For a full discussion of the liability of masters to inferior servants for the acts of superior servants, see extended note to Fox v. Sandford, 67 Am. Dec. 590.

MASTER AND Servant - Delegation of AUTHORITY BY MASTER-LIABILITY TO SERVANT, A master owes certain duties to his employees, and a delegation by him of them to some third person will not relieve him for a failure to discharge such duties: Dayharsh v. Hannibal etc. R. R. Co., 103 Mo. 570; 23 Am. St. Rep. 900; International etc. R'y Co. v. Kernan, 78 Tex. 294; 22 Am. St. Rep. 52.

MASTER AND Servant—WHAT RISKS ASSUMED BY SERVANT. — A servant assumes all the risks of the employment which are obvious, and which he may fairly be supposed to understand: Ciriack v. Merchants' etc. Co., 151 Mass. 152; 21 Am. St. Rep. 438; Nadau v. White River etc. Co., 76 Wis. 120; 20 Am. St. Rep. 29, and note; Sweet v. Ohio Coal Co., 78 Wis. 127; Coal Co. v. Wombacher, 134 Ill. 57. A servant assumes the risk of the negligence of fellow-servants: Hefferen v. Northern Pac. R. R. Co., 45 Minn. 471.

Master and SERVANT-LIABILITY OF MASTER, HOW DETERMINED. — It is the character of the employment, and not the instructions given by the master to the servant, that must determine the latter's liability: McClung v. Dearborne, 134 Pa. St. 396; 19 Am. St. Rep. 708; Harrison v. Detroit etc. B. B. Co., 79 Mich. 409; 19 Am. St. Rep. 180, and note.

SARLES V. MOGEE.

[1 NORTH DAKOTA, 365.]

MORTGAGES - PRIOR AND SUBSEQUENT MORTGAGEES NOTICE. A prior mortgagee is not bound to protect the equitable rights of a subsequent mortgagee in the property of which the former has no notice, actual or constructive. The recording of the subsequent mortgage is not such notice so as to prevent the prior mortgagee from releasing from the lien of his mortgage any property upon which the subsequent mortgagee has no lien.

Edgar W. Camp, for the appellant.

John S. Watson, for the respondent.

CORLISS, C. J. Viewed in the light of the record, the plaintiffs sought and obtained against the defendant unwarranted relief, by invoking that equitable principle whose peculiar office it is to create a duty enforceable in a court of equity which a court of law does not recognize as of binding force. They prayed that they might be relieved from the injurious consequences of defendant's alleged disregard of an equitable duty which they claimed she owed to them. Did she owe such duty? The facts, so far as disclosed by the record, compel a negative reply to this inquiry. Defendant held a first mortgage upon certain premises. Plaintiff owned a second mortgage thereon. There

were buildings on the land. Upon them was insurance effected by the mortgagor in his own name, the policy stating that the loss, if any, should be paid to the first mortgagee, the defendant, as her interest might appear. These buildings were destroyed by fire, and the loss adjusted and paid. The amount exceeded the amount of defendant's mortgage. We will assume that it was all paid to her personally, and paid after the mortgage debt had all become due, although the record by no means necessitates such a view of the facts. A large portion of the money she paid over to the mortgagor, retaining an amount for which she gave credit on the mortgage. We will also assume, without deciding, that it was the defendant's duty, as first mortgagee, to respect the rights of subsequent encumbrances of which she had knowledge, and not suffer any of her security to pass from her control, to the prejudice of the subordinate lien; and that, it appearing that the value of the security held by the second mortgagees, the plaintiffs, was seriously impaired by the destruction of those buildings, it was the duty of defendant, if cognizant of plaintiffs' lien, to apply the insurance money in her hands to the extinguishment of her lien, and not suffer the greater portion of it to escape such lien by passing into the mortgagor's control. Still, not even in the forum of conscience would the relief sought for be granted upon the facts as shown by the record on this appeal. Defendant foreclosed her mortgage after this insurance money came into her hands, assuming that it did come within her control, and having purchased on the foreclosure sale, in course of time secured a deed vesting in her the title of the property under this foreclosure.

Plaintiffs, in this action to foreclose their second mortgage, ask that defendant's foreclosure proceedings, culminating in this deed, be annulled by the court, on the theory that it was the defendant's duty to apply the insurance money in extinguishment of her lien, because of her equitable duty not to impair the subordinate lien by her conduct with respect to the security. Plaintiffs insist that she had two distinct securities out of which she could collect her debt, the land and the insurance money; that they held a lien on only one of these securities, the land; that defendant owed to them the duty of obtaining their pay from the insurance money, which was sufficient to extinguish her lien; and that equity will regard such duty as performed, and the lien wiped out, on the prin ciple that one who disregards duty shall not assert his own

dereliction, to the detriment of another to whom that duty was owing. In all this record we find nothing to render these considerations pertinent. There was no equitable duty, because defendant had no knowledge of the rights of the plaintiffs as junior encumbrancers. Equity compels no one to respect an unknown right. Defendant did not know of plaintiff's mortgage when she suffered this insurance money to pass from her control to the mortgagor. There is no averment of notice in the complaint. This demurrable defect was not cured by the reception without objection of evidence of notice on the trial. Under such a state of the record, the complaint might be amended to conform to the proof. But there is no such evidence in the record. There is no such fact found. There is no pretense of actual notice. Without notice of the lien to be protected, there arose no duty to protect it: Deuster v. McCamus, 14 Wis. 307; Straight v. Harris, 14 Wis. 509; Howard Ins. Co. v. Halsey, 8 N. Y. 271; 59 Am. Dec. 478; Vanorden v. Johnson, 14 N. J. Eq. 376; 82 Am. Dec. 254; Ward's Ex'rs v. Hague, 25 N. J. Eq. 397; Wade on Notice, sec. 203, and cases cited. This principle is elementary. It is true that constructive notice is held to be sufficient to create the duty. But defendant did not have even constructive notice of plaintiff's inferior lien. The record of their mortgage constituted no such notice. It is only as to subsequent encumbrancers or purchasers that the recording of a mortgage or deed is notice. So the statute is written: Comp. Laws, secs. 3293, 4369. Similar statutes have been so constructed in many jurisdictions: Deuster v. McCamus, 14 Wis. 307; Straight v. Harris, 14 Wis. 509; Howard Ins. Co. v. Halsey, 8 N. Y. 271; 59 Am. Dec. 478; Vanorden v. Johnson, 14 N. J. Eq. 376; 82 Am. Dec. 254; Cheeseborough v. Millard, 1 Johns. Ch. 409; 7 Am. Dec. 494; Jones on Mortgages, secs. 562, 723, 982.

The judgment of the court below annulled the foreclosure proceeding, treating the mortgage lien as extinguished as to plaintiffs. This judgment was unwarranted by the complaint, the findings, or the evidence, and must therefore be reversed, and the complaint dismissed.

Equity

MORTGAGES-PRIOR AND SUBSEQUENT MORTGAGEES-NOTICE. which entitles the second mortgagee to benefit of a release by the first mortgagee of the part of the mortgaged premises not covered by the second mort gage arises only when the release was given by the first mortgagee with knowledge of the second encumbrance: Vanorden v. Johnson, 14 N. J. Eq. 376; 82 Am. Dec. 254, and note; Howard Ins. Co. v. Halsey, 8 N. Y. 271; 59 Am. Dec. 478; see note to Guion v. Knapp, 29 Am. Dec. 747.

CLARKE V. WALLACE.

[1 NORTH DAKOTA, 404.]

PARTNERSHIP POWER OF Partner to BinD FIRM BY GUARANTY. — One

who accepts negotiable paper bearing the indorsement of a firm as guarantors or sureties takes it subject to the presumption that the firm name was not signed in the usual course of business of the firm, and cannot recover on the indorsement alone, but must show special authority to make the indorsement on the part of the partner by whom the firm name was signed, or an authority to be implied from the common course of business of the firm, or a previous course of dealing between the parties, or that the indorsement was subsequently adopted and acted upon by the partnership. PARTNERSHIP - GUARANTY OF NEGOTIABLE PAPER BY PARTNER. — A member of a banking or other partnership has no implied authority, without the consent of his copartners, to guarantee negotiable paper in the firm name for the accommodation of a third person, in consideration of obtaining security for a firm debt, especially when the liability thus incurred is several times greater than the debt secured. In such a case, the other partners will not be bound by such guaranty, in the absence of proof of express authority, or authority implied from the previous course of business between the parties, or that such guaranty was necessary for carrying on the firm business in the ordinary way, or that it was subsequently ratified by the firm.

Nickeus and Baldwin, for the appellants.

Edgar W. Camp, for the respondent.

BARTHOLOMEW, J. The findings of the court show that in 1883 the defendants Winslow and Allen, together with John A. J. Sheets and Samuel M. Bickford, -the two latter now deceased, and their administrators being defendants herein,— were copartners engaged in the banking, real estate, and loan business, at Jamestown, Dakota Territory, under the firm name of "North Dakota Bank." Allen was the managing member of the firm. The firm had about thirteen hundred dollars on deposit in the First National Bank of Jamestown. The defendant Robert E. Wallace was president of the latter bank. This bank was in failing circumstances. Wallace needed five thousand dollars to help him out of the embarrassments connected with the failure of the bank, and he proposed to Allen that if the North Dakota Bank would aid him in obtaining a loan of that amount, he would secure the deposit of that firm in the said First National Bank. Allen, in his individual name, opened a correspondence with the plaintiff, Clarke, who was a non-resident, which resulted in obtaining a loan from Clarke to Wallace for the required amount, the note to be guaranteed by the North Dakota Bank.

Accordingly, Wallace executed the note, and Allen guaranteed it in the name of the North Dakota Bank, and the money was paid over to Wallace. Plaintiff, Clarke, loaned the money largely on the credit of the North Dakota Bank. Wallace secured the deposit of the North Dakota Bank in the First National Bank by delivering collaterals to Allen, and the amount of the deposit was subsequently realized out of the collaterals. Allen had no express authority from the other members of the firm to guarantee the note of Wallace, nor did the other members of the firm have any knowledge of such guaranty, or ever, in any manner, ratify the same, nor did they, prior to the bringing of this action, have any knowledge that the deposit in the First National Bank was paid from the proceeds of collaterals delivered by Wallace to Allen.

This action, so far as these appellants are concerned, is brought on the guaranty heretofore mentioned, the defense being lack of authority on the part of Allen to thus bind the firm. The contract of guaranty was entered into contemporaneously with the execution of the note, and plaintiff parted with his money largely upon the strength of the guaranty, and the consideration therefor was ample: Baylies on Sureties, 54, 55; 9 Am. & Eng. Ency. of Law, 69, and cases cited. The benefit received by the firm in obtaining security on its deposit in the First National Bank becomes material only so far as it bears upon the question of the authority of Allen to bind the firm. It is not usual for persons in business to make themselves answerable for the conduct of other people; and it is settled law that the party who takes a promissory note bearing the indorsement of a firm, either as guarantors or sureties, takes it burdened with the presumption that the firm name was not signed in the usual course of partnership business, and no recovery can be had by simply showing the indorsement. The holder is required to show special authority to make the indorsement on the part of the partner by whom the firm name was signed, or an authority to be implied from the common course of business of the firm, or previous course of dealing between parties, or that the indorsement was subsequently adopted and acted upon by the firm: Sweetser v. French, 2 Cush. 309; 48 Am. Dec. 666; Schermerhorn v. Schermerhorn, 1 Wend. 119; Bank v. Bowen, 7 Wend. 158; Foot v. Sabin, 19 Johns. 154; 10 Am. Dec. 208; National Security Bank v. McDonald, 127 Mass. 82; Moynahan v. Hanaford, 42 Mich. 329. In this case, there was no previous course of deal