the defendant's counsel, but which are too numerous to be cited here. There are exceptions and peculiarities in particular states, in some of which, as in some of the New England states and Kentucky, the old idea of an estate upon a condition continues to rankle in the law of mortgages, like a foreign substance in the living organism, but is rapidly being eliminated and thrown off by the healthy action of the courts under a more vigorous application of plain common sense.

But few of the incidents of this antiquated doctrine are now recognized in most of the states of this Union; the title, for nearly all practical purposes, being now recognized, both at law and in equity, as continuing in the mortgagor, and the mortgage as a mere lien for the security of the debt. But wherever any vestige of this now nearly exploded idea continues to prevail, in connection with the more liberal doctrines of modern times which the courts have been compelled, from time to time, to adopt, it seems only to confuse and deform the law of mortgages by various anomalies and inconsistencies, making it a chaos of arbitrary and discordant rules, resting upon no broad or just principle; while, by recognizing the mortgage as a mere lien for the security of the debt, at law as well as in equity, and thus giving it effect according to the real understanding and intention of the parties, the law of mortgages becomes at once a system of homogeneous principles, easily understood and applied, and just in their operation.

A mortgage, then, being a mere security for the debt or liability secured by it, it necessarily results:

(1) That the debt or liability secured is the principal, and the mortgage but an incident or accessory. See cases above cited; also, Richards v. Synes, Barnad. Ch. 90; Roath v. Smith, 5 Conn. 133; Lucas