CHAPTER XCIX.

MORTGAGE.

TITLE I.

MORTGAGE OF REAL PROPERTY

ARTICLE I.

OF MORTGAGES IN GENERAL.

Section 1. Definition and nature. A mortgage is the conveyance of an estate or property by way of pledge for the security of a debt, and to become void on payment of it. 4 Kent's Comm. 136. It is an estate created by a conveyance absolute in its form, but intended to secure the performance of some act, such as the payment of money and the like by the grantor or some other person, and to become void if the act is performed agreeably to the terms prescribed at the time of making such conveyance. 1 Washb. Real Prop. 475; Mitchell v. Burnham, 44 Me. 286. It is an estate upon condition defeasible by the performance of the condition according to its legal effect. Erskine v. Townsend, 2 Mass. 495. It is a pledge of real estate as a security for the payment of a debt. It is the accident of the debt, and defeasible upon its payment at any time before foreclosure. Briggs v. Fish, 2 Chip. 100. It is not only a lien for a debt, but a transfer of the property itself as a security for the debt. Conard v. Atlantic Ins. Co., 1 Pet. 386. It is an estate at law upon which a real action may be maintained. Dexter v. Harris, 2 Mason, 531. A defeasance, either written in the instrument, or in a separate writing, or established by parol, is essential to a mortgage. Without a valid agreement, binding the grantee to reconvey or yield up to the grantor when the condition shall have been performed, it is not a mortgage. Payne v. Patterson, 77 Penn. St. 134.

Mortgages were at common law held to be conveyances upon condition, and unless the condition was performed at the appointed time, the estate became absolute; in equity, however, the debt was considered as the principal matter, and the failure to perform at the appointed

time, a matter merely requiring compensation by interest in the way of damages for the delay. This right to redeem became known as the equity of redemption, and it has been limited by statute, in the different States, to some limited number of years. Courts of law have now adopted the doctrines of equity with respect to redemption, and in other respects, to a considerable extent. 1 Washb. Real Prop. 477;

Jackson v. Willard, 4 Johns. (N. Y.) 41.

The nature of the estate created by a mortgage is indicated by the etymology of its name-mort-gage-the French translation of the vadium mortuum, that is, dormant or dead pledge, in contrast with vadium vivum, an active or living one. They were both ordinarily securities for the payment of money. In the one there was no life or active effect in the way of creating the means of its redemption by producing rents, because, ordinarily, the mortgagor continued to hold possession and receive these. In the other the mortgagee took possession and received the rents toward his debt, whereby the estate worked out, as it were, its own redemption. Besides, in the one case, if the pledge is not redeemed, it is lost or dead as to the mortgagor; whereas, in the other, the pledge always survives to the mortgagor when it shall have accomplished its purposes. 2 Bouv. Law Dict. 197.

The mortgage is a mere lien or security, and passes no title in the land, but only a chattel interest. The debt is the principal, and the land the incident, and the equity may be sold and conveyed subject to the lien. Default in payment does not change its character, and payment before or after default extinguishes the lien. McMillan v. Richards, 9 Cal. 365. And where a lien on land conveyed is expressly reserved in a deed which is duly recorded, it creates a clear, equitable mortgage of which every one is bound to take notice, and the purchaser of the land at sheriff's sale takes nothing more than an equity of redemption, and holds the land subject to the lien for the unpaid purchase-money. Davis v. Hamilton, 50 Miss. 213.

A conveyance in the form of a deed of trust to secure the payment of a promissory note, and conditioned that, in case of failure to pay, the trustee shall sell, or, upon payment, reconvey, is, in effect, a mortgage. Webb v. Hoselton, 4 Neb. 308; 19 Am. Rep. 658. And where land is sold, and a written contract executed by the parties, whereby the vendor retains the title to the land as security for the unpaid purchase-money, and the vendee executes his notes for such purchasemoney, the notes and contract will be considered as one instrument, and regarded as a security in the nature of a mortgage, which may be sold and assigned, and enforced in the name of the assignee by a decree in equity. Wright v. Troutman, 81 Ill. 374.

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An agreement to give a mortgage, not objectionable for want of consideration, will be treated in equity as a mortgage. Burdick v. Jackson, 7 Hun (N. Y.), 488. See Carter v. Holman, 60 Mo. 498; Wright v. Shumway, 1 Wis. 23; Racouillat v. Sansevain, 32 Cal. 375.

§ 2. Who may make a mortgage. The mortgagor must be a party having an interest in the land at the time of the transaction. Payne v. Patterson, 77 Penn. St. 134. So a mortgage of land, made by one who has a legal and equitable title to a moiety of the property, which the mortgagor affects to convey, passes only his legal right, although he had a power from the person who held the residue of the legal, but not of the equitable estate in the land, to sell and convey his right also, the mortgagor not having affected to convey any part of it under his power from the other person, although his deed purported to mortgage the whole, and the equitable title not being in the person who gave the power. Shirras v. Caig, 7 Cranch, 34. A party in possession under a parol contract to purchase can mortgage his interest (Sinclair v. Armitage, 1 Beasley [N. J.], 174); and if he completes the purchase and obtains the title, it inures to the benefit of the mortgagee. Bull v. Sykes, 7 Wis. 449.

§ 3. What property may be mortgaged. All kinds of property, real or personal, which are capable of an absolute sale, may be the subject of a mortgage; rights in remainder and reversion, franchises and choses in action, may, therefore, be mortgaged. But a mere possibility or expectancy, as that of an heir, cannot. 2 Story's Eq. Jur., § 1012; 4 Kent's Comm. 144. Every thing which is the subject of a contract, or which may be assigned, is capable of being mortgaged. Neligh v. Michenor, 3 Stockt. (N. J.) 539. But at common law, nothing can be mortgaged that does not belong to the mortgagor at the time when the mortgage is made. Pierce v. Emery, 32 N. H. 484. The obligee of a title bond has an interest which he may mortgage. Baker v. Bishop Hill Colony, 45 Ill. 264.

Where personal chattels are mortgaged, and subsequently attached to the freehold, under circumstances showing that, as between the parties, they are to be considered personal chattels still, a transfer of the mortgage, after the chattels have been thus attached, together with a purchase of the equity of redemption by the assignee, transfers the title to such mortgaged property. Sheldon v. Edwards, 35 N. Y. (8 Tiff.) 279.

§ 4. Distinction between a mortgage and a conditional sale. As a general rule, where a contract and conveyance are made upon a negotiation for a loan of money, a court of equity will construe the conveyance to be a mortgage, whatever may be the form of contract,

if the person to whom the application for the loan is made agrees to receive back his money with legal interest, or a larger amount, within a specified time thereafter, and to re-convey the property, where it is apparent that the real transaction is a loan of money. And gross inadequacy of price is always a strong circumstance in favor of the supposition that a sale of the property was not intended. Holmes v. Grant, 8 Paige (N. Y.), 243; Hoopes v. Bailey, 28 Miss. (6 Cush.) 328. But where a sale is made with an agreement for a re-purchase within a specified time, if the consideration paid upon the sale is near the cash value of the property conveyed, the absence of any agreement on the part of the vendor to repay the purchase-money, so as to make his right to re-purchase and the vendee's corresponding right to recover back his money mutual and reciprocal, is a strong circumstance in favor of construing the contract to be a conditional sale and not a mortgage. Slowey v. McMurray, 27 Mo. (6 Jones) 113; Hill v. Grant, 46 N. Y. (1 Sick.) 496. Although adequacy of price paid and want of obligation to repay the purchase-money are important facts to show a conditional sale, yet they are not conclusive. Brown v. Dewey, 2 Barb. 28; Marshall v. Stewart, 17 Ohio, 356. Whether the particular transaction constituted a mortgage, or a conditional sale, must always depend upon the whole circumstances of the contract and is not confined to mere written evidence of it. Robertson v. Campbell, 2 Call. (Va.) 421; King v. Newman, 2 Munf. 40; Prince v. Bearden, 1 A. K. Marsh. 170; Oldham v. Halley, 2 J. J. Marsh. 114; Thompson v. Davenport, 1 Wash. (Va.) 125. If it can be gathered from the whole of a deed that it was intended only as a security for the performance of a particular duty, it will be considered as a mortgage, although there is no express provision that, upon the fulfillment of the condition, the deed shall be void. Steel v. Steel, 4 Allen (Mass.), 417.

In all doubtful cases, a contract will be construed to be a mortgage rather than a sale, because such a construction will be most apt to attain the ends of justice and prevent fraud and oppression. Honore v. Hutchings, 8 Bush (Ky.), 687; McNeill v. Norsworthy, 39 Ala. 156; Sears v. Dixon, 33 Cal. 326; Davis v. Stonestreet, 4 Ind. 101; Russell v. Southard, 12 How. (U. S.) 139. Each case of this character must be decided in view of the peculiar circumstances which belong to it, as the only safe criterion is the intention of the parties. Cornell v. Hall, 22 Mich. 377. But equity will consider any writing by which property is transferred as a mortgage rather than an absolute sale, if the intent is doubtful. Bright v. Wagle, 3 Dana, 253; Wilson v. Giddings, 28 Ohio St. 554; Hickman v. Cantrell, 9 Yerg. 172; Page v. Foster, 7 N. H. 392.

A conveyance of real estate conditioned to be void on the payment of a certain sum at a specified time, otherwise to remain in full force and virtue, is a mortgage and not a conditional sale. Ferguson v. Miller, 4 Cal. 97. So, where a contract purports to be a sale, by the terms of which the purchaser is to sell the property, and out of the proceeds pay an antecedent debt of the seller, with interest and expenses, any excess to be returned to the seller, and any deficiency to be made good by him is in effect a mortgage. Cannon v. McNab, 48 Ala. 99.

Where a deed contained a stipulation that it should be void, if on a day certain the grantor paid the grantee the consideration money, and it appeared that the grantor wanted to borrow money and proposed the transaction; that the grantee gave no money but his own notes and that the grantor gave no notes, it was held that there was in fact no loan, and that the transaction was a conditional sale. Pearson v. Seay, 35 Ala. 612. So, too, where no circumstances appear showing an original intention that a deed absolute on its face should be considered as a mortgage, a subsequent bond to reconvey on payment of the consideration by the grantor makes the sale conditional but not a mortgage. Swetland v. Swetland, 3 Mich. (Gibbs) 482.

If a debtor makes an absolute conveyance of land to his creditor in payment of the debt, and, cotemporaneously with the execution of the deed, the creditor delivers to the debtor a written instrument by which he agrees to reconvey the land upon receiving payment of a certain sum within a specified time, the transaction does not create a mortgage but is a conditional sale, and the creditor obtains the fee of the premises subject only to the right of the debtor to demand a reconveyance on complying with the terms of the agreement. Morrison v. Brand, 5 Daly (N. Y.), 40. A deed upon condition is not a mortgage unless it is a security for a debt, or a demand in the nature of a debt. If the demand, on a breach of the condition, would be for unliquidated damages, it is not a mortgage. Bethlehem v. Annis, 40 N. H. 34.

In conditional sales the rule is that the vendor must comply strictly with the condition upon which his right to a reconveyance depends, or his right to the reconveyance of the property is lost. Hoopes v. Bailey, 28 Miss. (6 Cush.) 328; Saxton v. Hitchcock, 47 Barb. 220. And a deed, in its form a conveyance, may be shown to be a mortgage by external evidence, but a formal mortgage cannot be shown to be a conditional deed. Kunkle v. Wolfersberger, 6 Watts, 126.

The rule distinguishing between a mortgage and a conditional sale is thus stated in a recent case: A deed absolute in form, if intended to secure the payment of money, and the relation of debtor and credi