alterations were very material, and were in existence at the time of the fire. In that case there was a forbidden physical alteration made, which continued down to the fire. In the present case there was simply a mortgage, ir nowise affecting the physical condition of the property, and which was canceled of record within three days and before the fire. which contains a limit of the waters within which the vessel is insured. If the vessel leaves the limited waters, and is lost, the insurer is not liable, but the liability reattaches on the return of the vessel to the limits. Hennessey v. Manhattan F. Ins. Co. 28 Hun, 98. So here, although the policy was suspended during the existence of the first mortgage, it was revived when that mortgage ceased to exist by the substitution of the second mortgage." There are many other cases which support those which we have already cited, that when such temporary encumbrance In Hinckley v. Germania F. Ins. Co. 140 was removed before the fire, it did not in Mass. 38, 54 Am. Rep. 445, 1 N. E. 737, validate the risk, as there was no mort where the defense was that the insured gage outstanding at the time of the fire. property was temporarily put to an ilIn Athens Mut. Ins. Co. v. Toney, 1 Ga. App. legal use, contrary to the terms of the 492, 57 S. E. 1013, above cited, the court, policy, the court, in construing the word summing up the authorities, says: "The “void," says: "But, irrespectively of this common people who insure should not be consideration, it is not the necessary meanentrapped by a harsh construction of a tech- ing of the word 'void,' as used in policies nical word. The insurance is revived by of insurance, that it shall, under all ciroccupancy, though suspended during the cumstances, imply an absolute and pervacancy.' So much for the authorities in manent avoidance of a policy which has support of the position announced by this once begun to run. But the meaning of the court. We are also very clear that this po- word is sufficiently satisfied by reading it sition is also more in consonance with jus- as void or inoperative for the time being." tice and sound reasoning. It would be a harsh and unjust rule to hold that a condition which in nowise contributed to the loss should work a forfeiture of the insurance. The principle of the old legal maxim, Cessante ratione legis, cessat ipsa lex, would seem to be applicable. No maxim of construction of contracts is better established, or has been more generally approved, than that of Lord Coke, 'He who considers merely the letter of an instrument goes but skin deep into the meaning,' and too minute a stress should not be laid on the strict and precise signification of words, to the destruction of the intention of the parties and the spirit of the contract." To this quotation of the court from Lord Coke the counsel for the plaintiff in this case adds this citation from St. Paul: "The letter killeth, but the spirit giveth life." II. Cor. III. 6. It will be noted that this is the standard form of policy established by statute, and Phillips on Insurance, § 975, says: "After the policy has begun to run so the premium has become due, it assuredly is but equitable that a temporary noncompliance should have effect only during its continuance. To carry it further is to inflict a penalty on the assured and decree a gratuity to the insurer, who is thus permitted to retain the whole premium when he has merited but part of it." V. Sumter Tobacco Warehouse Co. Phoenix Assur. Co. 76 S. C. 76, 10 L.R.A. (N.S.) 736, 121 Am. St. Rep. 941, 56 S. E. 654, 11 Ann. Cas. 780, where the defense was that the hazard was increased contrary to the terms of the policy, which made it void, says: "The contract of insurance must, like other contracts, be enforced according to its terms. In construing such contracts, however, courts should endeavor In Tompkins v. Hartford F. Ins. Co. 22 to ascertain from the language used, in the App. Div. 380, 49 N. Y. Supp. 184, where light of the surrounding circumstances and the policy provided that it should be entire- the nature of the business, the safeguards ly void if the property became mortgaged, which the parties intended to place around and where the property was mortgaged, but themselves. It may be reasonable to supthe mortgage was paid off before the loss, pose an insurance company would desire to the New York court says: "The defendant reserve the valuable right of canceling a contends that the policy was avoided by policy, even on a temporary increase of the giving of the first mortgage. The court hazard if known to it at the time, because below found, and we have held, that the such change might result in loss; but it second mortgage extinguished the first. is not reasonable to impute to it a purpose Even if the policy would have been void or desire to curtail its own revenue by canand inoperative during the life of the first celing a policy on account of a temporary mortgage, it revived on the death of that increase of hazard which has come to an mortgage. This principle is well settled end without loss, and from which it could in the analogous case of a marine policy, not possibly suffer detriment. Hence, there may be ground for holding a temporary increase of hazard forbidden by the policy to avoid the insurance without action or even knowledge on the part of the company, when the loss resulted from that cause, but there is no ground for such a holding when the increase of hazard came to an end without loss. The greater weight of authority supports this conclusion." stipulation is given effect so that this purpose and intent of the parties can be carried out, there is no reason for extending it further. In other words, it was the intent of the parties to prevent an increase of the risk to the insurer, and this can be amply protected by holding that the policy is only void if the mortgage is in force at the time of the loss. Instead of increasing the risk, this interpretation of the contract decreases it, because while the mortgage is in existence there is no liability on the part of the insurance company, and Silver v. London Assur. Corp. 61 Wash. if a loss then ensues there can be no re593, 112 Pac. 666, also sustains the proposi- covery, and when the mortgage is canceled tion that the removal of the temporary the insurer assumes no responsibility that breach of the condition revives the policy; it was not liable for when the policy was also Insurance Co. of N. A. v. Pitts, 88 | first issued. Nor is this construction Miss. 587, 7 L.R.A. (N.S.) 627, 117 Am. | against public policy, as offering an induceSt. Rep. 756, 41 So. 5, 9 Ann. Cas. 54. The last line in the above quotation reiterates what is said above by Cooley, Phillips, May, and Elliott in their works on Insurance, and is a correct statement. In Nebraska, where a policy contained a provision making it void if the property should be mortgaged, it was held that the payment of the mortgage revived the policy. State Ins. Co. v. Schreck, 27 Neb. 527, 6 L.R.A. 524, 20 Am. St. Rep. 696, 43 N. W. 340; Omaha F. Ins. Co. v. Dierks, 43 Neb. 473, 61 N. W. 740; Johansen v. Home F. Ins. Co. 54 Neb. 548, 74 N. W. 866. McClure v. Mutual F. Ins. Co. 242 Pa. 59, 48 L.R.A. (N.S.) 1221, 88 Atl. 921, holds the same general principles as the authorities above cited. In that case the defense was that certain prohibited articles were kept upon the premises. The policy provided that it should be void if they were. The court held that, if they were removed before the fire, and in nowise contributed to the loss, the policy was revived. Independent of the overwhelming weight of authority, there can be no reason to release the insurance company from liability for a loss which accrued after the forbidden mortgage was canceled, the mortgage having in nowise any connection with the loss. "For the letter killeth, but the spirit giveth life." The terms of a policy of insurance are construed against the insurer and in favor of the insured, and this is true although a standard form of policy has been adopted under legislative enactment. Gazzam v. German Union F. Ins. Co. 155 N. C. 330, 71 S. E. 434, Ann. Cas. 1912C, 362. The stipulation that the policy shall be void if the property "be or become encumbered by chattel mortgage" was inserted for the benefit of the insurer, upon the idea that, if the owner of the property was permitted to insure and then mortgage the property, it would be an inducement to him to destroy the property by fire, and if the ment to the insured to destroy his property, because, if destroyed while the mortgage is in force, the total loss falls on him. See also Insurance Co. of N. A. v. Pitts, 88 Miss. 587, 7 L.R.A.(N.S.) 627, 117 Am. St. Rep. 756, 41 So. 5, 9 Ann. Cas. 54; Sumter Tobacco Warehouse Co. v. Phoenix Assur. Co. 76 S. C. 76, 10 L.R.A. (N.S.) 737, 121 Am. St. Rep. 941, 56 S. E. 654, 11 Ann. Cas. 780, and cases cited. Our cases on the subject, which are collected in Roper v. National F. Ins. Co. 161 N. C. 151, 76 S. E. 869, were decided correctly, because in them the stipulation was violated at the time of loss, and it was properly decided that the policy was void. Nor is this construction in conflict with the cases of Fishblate v. Fidelity & C. Co. 140 N. C. 589, 53 S. E. 354; Bryant v. Metropolitan L. Ins. Co. 147 N. C. 181, 60 S. E. 983; Alexander v. Metropolitan L. Ins. Co. 150 N. C. 536, 64 S. E. 432; Gardner v. North State Mut. L. Ins. Co. 163 N. C. 367, 48 L.R.A. (N.S.) 714, 79 S. E. 806; and Schas v. Equitable L. Ins. Co. 166 N. C. 55, 81 S. E. 1014, where a representation actually false and material was held to vitiate the policy, although the misrepresented fact may not have contributed to the loss, for the insurance company is entitled to know the facts about which inquiry is made in order to decide whether it will enter into the contract or not, and those things are material for it to know which would naturally affect its judgment or decision as to making the contract, or which, by its inquiries, it has made material; the company being the judge of what it should know in order to determine whether or not it will issue the policy. The demurrer should have been overruled. NORTH DAKOTA SUPREME COURT. | sale and before the expiration of the time right of purchaser. Where property is sold on the foreclosure of a usurious mortgage, one who purchases at the foreclosure sale and pays his money without notice of the usurious character of the mortgage is protected as a bona fide purchaser of the property; and the same is true where, after the foreclosure Usury in mortgage as affecting rights of purchaser or redemptioners under foreclosure. It has been held that foreclosure under a power of sale given in the mortgage cuts off the right of the mortgagor to raise the question of usury, especially where the sale had the judicial sanction of a court of last resort in the state where the land was situated. Edgell v. Ham, 35 C. C. A. 584, 93 Fed. 759. A bill by the mortgagor after a foreclosure of the mortgage and sale of the land, and the issuing of a defective deed to the purchaser thereof, which ignores the sale, and treats the mortgage in all respects as if no attempt at forecloseure had been made, and which asks for a redemption and the cancelation of a mortgage, alleging usury and full payment, was dismissed in Welsh v. Coley, 82 Ala. 363, 2 So. 733, where the bill was not filed until the amount due the mortgagee on the mortgage, according to its face, was paid by the purchaser. It is stated that by waiting until after the purchaser had paid the full sum shown in the note and mortgage to be due, the mortgagor lost all right to claim usury. In Perkins v. Conant, 29 Ill. 184, 81 Am. Dec. 305, the mortgagee had exercised the power of sale by having the land bid off by an agent, conveying it to the agent, and then receiving from the agent a reconveyance of the premises to himself. The action was one to recover the usurious interest from the mortgagee. A recovery was denied on the theory that usurious interest that is paid cannot be recovered. It is stated that when the usurious interest was collected, through the foreclosure, it was by virtue of authority emanating directly from the mortgagor to make the sale for the purpose; and this sale having been made by authority from himself, it must be regarded as made with his assent and as his own voluntary act, as though he had made the sale in person and then paid the money. This case was approved in Tyler v. Massachusetts Mut. L. Ins. Co. 108 Ill. 58, and of redemption, a person buys the interest or estate of the mortgagee, who bids in the property at the sale. 2. The sheriff or other person who conducts the sale on the foreclosure of a mortIgage is the agent of the purchaser or holder of the certificate or of a subsequent lienor who has redeemed or obtained an assignment of such certificate from him, to receive the redemption money only, but as such agent has no authority to waive the payment of any part thereof; and, where a prior redemptioner or purchaser has paid taxes since the foreclosure of the mortgage, such redemptioner, in case of an attempted redemption from him, is entitled to the payment, not merely of the principal debt, but a second lien holder held not entitled to urge usury in the debt of a first lien holder who had become a purchaser at a sale held under the trust deed securing his debt. In Chapin v. Billings, 91 Ill. 539, one of the holders of a note secured by trust deed purchased the land upon a sale by the trustees. In an action by such purchaser in forcible entry and detainer to obtain possession of the land against the maker of the trust deed, there was held to be no right to raise the question of usury. It is stated that in forcible entry and detainer the title cannot be questioned; that the defense of usury sought to be interposed is one which must be interposed in equity if at all. The majority of cases in which this question is discussed proceed upon the theory that a sale of the mortgaged premises by virtue of a power contained in the mortgage does not necessarily preclude the mortgagor from raising the question of usury. It has been expressly held that the foreclosure of a usurious mortgage by sale under the power does not prevent the granting of relief. Exley v. Berryhill, 37 Minn. 182, 33 N. W. 567. The question, in the cases which proceed upon the theory that the mortgagor may show usury after a sale, resolves itself, so far as the present note is concerned, into one of determining the purchasers against whom it may be shown. Under a statute making the usurious contract and all securities given therefor absolutely void, one not a bona fide purchaser occupies no better position than the mortgagee. Accordingly it is held that the assignee of a purchaser at a foreclosure sale made under a power contained in a usurious mortgage, who does not show that either he or his assignor was a bona fide purchaser, cannot maintain an action to restrain the mortgagor from committing waste upon the mortgaged premises during the time allowed for redemption. Jordan v. Humphrey, 31 Minn. 495, 18 N. W. 450. It is stated by the court that it was not sufficient that the purchaser or his assignee did not appear record of the taxes also; and the issuance of a certificate by the sheriff without such payment and without the knowledge of and ratification by the said prior redemptioner will not be binding upon him. Same notice of redemption ing. 3. Chapter 127 of the Laws of 1907 amends § 142, Rev. Codes 1905, and provides that notices of redemption shall be recorded with the register of deeds, rather than filed; and such act is not unconstitutional, though applied to mortgages which were executed before its enactment. The requirement that such notice shall be recorded rather than filed in no way impairs the obligation of the contract of the mortgagor, or deprives him of property without due process of law. (December 12, 1914.) to have had notice of the circumstances of the loan, or the usurious character of the transaction; it should have appeared also that a valuable consideration was in fact paid upon the purchase or assignment. A bona fide purchaser of the note and mortgage before maturity, who afterwards received notice of the usury, and subsequently sold the property under the power contained in the mortgage, and became the purchaser, is not a bona fide purchaser as against the mortgagor, and therefore the mortgagor may take advantage of the usury and nave the transaction declared void. Scott v. Austin, 36 Minn. 460, 32 N. W. 89, 864. The original mortgagee, who had purchased through a trustee at the sale held under his mortgage, was held affected by usury in the debt secured by the mortgage, and the mortgagor entitled to recover the land in ejectment. Jackson ex dem. Sternberg v. Dominick, 14 Johns. 435. It is stated that the mortgage here forms a part of the purchaser's title, and he, being fully apprised that the mortgage was void in law, stands in no better situation than if no foreclosure had taken place. It is the theory of some cases, under a statute making a trust deed given to secure a usurious debt void, at least, at the option of the maker, that a power of sale contained in such trust deed is void also, and the purchasers from the trustees under the trust deed can acquire no legal title which will sustain an ejectment by them against the maker of the trust deed. Pottle v. Lowe, 99 Ga. 576, 59 Am. St. Rep. 246, 27 S. E. 145. It is stated that the purchaser under the trust deed did not evoke any application of the doctrine of estoppel against the maker of the trust deed, nor did he by evidence attempt to show that he purchased in ignorance of the usury, and therefore occupied the position of innocent purchaser, entitled to protection by virtue of such doctrine. Under this theory, even bona fide purchasers are not protected. Only a syllabus of the case of Wacasie v. PPEAL by defendants from a judgment A of the District Court for Pierce County in plaintiffs' favor in an action to determine adverse claims to certain real estate which defendants claim under certain mortgages, foreclosures, and mechanics' liens. Reversed. Statement by Bruce, J.: This is an action to determine adverse claims to real estate, the complaint being in the statutory form. The appellant and defendant asserts the following claims: (1) A sheriff's deed issued to it as a purchaser and redemptioner from the Berwick State Bank on the foreclosure by such bank of a prior mortgage, and on which foreclosure the bank was the purchaser; (2) two mortgages of $1,400 and $50 and a mechanics' lien on which a foreclosure is asked in case Radford, Ga. 82 S. E. 442, appears. In this it is stated that the grantee in a security deed tainted with usury cannot, as against the maker thereof, convey a good title even to a person who takes bona fide before maturity, for value, and without notice of the fact of usury. It is further stated that the mere fact of making the deed did not estop the grantor from asserting its invalidity as against one who purchased it at a sale made in accordance with the power contained in the deed, but the conduct of the maker of the deed in connection with the deed itself may be such as to work an estoppel. Under a statute making void a usurious contract and any securities given therefore, a deed of trust given to a trustee to secure the payment of a mortgage debt is void, and no subsequent act of the trustee, such as a foreclosure and sale under the power given in the trust deed, can render it valid; and therefore a purchaser under such a sale obtains no right to be relieved from the effect of usury. Den ex dem. Shober v. Hauser, 20 N. C. 222 (4 Dev. & B. L. 91). this is true even as to a purchaser without notice of the usury. Ibid. And But usury has been held not available against a bona fide purchaser. Thus, a bona fide purchaser from the mortgagee, who purchased at his foreclosure sale, is protected against any claim of usury in the note secured by the foreclosed mortgage after the time for redemption has expired. Holmes v. State Bank, 53 Minn. 350, 55 N. W. 555. It is stated that after the sale and during the time for redemption the purchaser had a conveyable interest in the land, that it was this interest in the land, and not the note and mortgage, which the purchaser from him bought. The statute under which this case was decided is not set out. In Jordan v. Humphrey, supra, the court, after referring to the rule that usury is not available against a bona fide purchaser where the debtor suffers the property to be regularly sold, states that this rule may be supported the sheriff's deed is held invalid. The plaintiff's seek to avoid the sheriff's deed by proof of a certificate of redemption theretofore issued to them. This certificate the defendant in turn seeks to avoid by proof that it is wrongfully issued without the payment of certain taxes and liens which were necessary to the redemption, and by proof of its subsequent receipt of the sheriff's deed. Plaintiffs further contend that the mortgage was usurious on the foreclosure of which the sheriff's deed was issued. The trial court found the issues for the plaintiffs and entered judgment quieting the title to the real estate in them. From this judgment the defendant has appealed and has asked for a trial de novo. upon the principle of equitable estoppel as well as upon grounds of public policy. A purchaser of the mortgage who subsequently sells the mortgaged premises by virtue of a power contained in the mortgage, and thereafter purchases from the purchaser at the foreclosure sale, and receives a conveyance therefor, is protected against the claim of usury in the original debt. Jack son ex dem. Bartlett v. Henry, 10 Johns. 185, 6 Am. Dec. 328. The statute providing for the method of selling mortgaged property under a power of sale contained in the mortgage provided for a notice, and this notice is stated by the court to be in tended for the mortgagor as well as for the world; that he has an opportunity to apply to chancery if he wishes to arrest the sale on the ground of usury, and if he stands by and suffers the sale to go on and an innocent party to purchase unconscious of the latent defect, and without any means of knowing it, the purchaser has the preferable claim in equity to protection. The statute under which Jackson ex dem. Bartlett v. Henry was decided declared that a sale had as provided by statute "shall not be defeated to the prejudice of any bona fide purchaser thereof in favor or for the benefit of any person claiming the equity of redemption." A bona fide purchaser for a valuable consideration without notice of the usurious character of the debt secured by the mortgage at the foreclosure of which he purchased is not affected by the usury. McNeill v. Riddle, 66 N. C. 290. The statute under which this decision was rendered is not set out in the opinion, but the court, after referring to the decision in Den ex dem. Shober v. Hauser, supra, states that after the decision in the earlier case a statute changed the law as to purchasers without notice. Although no regular foreclosure of the mortgage be shown, yet the assignee of a mortgagee, being in possession, being shown to be a bona fide purchaser, cannot be affected by usury in the original transaction. Messrs. J. A. Hosp, George A. Bangs, and George R. Robbins, for appellants: Just because plaintiff Anna G. Heitsch refused to comply with the statute, and lost her property, is no reason why a court of equity should interfere and save her from her own folly. She had the right to redeem, but failed to do so. 11 Cyc. 1324; 27 Cyc. 1503, notes, 54, 55; 11 Am. & Eng. Enc. Law, 213; 17 Am. & Eng. Enc. Law, 1036; 3 Freeman, Executions, § 314; Wiltse, Mortgage Foreclosure, S 1082; State ex rel. Brooks Bros. v. O'Connor, 6 N. D. 285, 69 N. W. 692; Nichols v. Tingstad, 10 N. D. 172, 86 N. W. 694; Grandin v. Emmons, 10 N. D. 223, 54 L.R.A. 610, 88 Am. St. Rep. 684, 86 N. W. 723; Lynch v. Burt, 67 C. C. A. 305, 132 Fed. 417; Reilly v. Phillips, 4 S. D. 604, 57 N. Jackson ex dem. Merrit v. Bowen, 7 Cow. 13. In Elliott v. Wood, 53 Barb. 285, a second mortgagee, who had purchased under his foreclosure sale, and who subsequently, upon the foreclosure of the first mortgage, became the purchaser upon that sale also, without notice of the usurious character of the first loan, was held not to be affected by the usury in such loan. But if the purchaser at the foreclosure sale has notice of the usury, a bona fide purchaser from him thereafter is not protected against the setting up of usury by the mortgagor, under a statute providing that "every sale, pursuant to a power as aforesaid, and conducted as herein prescribed, made to a purchaser in good faith, shall be equivalent to a foreclosure and sale under the decree of a court of equity so far only as to be an entire bar of all claim or equity of redemption of the mortgagor, his heirs and representatives, and of all persons claiming under him or them, by virtue of any title subsequent to such mortgage." Hyland v. Stafford, 10 Barb. 558. The action here was one of trespass by the original owner of the land, who was still in possession, and under the rule he was entitled to recover unless the purchaser showed a legal title in himself sufficient to support an action of ejectment at his suit. But see Holmes v. State Bank, 53 Minn. 350, 55 N. W. 555, and Chapin v. Billings, 91 Ill. 539, supra. A purchaser at a foreclosure sale without notice of the usurious character of the loan secured by the mortgage being foreclosed is an innocent purchaser, and acquires rights superior to a vendor of the mortgagor, who claims a vendor's lien upon the mortgaged premises, especially where the vendor at the time of the foreclosure sale not only made no objection to the sale, but stated to the purchaser and others that Hoots v. he had no claim upon the land. Williams, 116 Ala. 372, 22 So. 497. W. A. E. |