however, at the argument that they were not in fact executed until after the adoption of the resolution; and Fairbanks, the secretary and a witness for the plaintiff, testified that they "were executed in pursuance of the resolution or order of the trustees." We shall so treat them for the purposes of this decision.

Fairbanks, who was the only witness introduced on the trial, also testified that "A. Wolf did not borrow any money for the corporation that I know of, but purchased and assumed said debts in the name of A. Wolf & Co., and for the payment of which said notes and mortgage were executed." The resolution did not authorize or contemplate the execution of the notes and mortgage for any such purpose. It authorized and contemplated the borrowing of $12,985, and to that end authorized and directed the president and secretary to execute for and in the name of the corporation the necessary notes, together with a mortgage upon the corporate property. To borrow the money, and to execute the notes and mortgage of the corporation to secure its payment, was the sole power conferred on the president and secretary by the resolution. This they did not do, nor attempt to do, so far as the record shows. Instead, the president "purchased and assumed said debts in the name of A. Wolf & Co.," of which firm he was at the time a member, and then proceeded, in connection with the secretary, to execute the notes and mortgage in suit. This was clearly unauthorized by the resolution adopted by the Board of Trustees. (Koehler vs. Black River Falls Iron Company, 2 Black's R. 719.) But apart from this consideration, the transaction in question cannot be upheld. The law, for wise reasons, will not permit one who acts in a fiduciary capacity thus to deal with himself in his individual capacity. The position of A. Wolf as a member of the firm of A. Wolf & Co., and his position as a trustee and the president of the corporation defendant, were inconsistent and conflicting. In purchasing the debts of the corporation in his individual capacity, it was to his interest to buy them at as great a discount as possible. The greater the discount, the greater the gain. If he succeeded in purchasing the debts at any discount, to that extent he secured to himself not common to all of the stockholders. To permit this to be done would be to permit the violation of one of the plainest principles of equity applicable to trustees. In this particular case it does not appear that Wolf secured the demands against the corporation at any discount; neither does it appear that he did not. Nor does the policy of the law permit any inquiry into that question. Occupying as he did

the position of trustee, he should not have put himself in a position adverse to his cestuis que trust. One cannot faithfully serve two masters whose interests are diverse. (Andrews vs. Pratt, 44 Cal. 309; San Diego vs. S. D. and L. A. R. R. Co., 44 Cal. 106; Wilbur vs. Lynde, 49 Cal. 290; Pickett vs. School District No. 1, 25 Wis. 552; Cumberland Coal Co. vs. Sherman, 30 Barb. 553; Aberdeen Railway Co. vs. Blakie, 1 McQueen, 461; Field on Corp., Secs. 174 and 175, and authorities there cited.)

Respecting the point made to the effect that the transaction was ratified by the corporation, it is sufficient to say that, even if it admitted of ratification, there was no evidence of such ratification. (Cumberland Coal Co., 30 Barb. 575, and authorities there cited.) It results from these views that the Court below was right in sustaining the defendant's objections to the notes and mortgage.

Judgment and order affirmed.

We concur: McKinstry, J., McKee, J.

DEPARTMENT No. 1.

[Filed July 26, 1880.].
No. 6810.

A. MONTGOMERY, APPELLANT,

VS.

JONAS SPECT ET AL., RESPONDENTS.

EQUITY OF REDEMPTION. An equity of redemption is inseparably connected with a mortgage. The right to foreclose and the right to redeem are co-existent; and until the remedy to foreclose may be barred, the right to redeem may be exercised.

INDEBTEDNESS ESSENTIAL TO A MORTGAGE. It is essential to a mortgage that there should be a debt to be secured. If the relation of debtor and creditor remains, and a debt subsists between the parties, then the conveyance must be regarded as a security for the payment, and be treated in all respects as a mortgage.

Appeal from the District Court of the Tenth Judicial District, Colusa County.

W. F. Goad and W. C. Belcher, for appellant.

A. L. Hart and W. G. Dyas, for respondents.

MCKEE, J., delivered the opinion of the Court:

Whether a deed absolute in form be a mortgage is a question of intention to be inferred from all the facts and circumstances of the transaction in which the deed was executed,

taken in connection with the conduct of the parties after its execution. In such cases the central fact to be found is the existence of an indebtedness at the time of the transaction, and a continuation of the relation of debtor and creditor. If that fact be found, the inference deducible from it is that the deed was not made to transfer the title to the land described in it, but was made for the purpose of securing the debt which the grantor owed to the grantee.

It is essential, says the Court in Hanley vs. Hotaling, 41 Cal. 23, that there be an agreement either expressed or implied on the part of the mortgagor, or some one in whose behalf he executes the mortgage, to pay to the mortgagee a sum of money. So in Suarely vs. Pickle, 39 Gratt. 35, the Court of Appeals of Virginia says: "That it is essential to a mortgage that there should be a debt to be secured. It may be antecedent to, or created contemporaneously with, the mortgage." The only inquiry, then, necessary to be made is, whether the relation of debtor and creditor remains, and a debt still subsists between the parties. If it does, then the conveyance must be regarded as a security for the payment, and be treated in all respects as a mortgage. (Robinson vs. Copsey, 2 Edw. Ch. 138; Slee vs. Manhattan Co., 1 Paige, 56. The fact of a subsisting debt, to secure the payment of which a deed of real property may be given, must be proved like any other fact in a case. "But," as Mr. Justice Gaston says in McDonald vs. McLeod, 1 Ired. Eq. 227, "in examining transactions between borrowers and lenders, and between necessitous men and their creditors, Courts of equity, aware of the unequal relation of the parties, and of the facility by which the former may be surprised into improvident arrangements, and of the moral coercion which the latter can exercise over their apparent freedom of action, are particularly attentive to any circumstances tending to show an inconsistency between the form of an act and the intent of the parties, and will take great pains to get at the substance of what was done or intended to be done by them."

Examining by these rules the facts and circumstances of the transaction in which the deed in the case in hand was executed, we think that the fact of an indebtedness between the grantor and grantee in the deed is fairly establisbed by a preponderance of evidence. The defendant owed to the plaintiff an antecedent debt, which was secured by a mortgage upon a portion of the premises now in controversy. Upon that mortgage debt the plaintiff had brought an action of foreclosure, and obtained a decree, in which the Court found that there was due and owing to the plaintiff $6,648.87,

for principal and interest, counsel fees and costs, and directed a sale of the mortgaged premises to satisfy the same. Defendant wanted another year to pay the amount, at 14 per cent. per month interest, by giving another mortgage upon the same property. The plaintiff declined to take another mortgage, because, as he objected, the property was not worth enough to justify the expenses of another foreclosure and sale. Defendant offered to increase the security by giving all the real property which he had-property estimated by him to be worth $40,000, by the plaintiff at $10,000, and which the Court below found to be of the value of $25,000. To this the plaintiff seemed to assent. Both preferred that the transaction should take the form of a deed instead of a mortgage; the defendant, because he had been charged double taxation-taxes upon the land and also upon the mortgage; the plaintiff, because he would in that way avoid the expenses of a foreclosure and sale. The whole matter was referred to the agent of the plaintiff for consummation. The agent computed interest upon the amount of the decree up to the date of the execution of the deed, added the sum of $200 which his principal had advanced to the defendant for part payment of a judgment against him, making the sum of the indebtedness which the defendant then owed to the plaintiff $7,000. This amount was agreed to as correct, and was inserted as the consideration of the deed. Simultaneously with the execution of the deed an agreement was executed and delivered to the defendant, conditioned for a reconveyance of the property upon payment of the sum of $7.000, with interest at 1 per cent. per month, within one year from the date thereof.

There is, of course, no question as to the form of the transaction. The defendant is emphatic in his testimony as to his understanding and intention of the purpose for which the transaction was made to assume that form. The agent, with whom he transacted it, is undecided and more uncertain as to the purpose. When asked, in substance, whether he did or did not know that the deed was made to secure the payment of the $7,000, he answered: "Well, what I did in it I know. The work I did in it I know, and I thought I was taking a deed." And on re-cross examination he thus testifies:

"Q.-When he came to you, did he propose to make a mortgage?

"A. He said he would like to make a mortgage. "Q.-You told him you would not take a mortgage? "A.-I told him that I could not stand foreclosing; that

the property was not worth it, and I would not take a mortgage. That was my direction from Montgomery.

"Q.-You told him you would take a deed-an absolute deed?

"A.-Yes, sir.

"Q.-And he agreed to that, did he?

A.-He signed the deed. I do not remember the conversation that took place about it. He signed the deed I had made out.” Spect gave no note or memorandum for the payment of the $7,000 and interest. Nor does the written agreement contain any promise by him to pay. But this circumstance does not make the conveyance less effectual as a mortgage, if in fact there was a debt. (Flogg vs. Marin, 2 Sum. 533; Scott vs. Fields, 7 Watt. 360.) Had there been such a promise, or if such a note or memorandum had been given, it would have been in itself strong if not conclusive evidence of the existence of a debt. (Hickox vs. Lowe, 10 Cal. 197.) But although there was no personal obligation on the part of Spect to pay the $7,000 with interest, there is one circumstance which tends to raise a presumption of loan or indebtedness, and that is that the sum to be paid by Spect, in case he desired a reconveyance, was the precise amount expressed as the consideration in the deed, with interest at 14 per cent. per month. This fact alone would be insufficient to show that the money to be paid was a debt. (Farmer vs. Grose, 42 Cal. 169.) But when in addition to it the Court finds that the value of the land was $25,000, and it is proved that Spect remained in possession of it all, and made improvements on portions of it to the value of $3,400, and collected the rents and profits of it all, and occasionally sold some of the land and received the proceeds of the sales, it is difficult to resist the conclusion that both parties really understood and intended the transaction to be a mortgage. Besides, Montgomery, at Spect's request, conveyed to the wife of the latter, without consideration, some portions of the property, on which the improvements alone were assessed at $1,400; and he allowed judgments against Spect to be enforced against the property, which he afterwards redeemed from the execution sales, and charged the redemption money to Spect. If the deed had been executed for the purpose of transferring the title of the grantor to the lands described in it, judgments against Spect would have been worthless, as Montgomery himself testified; for the deed included all the real property which Spect owned or was possessed of, yet after the deed Montgomery advanced money to and for him at 1 per cent. per month, paid taxes for him, on which he