away by statute. This view was entirely repudiated by the court. It was held, on the contrary, that the liability was contractual, not purely statutory; that it arose by contract under the provisions of the law as contained in the company's charter. It was accordingly held to be protected as a contract by the clause of the federal constitution ordaining that "no state shall pass any law impairing the obligation of contracts." This is a federal question, and this decision, involving, as it does, a judicial construction of an important clause in the constitution of the United States, is conclusive on the state -courts. State v. Agee, 83 Ala. 119, 3 South. Rep. 856. But, independently of this consideration, the conclusion attained in that case is everywhere supported by the great current of judicial authority. The doctrine accordingly is generally asserted that, where a statute imposes upon stockholders an individual liability for corporate debts, whether to a limited or unlimited extent, this liability enters into the contract of subscription by each stockholder, and forms a part of the security of the creditors of the corporation when the debts are contracted, as fully as if it had been incorporated in the contract, and had been signed by the several subscribers for, or transferees of, such stock. Corning v. McCullough, 49 Amer. Dec. note, pp. 308-310; Hodgson v. Cheever, 8 Mo. App. 321; Lowry v. Inman, 46 N. Y. 119; Association v. Insurance Co., 70 Ala. 120, supra; Edwards v. Williamson, Id. 145; Aultman's Appeal, 98 Pa. St. 505; Cook, Stocks, § 118, p. 208. The only respectable authority holding the contrary doctrine which we find is Coffin v. Rich, 45 Me. 507, decided by the supreme court of Maine in the year 1858, which was six years prior to the promulgation of Hawthorne v. Calef, 2 Wall. 10, in 1864, where a similar decision of the Maine court was pronounced erroneThe view thus contended for by the cross-appellants manifestly cannot be sustained. The rulings of the chancellor on the demurrer fully accord with the foregoing principles, and the cross-assignments of error made in this court by the respondents to the bill based on these rulings must all be overruled.

«ous.

8. These principles strictly affect only those policies which were issued prior to December 5, 1875, the day when the repeal of the individual liability law was effected by the adoption of our present constitution, with its new provision on this subject. One of the policies sued on-that of Mrs. McDonnell— is a paid-up policy issued to her on February 22, 1882, after our present constitution went into effect. Her original policy, of which, the bill alleges, this was a mere continuation, had been issued on February 23, 1870, while the individual liability clause of the statute was in force. It is sought to distinguish the principles governing this contract from those governing original policies issued prior to the repeal of the old law. The chancellor, acting on this view, held that the paid-up policy of Mrs. McDonnell was a new contract, made under the influence of a new law, and that it must be governed by the provisions of the constitution of 1875 and of the Code of 1876. He decides, in effect, that the paid-up policy creates a new debt, incurred or contracted after the 5th of December, 1875, within the meaning of section 2023 of the Code of 1876. It must be kept in mind that the first or original policy expressly provided for its surrender, and the issue of the second or paid-up policy, "for the value acquired" under the first, on certain conditions. Upon the payment of 14 annual premiums, the assured was entitled to a paid-up policy for the full amount of $10,000, and upon the payment of any fewer number of premiums, (not less than two,) to a proportionate sum,-that is, to a new paid-up policy for a sum bearing the same ratio to $10,000 that the number of annual premiums actually paid bears to 14, which was considered the equitable or surrender value of the policy. This election of the assured to take a paid-up policy was to be manifested by giving notice of intention to the company within six months after the cessation of the policy in consequence of the nonpayment of any annual premium when due. The stipulation, it will be no

ticed, is, in legal effect, for continuation of the contract of insurance between the same debtor and creditor, upon the same consideration, and, by necessary implication, upon the same conditions, only for a less sum; viz., for the value of the policy, which was of easy and certain mathematical computation. We can perceive nothing in the terms of the new policy, or the circumstances of its issue and acceptance, which indicates an intention of the parties to make a new contract discharging or extinguishing the old one. The policy itself does not constitute the contract. It is merely the written evidence of it. Its surrender, therefore, is not necessarily a surrender of the rights acquired under it. The consideration upon which the first or original policy issued was the representations contained in the application for insurance and the premiums. There was no other or additional consideration for the second or paid-up policy. No new condition appears in it in anywise detrimental to the company, nor is the one paper in any sense a higher security than the other. No word or clause is used in the latter policy indicating any intention to abandon the valuable right acquired under the first policy to hold the stockholders individually liable for the payment of the amount due on it on a corporate dissolution of the company. We have seen above that this right was part and parcel of the contract of insurance, and cannot be construed to have been abandoned, except by a new contract made with a mutual intention to dissolve the former engagement to which it inhered as if incorporated in it. The onus is on the defendants to show that the taking of the new policy was in discharge of the contract evidenced by the first policy, or that it was a novation; the whole question being one of intention to be established by facts. Keel v. Larkin, 72 Ala. 493; Lee v. Green, 83 Ala. 491, 3 South. Rep. 785; McCrary v. Carrington, 35 Ala. 700; Marshall v. Marshall, 42 Ala. 151. A novation, under the rules of the civil law whence the term has been introduced into the modern nomenclature of our common-law jurisprudence, was a mode of extinguishing one obligation by another, -the substitution, not of a new paper or note, but of a new obligation in lieu of an old one,--the effect of which was to pay, dissolve, or otherwise discharge it. 1 Pars. Cont. 217; Butterfield v. Hartshorn, 26 Amer. Dec. 741; Bonnemer v. Negrete, 35 Amer. Dec. 217. It is observed by Pothier, in his Treatise on Obligations, No. 559, touching this subject: "If, since the debt was contracted, a new agreement has taken place between the creditor and debtor, by which a longer time of payment has been given, or a new place for the payment appointed, or the debtor allowed the liberty of paying to another person than the creditor, or even by which the debtor should have bound himself to pay a larger sum or a lesser one, to which the creditor was willing to confine his demand,-in all these cases and the like, according to the principle that the novation is not to be presumed, it must be decided that there has been no novation, and the parties intended only to modify, diminish, or augment the debt, rather than extinguish it, in order to substitute a new one to it if they did not explain themselves." It has been accordingly held, under this principle, in the state of Louisiana, where the civil law prevails, that there is not a novation where an agent has taken notes payable to himself for goods sold by him, and afterwards new notes for a longer time, but upon the same consideration, are executed by the purchaser payable to the principal. Hobson v. Davidson's Syndic, 8 Mart. (La.) 422.

In Insurance Co. v. Thomas, 74 Ala. 578, we held that an indorsement on a policy of insurance stipulating for a paid-up policy, on certain terms, was to be construed in connection with the original contract, with all its benefits and burdens, and not as a novation disembarrassed from the original conditions. A like rule applies in the present case. We may very easily test the soundness of the contention that a paid-up policy issued on no new consideration, and in pursuance of an express agreement in the original policy to issue it, is a novation operating to extinguish the contract evidence by such original policy.

As suggested by counsel, suppose any one assured, after complying with every stipulation imposed on him by the contract of insurance, had applied to the company to issue a paid-up policy, the application being made in due time and form. Upon the refusal of the company, it is clear that a bill for specific performance would lie to compel the issue and delivery of the policy. Would this be the making of a new contract upon any new consideration, or on new conditions? A court of chancery would have no jurisdiction to do this. It could not introduce a new contract in substitution for, or extinguishment of, the old one. It could not dissolve the former one, nor expunge any of its accessories or incidents. It could only compel the carrying out of the contract already agreed on between the parties. And we see nothing in the issue of the present paid-up policy of Mrs. McDonnell essentially different from the suggested case, so far as concerns the question before us. So, if the whole number of premiums (14 in number) had been paid, and the company had voluntarily issued a new policy for the full amount of $10,000 in the words of the old one, we cannot see that any intention could be inferred to relinquish the security afforded to the assured by the individual liability of the stockholders, which is an obligation primary and original in its nature, by the mere fact of the intermediate repeal of the statute creating this liability. It is our opinion that the canceling of the original policy and the issue of a paidup policy in its stead, pursuant to the express agreement to do so, is a mere continuation of the former contract of insurance, unaffected by the new law, as promulgated by the constitution of 1875 and the Code of 1876. This substitution of one paper for another paper was a change merely in the evidence or proof of the contract, as modified in accordance with its own original terms. It could not have been intended to release the security afforded to policy-holders by the individual liability of stock holders, on the faith of which, it must be presumed, credit was largely extended to the company. It follows from these views that the chancellor erred in sustaining the demurrers of the defendants to the amended bill of the appellant Mrs. Kate McDonnell and others suing on paid-up policies of insurance issued since December 5, 1875; and that he committed no error in overruling the other assignments of demurrer. The decree will be reversed on the appeal of Mrs. Kate McDonnell and others, and remanded, that a decree may be rendered in accordance with the foregoing opinion. The appellees will take nothing on their cross-assignments of error, all of which are overruled.

PERDUE . BROOKS et al.

(Supreme Court of Alabama. December 10, 1888.)

1. USURY-PAYMENT BY THIRD PARTY-RECOVERY-INNOCENT HOLDER.

One who pays an usurious mortgage without notice of the usury, at the request of the mortgagor, may recover from him the sum so paid.

2. PAYMENT APPLICATION-SPECIAL APPROPRIATION.

Rents paid by the mortgagor to the mortgagee, for the use of the land mortgaged, and specially appropriated to the discharge of the mortgage debt, are improperly applied by the mortgagee on accounts constituting no charge on the land.

3. DAMAGES-MEASURE-WASTE-CUTTING TIMBER.

On a bill to redeem land mortgaged, the register improperly disallowed damages for timber cut by the mortgagee in preparing the land for cultivation, on the ground that on account of remoteness from market, and the existence of a stock law, it had no value, and that the damage was more than compensated by rendering the land fit for cultivation; the proper measure of damages being the difference between the market value of the land before and after destruction of the timber.

4. COSTS-DIVISION BETWEEN PARTIES.

The bill, though it offers to pay whatever may be due on the mortgage, having been filed without a previous attempt or offer to pay, and the mortgagees having claimed that the conveyance was absolute, and that the land was their own, the costs should be divided between the adverse parties.

Appeal from chancery court, Lowndes county; S. K. MCSPADDEN, Judge. Bill by Thomas Perdue against A. F. Brooks and others, to have an absofute deed declared a mortgage, and to redeem. Reference to register to state the accounts, and from the statement made complainant appeals.

Watts & Son, for appellant. Richardson & Steiner, for appellees.

CLOPTON, J. The questions arising in this case, with one exception, relate to the report of the register as to the state of the account between the parties, and the amounts due on the mortgages. On January 20, 1883, appellant executed to appellees a deed, absolute on its face, to the land in controversy, in consideration of $538, which they loaned or advanced to him to pay a prior mortgage on the premises to J. M. Carr, and made to appellant an instrument in writing by which they agreed to reconvey the land to him on payment of the money advanced. In February, 1883, appellant gave to J. J. Crenshaw a mortgage on personal property to secure a debt of $400. In February, 1884, appellees, at request of appellant, paid Crenshaw the full amount due on his mortgage, and took a transfer of the same. At the same time the instrument of January 20, 1883, was surrendered to appellees, and they gave another instrument, obligating themselves to reconvey the land on the payment of $1,164.44, and also any additional amount which appellant might owe them for supplies during 1884. The bill is filed by appellant to have the deed declared a mortgage, and to be let in to redeem, and to have the Crenshaw mortgage satisfied and canceled. On the hearing, the chancellor decreed that the deed was intended as a s curity for the money advanced at the time of its execution, and that the instrument of February, 1884, does not operate to create an additional incumbrance. It was referred to the register to state an account of the amount due on each mortgage. It being shown that usurious interest was charged in the Crenshaw mortgage, appellant insists that the sum originally loaned should be taken as the principal, and legal interest counted thereon, in ascertaining the amount due on account of this mortgage. It clearly appears that appellees paid Crenshaw, by request of appellant, the full amount of the mortgage, including the usurious interest, and it is not satisfactorily shown that they had notice of the usury. The general rule is that, to cut off the defense of usury against commercial paper in the hands of a transferee, there must be a renewal of the debt by giving a new security payable to the transferee. Mere taking a transfer of the paper in good faith, and without notice of the usury, is insufficient; but, though no new security is given, the debtor may by his conduct estop himself to set up the defense. McCullough v. Mitchell, 64 Ala. 250. When the maker promises an innocent holder of usurious paper to pay it in consideration of delay, the promise may be enforced; and usury in an original contract, which has been changed by a new contract founded on it, cannot be set up against an innocent party to the new contract. Palmer v. Severance, 8 Ala. 53; Jackson v. Henry, 10 Johns. 185; Gee v. Bacon, 9 Ala. 699. The payment of the full amount due on the Crenshaw mortgage by appellees, at the instance and request of appellant, was an equivalent of the payment of the usury charged therein by appellant, which he could not recover back from Crenshaw. Having induced appellees, for his accommodation, and to obtain indulgence, to advance the money to pay the mortgage, and to hold it as security for the advance, appellant cannot set up against them the usury in the mortgage originally.

The chancellor having decreed that the deed to the land is a mortgage, and there being no complaint of his decree in this respect, we must regard it as such in considering the rulings on the exceptions to the report of the register. Appellant rented the land from appellees during 1883, at the sum of $194, which was included in a note for $243 given to them; and re-rented, during 1884, at the same rental, for which he gave his note. Both notes were paid. The appellees stand, therefore, in the position of a mortgagee in possession,

and must be held liable for the rents received by them when the mortgagor comes to redeemf. In stating the account, the register applied the first note to an account which appellees held against appellant, contracted in 1882 and 1883, and credited only the balance of the proceeds on the land mortgage. The proceeds of the second note were applied to an account contracted in 1884, and the balance of the proceeds was credited on the Crenshaw mortgage. A mortgagee, who has paid a prior incumbrance, is entitled to be repaid before the mortgagor will be allowed to redeem; but he cannot require, as a condition to redemption, the payment of other demands, which are not a charge on the land mortgaged. 2 Jones, Mortg. § 1081. The payment of $194 as rent for each of the years 1883 and 1884 was a special appropriation, by agreement of the parties, of such payments. They are rents actually received by appellees, for which they are bound to account on redemption by the mortgagor, and should have been wholly applied to the reduction of the mortgage on the land. If any taxes on the land were paid by the appellees, the amount so paid should be estimated as a part of the mortgage debt.

It is the unquestionable duty of a mortgagee in possession to preserve the property in ordinary repair, and prevent it from going to waste. If he commits waste himself, he is liable for the damage suffered by the mortgagor. The evidence shows that appellees, for the purpose of preparing a part of the land for cultivation, destroyed a large quantity of timber. The register reported that appellant had suffered no damage therefrom. The reasons on which he based his conclusions are the remoteness of the timber from market, and the want of a demand for timber because of the existence of a stock law in that section of the county, and that, while appellant was damaged in having valuable timber destroyed, he is more than compensated by having the land rendered fit for cultivation, and capable of yielding a revenue. The register mistook the principles on which to determine whether or not appellant had suffered damage from the destruction of the timber. Witnesses may widely differ in their opinions, whether it was of benefit or disadvantage, each viewing the matter from his own stand-point. Ordinarily, in cases of waste, the measure of damage is the diminution in value of the land,-the difference between its market value before and after the destruction of the timber. Stoudenmire v. De Bardelaben, 85 Ala., 4 South. Rep. 723. The value of the timber destroyed is not necessarily equivalent to the depreciated value of the land, but may be regarded in the inquiry as to the extent of its diminution in value. Clark v. Zeigler, 79 Ala. 346. The register, it seems, disregarded the evidence in reference to the decreased value of the land. It should be observed, however, that, if the timber was destroyed with the consent of the appellant, the appellees not having taken any advantage of having the legal title absolute in form, he would not be entitled to hold them to an account for the destruction of the timber.

Though the bill contains an offer to pay whatever may be ascertained to be due on the mortgage, alleging that it was satisfied, it was filed without a previous attempt or offer to pay the amount justly due. Appellees claim the land as their own, and that the deed is what it purports to be,-an absolute conveyance. The parties assert adverse rights, and both are at fault. In such case, a division of the costs is equitable. Hudson v. Kelly, 70 Ala. 393. Reversed and remanded.