We concur: VAN FLEET, J.; GAROUTTE, J.

(4 Cal. Unrep. 984)

MCMAHON ▼. THOMAS et al. (No. 15,699.) (Supreme Court of California. March 13, 1895.) TRANSFER OF NOTE-BONA FIDE HOlder.

A regularly authorized insurance agent, to whom is forwarded by his company a policy to be delivered to the assured, together with the latter's note for collection or discount, and who discounts it without any knowledge of the soliciting agent's alleged fraudulent representations in procuring the policy, and who has no interest in the insurance or connection with the soliciting agent except an agreement that he will discount notes taken by the latter, is a bona fide holder of the note, and the soliciting agent's misrepresentations are not available as a defense against him.

Department 2. Appeal from superior court, San Benito county; N. A. Dorn, Judge.

Action by Thomas McMahon against John Thomas and Agnes C. Thomas on a promissory note. From an order granting plaintiff's motion for a new trial after verdict and judgment in favor of defendants, defendants appeal. Affirmed.

D. W. Burchard and Montgomery & Jefferson, for appellants. Briggs & Hudner, for respondent.

HENSHAW, J. Appeal from an order granting plaintiff a new trial. The action was on a promissory note, and was tried with a jury. Defendants pleaded fraud in the procurement of the instrument, setting up that one Burns, as agent of the Mutual Life Insurance Company of New York, represented to them that his company would upon application issue to John Thomas a policy of life insurance, under which, by making annual premium payments of $366 for 15 years, he would then be entitled to $5,000, "death or no death," and that should he pay such premiums for three or any greater number of years, and then decide to abandon his insurance, he would receive on demand the amounts paid, with interest at the rate of 4 per cent. per annum. Upon these representations, he signed an application for a "15 Pay Ins. Life W. R. O. R. 15, whole Prem." policy. He did not understand these figures and abbreviations, and did not ask their meaning, but was informed by Burns that his signature to the application would bring the specified policy. Burns further in

that time and day, it would be necessary for him to execute the promissory note, but that, if the policy was not as represented, the note would be returned. These charges are supported by the evidence of defendants, and denied by Burns. Plaintiff was indorsee of the note, and, to bind him, it is pleaded that he took it with full knowledge of the acts and facts constituting the fraud. Plaintiff was a resident agent of the insurance company. Burns seems to have been a visiting or traveling agent. As to his connec tion with the matter, plaintiff testified (and the evidence is uncontradicted and corroborated) that he had nothing to do with the procurement of the application or note; that policy holders at their own risk; that he re the agents took notes from applicants or ceived from the general office in San Fran cisco a policy for delivery to Thomas, and delivered it; that he received also from the general office this note and another for collection or discount, and believing the mak ers to be good, and knowing nothing of any difficulty or disagreement, he discounted the notes himself, and thus became owner of the one in suit; that he had no interest in the insurance of defendants when he purchased the note, and was not jointly interested with Burns in the profits of insurance Burns might obtain, but merely had an arrangement whereby he was to receive a specified discount on any notes which Burns might take, and which plaintiff should cash after acceptance of the application; and, finally, that he first heard of defendants' dissatisfaction and charges after he had bought and paid for the note.

The court granted a new trial upon the ground, among others not necessary to consider, that there was no evidence that plaintiff, at the time he purchased or discounted the note sued on, was cognizant of any fraud in its procurement, or any dissatisfaction on the part of defendants with the policy received by them. The ground of this ruling is fully supported by the record. No evi dence therein contained raises even a conflict upon the proposition that plaintiff was an innocent, bona fide holder for value and before maturity. The order appealed from is affirmed.

We concur: TEMPLE, J.; MCFARLAND, J.

Commissioners' decision. Department 2. Appeal from superior court, Santa Barbara county; W. B. Cope, Judge.

Action in claim and delivery by Fernando Cardenas against John F. Miller to recover a quantity of barley, or its value, and damages. From a judgment in favor of defendant and order denying a new trial, plaintiff appeals. Affirmed.

B. T. Thomas, for appellant. A. Leslie and Richards & Carrier, for respondent.

SEARLS, C. This is an action in claim and delivery, to recover a quantity of barley, or its value, and damages. The cause was tried by the court without a jury, and findings in writing made and filed, upon which judgment was entered in favor of defendant. Plaintiff appeals from the judgment, and from an order denying his motion for a new trial. The complaint is in the usual form in claim and delivery. The answer denies many of the allegations of the complaint, and justifies the taking and holding the barley as the assignee in insolvency of one A. J. Drennan, who is alleged to have been the owner thereof. At the trial it was shown that in 1892 A. J. Drennan raised a crop of barley upon certain land in Santa Barbara county, which he leased from two several individuals, giving one-fifth of the crop to the owners of the land in lieu of rent. On the 11th of March, 1892, Drennan executed in due form a chattel mortgage to Fernando Cardenas, the plaintiff and appellant herein, upon his share of the growing crop of barley, to secure the payment of $200, with interest at 1 per cent. per month. The mortgage contained the affidavit of the parties, and was duly acknowledged, but was not recorded until the 28th day of June, 1892, when it was duly recorded. John F. Miller, the defendant and respondent herein, brought suit against Drennan to recover money due upon a promissory note dated in 1891, issued an attachment, etc., which was levied upon the interest of Drennan in the growing crop on the 23d day of June, 1892. The levy was made by the sheriff by leaving personally with the defendant Drennan a copy of the writ of attachment, together with a notice, etc, as provided by subdivision 5 of section 542, Code Civ. Proc., and by placing a keeper in charge of the growing crop. Defendant Miller had actual notice of the chattel mortgage at the time of suing out and service of his writ of attachment. On the 30th day of June, 1892, A. J. Drennan filed his petition in insolvency in the superior court in and for the county of Santa Barbara, and on the same day an order adjudicating him an insolvent, directing the sheriff to take possession of his estate, staying all proceedings against said insolvent, directing publication, etc., was duly entered. The sheriff took possession of the property,

and placed B. F. Nosser in possession in place of S. C. Tyler, who had acted as keeper for the sheriff under the attachment. Such proceedings were thereafter had in the insolvency proceedings that on the 13th day of August, 1892, John F. Miller, the defendant herein, was appointed assignee of the estate of said insolvent, and on the same day received an assignment of all the property of the estate from the clerk of the superior court. The barley was harvested, threshed, and sacked by plaintiff in the latter part of August. There is testimony tending to show that this was done by consent of the sheriff or his keeper. Plaintiff, however, claimed the right so to do under his mortgage. About the 1st of September, 1892, defendant, as assignee, took possession of the barley, and removed it, offering to pay plaintiff his expenses for harvesting and threshing, amounting to about $300, but refusing to pay $200, claimed by the plaintiff as due on his mortgage. The attachment having been levied June 23, 1892, and, the chattel mortgage not having been recorded until five days thereafter, viz. June 28, 1892, the question arises, has the lien of the attachment priority over that of the mortgage in favor of an attaching creditor who had actual notice of the existence of such chattel mortgage? If this question be answered in the affirmative we are of opinion the judgment of the court below should be affirmed, and, if a negative answer be returned, such judgment should be reversed. There are some minor points made by counsel for appellant, but upon examination it is believed that they are either not sustained by the record or do not call for a reversal.

Under the doctrine enunciated in Beamer v. Freeman, 84 Cal. 554, 24 Pac. 169, the lien of the attachment, if prior to that of the mortgage, though such attachment was dissolved by the proceedings in insolvency taken within one month after the attachment lien attached, did not inure to the benefit of the holder of the chattel mortgage, but to the benefit of general creditors of the insolvent; and the assignee in insolvency was, as the trustee of the creditors, entitled to possession of the property in dispute. The contention of appellant is that the defendant, having had actual notice of the existence of plaintiff's chattel mortgage, was bound by it as effectually as if it had been placed on record before he instituted his suit and caused the writ of attachment to issue and be levied upon the mortgaged property, and in support of this contention we are referred to section 1217 of the Civil Code, which is as follows: "An unrecorded instrument is valid as between the parties thereto and those who have notice thereof." The term "instrument," in its broad sense, includes formal or legal documents in writing, including contracts, deeds, wills, bonds, leases, mortgages, etc.

In the law of evidence it has a still wider meaning, and includes not merely documents, but witnesses, and things animate or inanimate, which may be presented for inspection. 1 Whart. Ev. § 615; Black, Law Dict. tit. "Instrument." It is a familiar rule, however, that in construing a statute, words used therein, and their meaning, are to be construed with reference to the subject-matter embraced in such statute. Chapter 4 of the Civil Code, in which section 1217 occurs, relates to the recording transfers of real property, what may be recorded, mode of recording, proof and acknowledgment of instruments, and effect of recording, or the want thereof. The first section of the chapter (section 1158, Civ. Code) provides that "any instrument or judgment affecting the title to or possession of real property may be recorded under this chapter." The entire chapter deals with real property, and the recording of instruments relating thereto. It follows that section 1217, the last section in the chapter, must be held to relate to the same subjectmatter. This intention is made more manifest by section 1164 of the same chapter, which provides that "transfers of property in trust for the benefit of creditors, and transfers or liens on property by way of mortgage, are required to be recorded in the cases specified in the titles on the special I relation of debtor and creditor, and the chapter on mortgages respectively." This last section tends to show the understanding and intent of the lawmakers to relegate the manner of recording in the specified cases to the several statutes pointed out and which provide therefor.

Turning to the chapter on mortgages, and we find that, as to chattel mortgages, or mortgages on personal property, the method of their execution is provided, as well as the effect of nonrecordation, differing essentially from cases of mortgages on real property. Section 2957 is as follows: "A mortgage of personal property is void as against creditors of the mortgagor and subsequent purchasers and incumbrancers of the property in good faith, and for value, unless (1) It is accompanied by the affidavit of all the parties thereto, that it is made in good faith and without any design to hinder, delay, or defraud creditors. (2) It is acknowledged or proved, certified and recorded in like manner as grants of real property." It will be perceived that under the section quoted the mortgage, unless it is recorded, "is void as against the creditors of the mortgagor and subsequent purchasers and incumbrancers of the property in good faith and for value." The defendant was a creditor of the mortgagor. In order for the mortgage to be void against subsequent purchasers and incumbrancers, it is requisite that they be such in good faith; that is to say, with an honest intention to obstain from taking any unconscientious advantage of another. together

v.39p.no.7-50

with an absence of all information or belief of facts which would render the transaction unconscientious. The terms "good faith" and "bona fide" purchasers are borrowed from equity jurisprudence, and it is said must be interpreted accordingly. Wells, Fargo & Co. v. Smith, 2 Utah, 52; Alden v. Trubee, 44 Conu. 459; De Mott v. Starkey, 3 Barb. Ch. 406; Spicer v. Waters, 65 Barb. 231. The foregoing remarks apply to chattel mortgages under the statutes, and where no delivery of possession of the property mortgaged to the mortgagee has been made.

The contention of appellant is that the term "creditors," as used in the statute quoted supra, is modified by the terms "in good faith and for value," equally with the words "subsequent purchasers and incumbrancers." In other words, the position of appellant is that creditors, like mortgagees and subsequent purchasers, must be such in good faith, and that there can be no good faith in such a case where the creditor, as here, has actual notice. Chattel mortgages, in this state, which are not recorded, are absolutely void, except in the cases provided for in the statute. Recording the instrument takes the place of the delivery of possession of the mortgaged chattels. Berson v. Nunan, 63 Cal. 550. Their validity depends as much upon their proper acknowledgment and registration as upon their execution and delivery. Under the law of this state as it formerly existed, such mortgages, unless recorded, were void as to all the world except the parties thereto. Now they are valid as to all the world except the two enumerated classes, viz. creditors, and subsequent purchasers and incumbrancers of the property in good faith and for value. The term "creditor" signifies "a person to whom a debt is owing by another person called the debtor." Black, Law Dict. In the general and extensive sense of the term, he is a creditor who has a right by law to demand and recover of another a sum of money on any account whatever. Stanly v. Ogden, 2 Root, 261. The term "good faith," as applied to a purchaser, ex vi termini, means one who purchases without notice and for value. Black, Law Dict. This term has no natural application to a creditor who is of necessity such for value; and without value, either express or implied, he is not a creditor. No sufficient reason is discerned for supposing that the "lawmakers" intended to modify the term "creditor" by the language naturally applying to subsequent purchasers and incumbrancers. The term "creditors" is general, and applies to creditors existing prior to the mortgage as well as subsequent. A prior creditor could not have had notice, at the time of advancing his money or other value to a debtor, of a mortgage which did not then exist, and as against him the equities which may be invoked against a subsequent purchaser or incumbrancer with notice and for value have no existence. Non con

V. E. Shaw and Chas. Wellborn, for appellant. Trippet and Boone & Neale, for respondent.

VANCLIEF, C. On June 7, 1893, the Consolidated National Bank, incorporated under the national banking laws of the United States, was doing a general banking business in the city of San Diego, in this state, but on June 21, 1893, failed and suspended payment; and on July 23, 1893, the defendant was appointed receiver of said bank. On said 7th day of June, 1893, the plaintiff deposited with that bank for collection a draft in her favor drawn by the Mutual Benefit Life Insurance Company of Newark, N. J., on the National State Bank of Newark, N. J., for the sum of $1,521.42. The bank of San Diego refused to accept the draft as a deposit, but advanced to plaintiff on her check, at the time the draft was taken for collection, $21.42, and charged her with this sum on its books as an overdraft. At the same time the plaintiff directed the bank of San Diego to deposit the proceeds of the draft when collected in the Savings Bank of San Diego County, whose place of business was in the same rooms as that of said Consolidated National Bank, but later, on the same day, countermanded this order, and directed said bank to wait until she returned from a visit she intended to make to Oceanside, from which she expected to return in about three weeks, and that she would then give detinite instructions as to what should be done with the proceeds of the draft. Said bank immediately forwarded the draft by mail to its correspondent, Kuntze Bros., bankers in New York, for collection, with instructions to collect and place to its credit. On June 14, 1893, Kuntze Bros. collected the draft, and credited the proceeds as instructed, and immediately notified said bank thereof by mail; and the notice was received by the bank on June 20, 1893, when it placed to the credit of the plaintiff on its books the sum of $1,521.42, and on the following day (June 21st) failed and suspended payment. The plaintiff had no notice that the draft had been collected, nor that the bank had credited her on its books with the sum collected by Kuntze Bros., until after the failure of said bank. For a long time before the failure, said Consolidated Bank, including all the times of the transactions above stated, had a running account with Kuntze Bros., in which it was credited with collections made for it by the latter, and charged with its drafts against such collections, some of which drafts were paid and charged after the collection of the draft in favor of plaintiff; but at all times after the collection of this draft said Consolidated Bank was credited in said account by a sum largely in excess of the amount of this draft, and also largely in excess of the total amount of drafts drawn by Isaid bank on Kuntze Bros. Since the failure of said bank, the defendant, as receiver

thereof, has collected from Kuntze Bros. the balance of said account to the credit of said bank, amounting to about $6,000, which, among other items, included that of $1,521.42, the proceeds of the draft in favor of plaintiff, and mingled the same with the funds of the bank which came into his hands as receiver. This action was brought to recover the sum of $1,500 as the proceeds of said draft, on the theory that defendant held in trust for the plaintiff; and, having found the facts substantially as above stated, the court below rendered judgment in favor of plaintiff for the sum demanded.

The defendant brings this appeal from the judgment on the judgment roll, without a bill of exceptions, and contends that, upon the facts found, the judgment should have been in favor of defendant. I think, however, the judgment is clearly right. The relation between the plaintiff and the bank resulting from the original contract for the collection of the draft was that of principal and agent, giving the bank no title to the draft or to the proceeds thereof; and that relation continued to exist until after the failure of the bank, because the obligation of the bank to collect the money on the draft had not been completely discharged at the time of the failure. The receipt of the money on the draft by the bank's subagent, Kuntze Bros., was not a collection of it by the bank; and the bank had no right to credit plaintiff with the money proceeds of the draft on its books and thereby to change its relation to the plaintiff from that of agent to that of debtor, until after it had actually received the money from Kuntze Bros. At the time of the failure of the bank the cash proceeds of the draft in the hands of Kuntze Bros. was the property of the plaintiff, and as such came directly from Kuntze Bros. to the hands of the receiver, who holds it in trust for plaintiff, it being sufficiently distinguishable from the funds of the bank; and therefore it is not a part of the assets of the bank to be distributed to its creditors. The rule of law applicable to the facts of this case is stated and exemplified by Mr. Morse in his work on Banking (section 568, subd. d), as follows: "A bank, upon receiving from L. a draft indorsed For collection on his account,' provisionally credited him with it, presented it for payment, and surrendered it to the drawee on receiving his check for the amount, but, instead of demanding the money thereon, had the check certified as good, and on the same day suspended payment. The next day the check was collected, and the money mingled with other money in the hands of the receiver. It was decided that he held it in trust for L. The bank had no authority to take anything but money. Receiving a check and having it certified was not a completion of its agency to collect. That duty terminated only with payment of the check, and only then did the authority to credit arise if the bank was a