Page:The New International Encyclopædia 1st ed. v. 14.djvu/43

MORTGAGE. 31 MORTGAGE. as will appear, even that is not essential. In some States statutes have been passed author- izing a mortgage which is not a conveyance in form, but which for all practical purposes has the same eflect as the conuuon-law mortgage as modified by equity. One imjiortant consequence arising from the fact that at cunnnon law' the mortgagee acciuired a title was that Iiis mortgage was valid against an innocent purchaser of the property for value without notice of the mort- gage, which could not have been the result had the mortgage been a mere lien or right in /jerso- wam against the r.:ortgagor. See Equity; Fraud. Tliis rule has been modified in the United States by statutes universally adojited requiring mort- gagees and purchasers of property generally to record their documeiils of title in order to protect them against claims of purchasers without notice* When the intention of an agreement is to create a mortgage, although it is not in effect a conveyance and consequently not a legal mort- gage, equity will enforce the agreement against the mortgagor or third parties having notice of the agreement as though it were a valid mortgage. Thus where the owner of real estate deposited his title deeds of the property with another for the purpose of scuring a debt or obligation, the English courts of equity have recognized in the transaction a valid mortgage. This doctrine of creating a mortgage by pledge of title deeds has not been recognized in the United States. (See LiEX.) When a conveyance is absolute on its face, equity, disregarding the parol-evidenee rule, will inquire into all the circumstances of the transfer of title, and if it appear that the transfer was made only for the purpose of giving security, equity will treat the whole transaction as a mortgage and allow the grantor to redeem the property upon payment of the mortgage in- delitedness. .All mortgages, however, whether ex- press or implied from the circumstances, are to be distinguished from conditional sales, which are agreements to sell and transfer title to the property upon the happening of a certain event. It will ie obser'ed that the position of a mort- gagor is closely analogous to a conditional ven- dor who has agreed to sell property upon payment of a certain smn. There is, however, one im- portant distinction between the two relations. In the case of conditional sales there is no ex- isting indebtedness. The vendee is under no obligation to pay money to the vendor before electing to purchase, while the mortgagor is so Iionnd. In determining in any given case whether the transaction is a conditional sale or a mort- gage, courts will scrutinize the evidence with great care, and in case of doubt the tendency is to hold the transaction to be a mortgage. From the nature of mortgage it seems probable that a legal liability independent of the mort- gage itself is not essential to its validity, out in general all mortgages are accompanied by some form of legal ol)ligntion for the performance of which the mortgage is given as security. This is usually a promissory note or bond payable to the mortgagee, and where the purpose is to issue numerous lionds secured by one mortgage, the )U'actice is to make the mortgage or conveyance to a trustee, who holds the property as security for all the bondholders. Eailroad mortgages are usually made in this manner. If the note or bond is illegal or there is any illegality in the mortgage transaction, the mortgage is invalid. ilortgages are sometimes given to secure future advances to be made by the mortgagee. Such mortgages are valid atd enforceable as between the mortgagor and mortgagee, but in some States they are held not to be valid against third parties, except as to advances actually made, of which the third Jiarty has actual or constructive notice at the time of acquiring an interest in the property. In a number of States, statutes provide that mortgages for future advances shall have no validity against third persons. Any legal iiropertj', either real or personal, may be mortgaged, even including future or in- clioate property, as crops planted but not yet grown, which the conunon law regards as being capable of present ownership. Hut a UKU'tgage of property not yet acquired by the mortgagor could have no validity at conunon law. ilortg.ages of this character as well as mortgages of equibible interests w-ere recognized and enforced by equity when the rights of iiuioccnt third parties were not involved. Such mortgages are now generally regarded as valid between mortgagor and mort- gagee, but there are a variety of views held in the several States as to their validity against third parties — some courts, as those of Massa- chusetts, holding that they can have no validity against even creditors of the mortgagor unless the mortgaged property is delivered to the mort- gagee, and some, as those of Xew Jersey, hold- ing that they are valid against all parties having notice of the mortgage. The mortgage, besides a description of the mortgaged property and the mortgage indebted- ness, may, and usually does, contain clauses pro- viding that the whole debt shall become due and payalde upon failure to pay interest or taxes and assessments upon the mortgaged property. The mortgage may also include a power of sale enabling the mortgagee to sell the mortgaged property without foreclosure upon the mort- gagor's failure to pay the debt. In many States such a provision is made inoperative by statutes which require foreclosure of the mortgage ex- clusively by judicial proceedings. A stipulation that the mortgagor shall have no right to redeem will be disregarded by the courts upon the same principle that courts of equity disregarded the condition of the common-law mortgage. The estate of the mortgagor in possession has been likened to a tenancy at will or by sufferance, and as between himself and the mortgagee, the analogy is very close. At common law the mortgagee having the title could take possession at will, the sole right of the mortgagor, if the mortgagee exercised this right, being to redeem by payment of the mortgage indebtedness on the due date, but as to all others, the mortgagee in possession is clothed with substantial ownership. He is entitled to the rents, issues, and profits of the mortgaged property; he may sell or incumber it subject to the mortgage, and upon his death the property goes to his heirs at law. In many States the mortgagee's common-law right to take jiossession of the mortgaged prop- erty by ejc'ctment or other appropriate action has been cut off. and he can only secure possession of the mortgaged ]iroperty through foreclosure. -Vlthough the mortgagee holds the title to the mortgaged property, the law recognizes that he holds it as an incident to his claim against the debtor, which is personal property. The mort- gagee's estate, therefore, in both real and per-